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The recent floods in Spain have inflicted huge personal and financial costs. But in terms of GDP, the effect is likely to be quite small as the temporary loss in activity will probably be offset by increased government expenditure. Similarly, while the …
12th November 2024
This page has been updated with additional analysis since first publication. BoE will look through rebound in pay growth Even though the rise in pay growth in September will probably be followed by a bigger gain in October, as the new 5-6% public sector …
The euro has suffered more than most in the wake of Trump’s victory and we doubt that will let up anytime soon. Given our view that tariffs will be imposed next year and the ECB will ease by more than investors expect, we forecast the euro to slide to …
11th November 2024
End to the war in Ukraine in sight? One of the most important channels through which Donald Trump’s victory in the US election could affect Emerging Europe – and the global geopolitical landscape – is if he seeks to end the war in Ukraine, as he pledged …
8th November 2024
GDP growth picked up in Q3 but timelier data suggest that the economy is poised for a weak Q4. We expect growth to remain slow next year regardless of whether President Trump raises tariffs on imports from Europe. We also think that inflation will be well …
Winston Churchill is supposed to have said that “jaw-jaw” is better than “war-war” and we think European politicians will take the same view when faced with the threat of a trade conflict next year. We set out our working assumption about how a US …
After a big couple of weeks for the UK, the US, the world and global financial markets, we have revised some of our economics forecasts. Due to the policies in the UK Budget (bigger and sooner rises in government spending than taxes, see here ), we now …
Easing cycle on pause, waiting for more clarity on fiscal policy The National Bank of Romania (NBR) left its policy rate on hold again today, at 6.50%, against a backdrop of stubborn above-target inflation and concerns about the loose fiscal stance ahead …
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will the sector continue to deliver? Join our Commercial Real Estate team for a special online briefing all about the …
UK Commercial Property Valuation Monitor (Q3 24) …
7th November 2024
Watch a recording of our post-MPC online briefing here . While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only gradually. We agree and due to the Budget (and not the US …
Easing cycle to continue, but risk of slower pace of cuts The Czech National Bank (CNB) cut its policy rate by 25bp again today, to 4.00%, and we still think that the conditions will be in place for the policy rate to be lowered to its estimated neutral …
The collapse of its coalition government, triggered by disagreement over fiscal policy, means Germany will probably have a CDU-led government by mid-2025. This may be more stable and functional than the outgoing coalition, but would face the same …
Watch a recording of our post-MPC online briefing here . Budget means Bank may not cut rates as fast and far While cutting interest rates from 5.00% to 4.75% today, the Bank of England implied that the Budget means rates will continue to fall only …
Today’s 50bp cut is likely to be the only one in the cycle for the Riksbank, and we expect it to cut by just 25bp at its next two meetings to take the policy rate to its “terminal” level of 2.25% in January. This is less than the four cuts that market …
This page has been updated with additional analysis since first publication. Retail sales strong in September but unlikely to keep rising rapidly Euro-zone retail sales rose in September rounding off a good quarter for retailers. We suspect that sales …
Alongside its decision to leave interest rates unchanged today, Norges Bank reiterated that it expects to remain on hold in December too. It is likely to start cutting in Q1 next year and we suspect that it will then loosen policy a little more quickly …
Riksbank increases pace of cuts, but doesn’t change its terminal rate forecast The Riksbank cut its policy rate by 50bp today to 2.75%, but the accompanying policy statement suggested that it plans only two more 25bps rate cuts to take it to a …
German industry continues to struggle The German industrial production release will be overshadowed by the break-up of Germany’s ruling coalition, which we will comment on later this morning. But the further fall in industrial output in September …
This page has been updated with additional analysis since first publication. House prices rise to record high and will accelerate next year October’s 0.2% m/m rise in Halifax house prices suggests that the recent momentum in house prices has a bit further …
Donald Trump’s second presidency is likely to result in lower US GDP growth, faster US inflation and a slightly higher path for the fed funds rate. The implications for the rest of the world are highly uncertain, not least because it is unclear how many …
6th November 2024
NBP leaves rates on hold, risks to our rate forecast shift up slightly The decision by the National Bank of Poland (NBP) to leave its policy rate on hold again today, at 5.75%, was never in doubt, and we think that interest rate cuts are unlikely to …
Contraction in housing activity drags headline construction PMI down After a strong September the headline CIPS construction PMI dropped back to 54.3 in October, although that still points to an expansion of construction activity. A rebound in long-term …
Data released last week showed that the euro-zone’s unemployment rate was unchanged at a record low in September. But a broader assessment of the labour market suggests that it is cooling, and the latest surveys suggest that it will continue to do so. …
5th November 2024
The net fiscal loosening of £36bn (1.1% of GDP) in 2029/30 relative to previous plans unveiled by the Chancellor in the Budget means we now expect GDP growth of 1.8% and 1.7% in 2025 and 2026 respectively, compared to 1.5% in both years previously. But …
Inflation figures out of Turkey – including those published for October yesterday – have surprised on the upside and forward-looking indicators suggest that the disinflation process will be slow in the coming months too. Consensus expectations for the …
We expect interest rates to be cut to around the equilibrium of 3% or so in the US, UK and Australia. But rates in the euro-zone and Canada seem likely to fall below their equilibria next year, troughing at 1.5% and 2%, respectively. This judgement …
4th November 2024
Another upside surprise likely to reenforce CBRT’s hawkish stance The smaller-than-expected fall in Turkish inflation in October, to 48.6% y/y, is likely to dash any remaining hopes that a monetary easing cycle will start this year. The risks now seem …
CEE struggling, Hungary in a league of its own The Q3 GDP data out of Central Europe this week continued a bleak run of activity data for the region. The Czech economy grew by just 0.3% q/q – in line with our forecast, but some way below the central …
1st November 2024
While the market fallout from Wednesday’s Budget is still a long way from the 2022 mini-budget episode, investors are clearly nervous about the fiscal outlook. Gilt yields have risen sharply since Wednesday’s Budget. The 10-year yield is up about 21 basis …
The main economic news in the euro-zone this week were the stronger-than-expected GDP figures for Q3 and inflation figures for October, as well as a concerted effort by ECB policymakers to play down the need to accelerate the pace of rate cuts. So it is …
Euro-zone investment has been weak since the pandemic. And despite the recent downward revision to our ECB interest rate forecasts, we don’t think it will pick up substantially, given the sluggish outlook for both economic growth and the competitiveness …
Inflation to drop sharply next year Another larger-than-expected fall in both headline and core inflation in Switzerland will increase concerns that the country could temporarily enter deflation next year. This will pile on pressure on the SNB to act …
This page has been updated with additional analysis since first publication. Mortgage rates will still fall next year and support house prices October’s 0.1% m/m rise in Nationwide house prices was a bit weaker than expected (consensus forecast +0.3% m/m, …
While the market fallout from yesterday’s UK budget announcement is still a very long way from the 2022 “mini-budget” debacle, the surge in Gilt yields and fall in sterling over the past couple of days has some similarities to that episode. A meltdown of …
31st October 2024
The policies announced in yesterday’s Budget won’t have a significant bearing on the housing market. But the prospect that interest rates are a bit higher may soften demand and creates some downside risk to our forecast for house price growth of 5.0% next …
Despite the Riksbank reopening the door to a 50bp cut at its last meeting, we think it will proceed gradually and cut by 25bps next week to 3.0%. This is because the policy rate is approaching the neutral rate and the risks of over loosening are …
An interest rate cut from 5.00% to 4.75% seems nailed on for November It’s less clear whether BoE will quicken the pace and cut rates in December too We think cuts will remain gradual until mid-2025, with rates eventually falling to 3.00% The Bank of …
We doubt the sell-off in gilts following the Budget will gather momentum and cause another step down in commercial property values. However, given the current narrow spread between risk-free interest rates and property yields, the latter are likely to …
Norway’s economy is struggling and inflation keeps falling faster than Norges Bank expects, yet the Bank has not started loosening policy. Next week we think it will open the door to a December rate cut. At its last meeting in September, Norges Bank said …
The latest activity data out of Emerging Europe have been surprisingly weak, and GDP growth in many parts of the region looks as though it will come in below our previous expectations this year. That said, above-target inflation remains a concern, and we …
The Q3 RICS commercial survey painted a somewhat mixed picture of the market. There was a slight improvement in investment and capital value expectations, but rental expectations were revised down. That highlights that the road to recovery for commercial …
This page has been updated with additional analysis since first publication. Inflation rises but is still below ECB forecasts Euro-zone inflation came in a touch higher than expected in October but was still below the ECB’s projections for Q4. While …
The sell-off in the Gilt market after today’s budget announcement in the UK probably reflects concerns that the Chancellor’s fiscal plans will result in an increased a supply of bonds and less monetary easing. We will be reviewing our forecast for Bank …
30th October 2024
Growth slowing further in Q3, but consumer spending remains strong The latest Russian industrial production and retail sales figures for September were a bit stronger than expected, although GDP growth still probably slowed over Q3 as a whole towards 3.0% …
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks ease further, regional divergence among fiscal risks Financial vulnerabilities have declined further …
Our more detailed and update analysis can be seen here . Despite large rise in taxes, Budget still boosts economy As the Budget loosens fiscal policy relative to previous plans, it is consistent with GDP growth perhaps being a bit stronger and interest …
Residential’s growing share of investor portfolios speaks to the buzz around its potential to keep providing outsized returns. But will residential continue to deliver? Which economies and markets offer the best opportunities? And what could go wrong with …
Central Europe continues to struggle The weaker-than-expected Q3 GDP data out of Central Europe, which showed that the Hungarian economy slipped back into recession last quarter, suggests that stagnating demand from the euro-zone is continuing to act as a …
