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Israel’s economy is under strain from the conflicts in Gaza and Lebanon, with supply constraints both holding back growth and causing inflation concerns to build. The softer-than-expected inflation figures for September released today will provide some …
15th October 2024
Italy’s 2025 budget, set to be approved by cabinet today, suggests Italy will bring its deficit below the 3% of GDP limit imposed by EU fiscal rules much sooner than France. But Italy’s debt-to-GDP ratio is still likely to remain much higher than …
The BRICS+ summit in Russia next week is likely to see another push on expansion, mainly to close allies of China and Russia. But limited economic benefits for potential new members, divisions among existing members, and concerns (for some) about …
This page has been updated with additional analysis since first publication. Rise in industrial production not the start of a recovery While the 1.8% m/m rise in industrial production in August was the strongest monthly rise in over a year, it is probably …
The ECB’s latest Bank Lending Survey suggests that demand for credit is recovering, but the rebound in housing loans is much stronger than in consumer or enterprise loans. The Bank Lending Survey for Q3 provides grounds for optimism that the housing …
This page has been updated with additional analysis since first publication. Further easing in wage growth supports case for more interest rate cuts The further fall in wage growth in August, together with signs that the labour market continued to loosen …
It’s a rare thing for a press conference from China’s Minister of Finance to excite quite so much, but there were widespread hopes in markets that Saturday’s briefing from Lan Fo’an would finally provide the details of fiscal easing plans that had been …
12th October 2024
Inflation declines, but another rate hike looking more likely Headline inflation fell to 8.6% y/y in Russia in September but this was a touch less than expected and the breakdown showed that core price pressures are easing only very slowly. It now looks …
11th October 2024
We think that the larger rise in yields in the UK than elsewhere over the past month is due to expectations that the Budget will boost demand rather than fiscal fears. That said, there is some upside risk from the Budget to our forecast for gilt yields to …
Some encouraging signs in the latest CPI data The batch of September inflation data out of the region this week offered some welcome signs for central banks. In Hungary, the headline rate fell to 3.0% y/y – its lowest rate since January 2021 and slightly …
It makes sense that businesses and households are getting jittery ahead of the Budget on 30 th October. After all, it’s no secret that taxes will rise. This explains the falls in both business and consumer confidence in September. (See Chart 1.) (Our …
France needs austerity Having survived a vote of no confidence on Tuesday evening, on Thursday France’s government presented its 2025 budget. The key points had been well signposted in advance: €60bn of savings next year, equivalent to 2% of GDP, made up …
We expect sterling to weaken by ~4% against the euro and ~1% against the dollar by end-2025 . This reflects our view that the Bank of England will loosen monetary policy by more than what investors are anticipating, GBP’s high valuation and stretched …
This page has been updated with additional analysis since first publication. Modest economic growth more likely than another recession this year The 0.2% m/m rise in GDP in August (consensus and Capital Economics 0.2%), which came on the back of the …
ECB is certain to cut interest rates by 25bp next week. And we think it will cut at each meeting until the deposit rate hits 2.5%. Inflation likely to be below 2% next year, so risks are skewed towards more cuts. A 25bp interest rate cut looks nailed on …
10th October 2024
China’s policy stimulus measures have generated large market moves but it is the fiscal element, which hasn’t been detailed yet, that has the potential to lift the economy. We’re not expecting a huge fiscal package and it may be less commodity-intensive …
The Bank of England’s Q3 Credit Conditions Survey suggests house prices will rise further in Q4 and supports our view that a mild slowdown in GDP growth this year is more likely than another recession. Despite the fall in the average quoted mortgage …
Prime high street rental growth in Barcelona has outpaced Madrid since late 2022. However, we think rental growth will converge in the coming years as tourism numbers fall back to pre-pandemic levels in Barcelona and stronger domestic spending prospects …
In contrast to offices, there is less evidence of a ‘flight to quality’ in the overall retail sector. Shopping centres are the exception, where the spread between both prime and non-prime yields, and floorspace and financial vacancy rates has widened in …
Surge in supply ahead of Budget may temporarily dampen prices A leap in the number of homes being put up for sale in September, perhaps due to fears of second-homes and rented properties being subject to higher capital gains tax after the Budget, may …
This page has been updated with additional analysis since first publication. Core inflation below Norges Bank forecast once again Core inflation in Norway was again below Norges Bank’s forecast in September, strengthening the case for it to start cutting …
Given the amount of signalling by Governing Council officials, it would be surprising if the ECB didn’t cut rates at its October meeting. But how far will the Bank go to ease monetary policy from here, and how quickly will it get there? Our Europe team …
9th October 2024
Sweden’s economy is likely to see a strong rebound next year as consumption will benefit from fiscal stimulus and lower household interest expenditure. We think that the recovery will encourage the Riksbank to only cut its policy rate from 3.25% to 2.5% …
While electric vehicle (EV) rollouts in Europe and the US have stalled and are set to remain sluggish over the next few years, the uptake of EVs in China has surged beyond expectations. So, for all the focus on the near-term supply risks to oil, the …
War concerns drive further hawkish tilt at the BoI The communications alongside the decision by the Bank of Israel (BoI) to leave its policy rate on hold again today, at 4.50%, underline that policymakers have grown more concerned about the escalation of …
We think the Chancellor will raise taxes in line with the planned £16bn (0.6% of GDP) a year increase in public spending at the Budget on 30th October. The main influence of this will just be a rotation in the shape of GDP growth away from consumer …
This page has been updated with additional analysis since first publication. August recovery but prospects for German industry still bleak The big increase in German industrial production in August isn’t much reason to celebrate as it was only enough to …
8th October 2024
Inflation down again September’s drop in inflation in Sweden will reinforce the Riksbank’s inclination to keep cutting interest rates at the next few meetings. Statistics Sweden’s first ever “flash” estimate of inflation revealed that headline CPI …
This page has been updated with additional analysis since first publication. Retail data highlight weakness of consumer spending Euro-zone retail sales edged up in August but were still below their level in May. The big picture is that overall consumption …
7th October 2024
This page has been updated with additional analysis since first publication. Confirmation house prices rebounded in Q3 The third consecutive monthly rise in the Halifax house price index in September provides further evidence that the falls in mortgage …
Israel’s economy has frequently bounced back from conflict throughout its history, but developments over the past week have raised the risk of permanent scarring to the economy from the ongoing hostilities across the Middle East. The latest ratcheting up …
4th October 2024
Oil spikes, but won’t knock the BoE off course On its own, the jump in oil prices from $72 per barrel (bp) on Monday to a one-month high of $79pb due to the conflict in the Middle East (see here and here ) isn’t enough to have a bearing on how fast the …
France’s prime minister, Michel Barnier, revealed his hand this week – or at least he showed some of his cards – as he set out plans to fill the hole in the country’s public finances. He has given himself a bit more time to bring the deficit down to the …
Easing cycle paused, and cuts in 2025 will be limited The decision by the National Bank of Romania (NBR) to pause its easing cycle today, leaving the policy rate at 6.50%, seems to reflect growing concern about the persistence of underlying inflationary …
After months of speculation, investors will find out how the UK Chancellor plans to balance tax, spending and investment decisions as the new government tries to fill a fiscal hole and support the economy. Our economists were online shortly after Rachel …
This could be a Budget statement that defines the UK economy’s performance through the rest of this decade. The new Labour government warns of having to clean up a fiscal mess left by its predecessors, but also speaks of investing for long-term economic …
Economic growth in the euro-zone slowed in Q2 and timelier data suggest that it weakened further in Q3. That, together with the fall in headline inflation below 2% in September, should prompt another 25bp cut by the ECB at its October meeting. With the …
Data published today show that the euro-zone’s household saving rate rose even further in Q2 this year. The increase since late 2022 can be attributed to low consumer confidence and high interest rates, but the extent of the rise and the fact that it has …
Construction activity rebounds to 2½ year high The headline CIPS construction PMI rebounded to a 2½ year high of 57.2 in September as the prospect of lower interest rates, rising capital values and a government committed to boosting home construction …
The 2025 draft budget recently outlined by Russia’s finance ministry shows that, rather than falling next year as initially planned, defence spending will rise by more than 20% to hit 6.2% of GDP. While personal income and corporate tax hikes will help to …
3rd October 2024
The British pound fell sharply today, and we suspect that it will weaken more over the next year or so given our dovish view of Bank of England policy, the currency’s still-high valuation, and stretched speculative positioning. Sterling has dropped by …
After falling to 1.8% in September, headline inflation in the euro-zone is almost certain to rise in the final few months of 2024. But we think that falling oil and natural gas prices will cause it to drop back again next year and average about 1.5% in …
Non-high street retail subsectors have seen a stronger rental recovery from post-pandemic lows than high street shops. And we think this outperformance will continue given tighter availability and slightly more favourable demand drivers. That said, there …
Global headlines this week have been dominated by the escalating conflict in the Middle East and attention is now focussed on Israel and the scale and nature of its response to Iran’s retaliatory attack on Tuesday. From a macro perspective, the key risk …
This page has been updated since publication with additional analysis. Sharp drop in inflation will encourage further cuts by SNB The unexpectedly sharp fall in Switzerland’s headline and core inflation in September will cement the SNB’s dovish stance and …
Stronger-than-expected inflation rules out rate cuts this year The smaller-than-expected decline in Turkey’s headline rate to 49.4% y/y in September will be a disappointment to policymakers at the central bank (CBRT), and supports our view that a …
Planned austerity would dampen growth The new French government’s plans to tighten fiscal policy by as much 2% of GDP next year would help to put the public finances on a sounder footing but also risk pushing the economy towards recession. It would also …
2nd October 2024
NBP on hold, monetary easing in 2025 will be limited 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 continue to think that the easing cycle won’t resume until mid-2025. …
Global Commercial Property Chartpack (Q3 2024) …
