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This page has been updated with additional analysis since first publication. Steady improvement in credit is supporting the economy July’s money and lending data provide further evidence that a steady improvement in the flow and demand of credit is …
30th August 2024
This page has been updated with additional analysis since first publication. Lower mortgage rates may soon help house prices regain momentum Despite the recent declines in mortgage rates, the small fall in the Nationwide house price index in August …
Road cleared for ECB cut in September Inflation figures for Germany and Spain suggest that euro-zone headline inflation may have fallen to the ECB’s 2% target in August and that the core rate edged down. That paves the way for a September rate cut, but …
29th August 2024
Prime office rents look set to rise by more than we had previously expected over the next few years given still low CBD vacancy, preferences for prime space and cuts to the supply pipeline in 2025-26. While we still expect rental growth to slow, our …
Modest increase in sentiment The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally edged higher in August, which suggests that the regional economic recovery has continued, albeit at a moderate pace, this …
Growth steadies at the start of Q3 The latest Russian industrial production and retail sales figures for July were a mixed bag and suggest that the economy maintained a steady pace of growth at the start of this quarter. But we still think GDP growth will …
28th August 2024
The ongoing reassessment of the monetary policy outlook in the US and Europe has (again) made the UK look like an outlier. We doubt that will last. Since the start of the summer, expected interest rates have fallen significantly in most major economies, …
City offices have underperformed their West End neighbours by a wide margin since 2022. More encouraging recent data have led us to revise up our City rental projections, but we still expect stronger gains in the West End over the forecast horizon. …
Rates on hold while geopolitical uncertainty remains The decision by the Bank of Israel (BoI) to leave its policy rate on hold again today (at 4.50%) rather than resume the easing cycle, reflects policymakers’ concerns with supply-side constraints in the …
For all the talk about AI, equities in Europe have delivered nearly as much as those in the US over the past few years. But we think that US equities will take the lead more clearly over the next year or so. Only the eventual bursting of an AI bubble …
Capital Markets Union (CMU) is regarded by many European policymakers as one of the key reforms needed to close the gap between EU and US productivity. But a full CMU is a long way off, and in any case fragmented capital markets are just one source of …
Rates left on hold, easing cycle will be more “stop-start” from here The Hungarian central bank (MNB) suggested that its decision to leave the policy rate on hold today, at 6.75%, was likely to mark a temporary pause in the easing cycle, rather than an …
27th August 2024
China retaliates to EU tariffs on EVs This week the EU announced a series of additional levies on Chinese EV imports on top of those announced a few months ago. China retaliated by making a complaint to the WTO and launching an anti-dumping investigation …
23rd August 2024
Ukraine’s surprise incursion Ukraine’s incursion into Russia continued this week. Ukraine found a weak spot in Russian defences two weeks ago and mobilised resources to exploit it. The scale of the incursion is significant, with some suggesting that …
At first glance, the 1.1% m/m increase in Adzuna job vacancies in July, the first monthly rise this year, together with the fall in the unemployment rate to 4.2% in June and the 127,000 rebound in employment between April and June, suggests the recent …
Although the EU is making progress in expanding its semiconductor production capacity, including through a new plant in Dresden, it is still a long way behind the US and Asia and is unlikely to catch up anytime soon. This will keep the EU reliant on …
Europe Commercial Property Chart Pack (Q3 2024) …
The Q2 GDP data out of Emerging Europe have generally disappointed to the downside, and leading indicators have weakened at the start of Q3. With interest rates likely to be kept high in Russia and Turkey over the coming months, we think that a further …
22nd August 2024
Overview – Commercial property yields and capital values have stabilised in recent months, which has encouraged investors to dip their toes back into the sector. But the recovery is set to be a weak one. Admittedly, we expect rental growth will be a …
Ceasefire seems a long way off Despite the US government’s efforts to push for a ceasefire agreement between Israel and Hamas this week, a deal seems some way off. The economic spillovers from the war in Gaza have been largest for the economies of Egypt, …
The scale of the fall in negotiated wage inflation in Q2 was largely due to one-off payments made in Germany in March but not repeated in Q2. However, the underlying trend in wage inflation is clearly downwards and is a good reason to expect the ECB to …
This page has been updated with additional analysis since first publication. Fading price pressures support the case for more rate cuts this year August’s composite PMI provides further evidence that some of the recent strength of activity in the first …
This page has been updated with additional analysis since first publication. August PMIs still consistent with economic slowdown The rise in the flash PMIs for August is not as good as it looks as it was largely due to a boost from the Paris Olympics and …
A soft start to Q3 The weaker-than-expected batch of Polish activity figures for July is more likely to be a blip than the start of a soft patch. We remain comfortable with our view that Poland’s economy will expand by around 3% over the year as a whole, …
We don’t think the slew of inflation-busting public sector pay deals that have been agreed by the new government will prevent wage growth from slowing next year to the rates of 3.0-3.5% we think are consistent with the 2.0% inflation target. But the big …
21st August 2024
This page has been updated with additional analysis since first publication. Limited wiggle room for the Chancellor at the Budget July’s public finances figures continued the recent run of bad news on the fiscal position, with public borrowing on track to …
CBRT staying the course The Turkish central bank (CBRT) left its main policy rate unchanged again today, at 50.00%, and offered little sign that it will soon start an easing cycle. While most other analysts expect monetary loosening to start in Q4, we …
20th August 2024
There are good reasons to expect services inflation to start falling again towards the end of this year and in 2025. But as long as wage growth remains high, services inflation will stay strong too. This morning Eurostat published the full breakdown of …
Europe Commercial Property Valuation Monitor (Q3 2024) …
We think the Riksbank will follow today’s 25bp rate cut with a cut at each of the three remaining meetings this year to take the policy rate to 2.75%. But we expect the terminal rate to be 2.5% which will be reached in early 2025. This is higher than the …
Riksbank cut will be followed by one at each remaining meeting this year Alongside the Riksbank’s decision to reduce the policy rate by 25bp today to 3.5%, policymakers also lowered their rate expectation for the end of this year from either 3.25% or 3.0% …
Israel’s economy slowed more than expected in Q2 as weak investment and supply constraints continued to hold back activity. A ceasefire to halt the conflict in Gaza would clearly be positive for the near-term growth outlook, but we doubt the economy would …
19th August 2024
The good news just kept coming this week. The economy grew by an above-trend rate for the second quarter in a row in Q2 (see here ), the unemployment rate fell to 4.2%, well below most estimates of the natural rate of around 4.50%. (See here .) And at …
16th August 2024
Poland the region’s star in Q2 Perhaps the standout feature of the data released in the region this week was the strength of Polish GDP in Q2. Output expanded by a bumper 1.5% q/q, its fastest pace since Q1 2022. (See our initial take here .) The data …
We think concerns about a wage-price spiral in Germany look overdone. The German Institute of Economic and Social Research (IW) suggested that wages in Germany would “shoot up” by 5.6% this year, based on agreements reached in the first six months. This …
This page has been updated with additional analysis since first publication. Better start to Q3 not as good as it looks After a weather disrupted Q2, July’s 0.5% m/m rise in retail sales volumes (consensus forecast 0.6% m/m, CE forecast 0.5% m/m) was …
While expectations for interest rates in the UK have already fallen by 40bp by end-2025 since mid-July, our projections for UK CPI inflation to remain below the 2% target for much of 2025 and 2026 suggest to us that the Bank of England (BoE) will ease …
15th August 2024
The recent drop in mortgage rates has caused house prices to rise a bit faster than expected. As a result, we now think house prices will grow by 2.0% y/y in Q4 2024 (1.0% previously). What’s more, our forecast that Bank Rate will be cut from 5.00% now to …
Given the revival in house prices and recent falls in mortgage rates, we are raising our Q4 2024 house price growth forecast from 1.0% y/y to 2.0%. We now think that the number of housing transactions per year will increase from 1.02m in 2023 to 1.07m in …
Despite better occupier data in H1, the weak consumer backdrop and still elevated vacancy mean we expect German retail rents to only hold steady this year. Thereafter, we expect rental gains to lag the euro-zone average, especially in Frankfurt given the …
Norges Bank’s decision to leave its policy rate unchanged at today’s meeting, at 4.5%, was never in doubt. However, we still suspect that continued declines in inflation will allow it to start cutting before the end of the year, which would be earlier …
Norges Bank at risk of falling behind the curve Norges Bank’s decision to leave its policy rate unchanged at 4.5% was never in doubt. We still suspect that continued declines in inflation will allow it to start cutting before the end of the year, which …
Swiss economic growth returns to trend rate Switzerland’s sporting event-adjusted GDP growth accelerated to 0.5% q/q in Q2, its fastest pace in over a year and slightly above our forecast of 0.4%. At the margin this may give the SNB some caution against …
This page has been updated with additional analysis since first publication. Strength in Q2 won’t last While the economy flatlined in June, it still managed to grow by 0.6% q/q rise in GDP in Q2. That said, some of the rebound in activity in Q2 may have …
Since the Riksbank’s last meeting in June, Swedish inflation and activity data have been weaker than policymakers expected. We think this will encourage them to cut the key policy rate from 3.75% to 3.5% next week and to indicate at least a further 50bp …
14th August 2024
Commercial property investment is on track to hit our forecast for a rise of 20% this year, helped by a substantial rise in retail transactions. A decent rental growth outlook coupled with attractive valuations, particularly for shopping centres, is …
Euro-zone growth likely to remain weak Data released today confirmed that the euro-zone economy expanded by 0.3% q/q in Q2, but surveys published for July suggest that it may be slowing again. The second estimate of euro-zone GDP in Q2 was unchanged from …
Strong second quarter will dampen expectations for rate cuts The larger-than-expected pick-up in Polish GDP growth in Q2, to 1.5% q/q (from 0.8% in Q1), suggests that the risks to our forecast for GDP to expand by 3% over the year as a whole are now …
This page has been updated with additional analysis since first publication. Soft surprise opens the door to more interest rate cuts later this year The smaller-than-expected rise in CPI inflation from 2.0% in June to 2.2% in July (consensus forecast …
This page has been updated with additional analysis since first publication. Easing in wage growth clears path for more rate cuts later this year The further easing in wage growth will be welcomed by the Bank of England as a sign that labour market …
13th August 2024
