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Turkey’s policy shift has ticked a lot of the right boxes so far and the central bank’s large rate hike this month will go a long way to rebuilding confidence among investors. But there are still question marks about how much tightening will be delivered …
31st August 2023
While the macro backdrop was broadly unchanged, rents were stronger and yields were higher than expected in Q2, forcing us to re-examine our 2023 real estate view. As a result, we have edged down our end-year all-property view for capital values. This now …
We’ve become a bit more confident in our forecast that the Bank of England will raise interest rates from 5.25% now to a peak of 5.50%, rather than much further, as higher interest rates appear to be weighing more heavily on activity. The peak in UK …
Double-digit inflation will prevent September rate cut The fact that Polish inflation remained in double-digits in August, at 10.1% y/y, means that an interest rate cut at the central bank’s meeting next week now seems very unlikely. That said, we think …
This page has been updated with additional analysis since first published. Signs of softening activity at the start of Q3 The latest activity data for Russia for July suggest that retail sales maintained solid momentum while industry has come off the boil …
30th August 2023
Stronger-than-expected inflation data from Germany and Spain today add to the uncertainty surrounding the near-term path of ECB policy. On balance, we think that the ECB will raise rates once more in this cycle and that government bond yields will fall by …
A strong rebound in tourism has bolstered retail rents in Spain and Portugal over recent quarters. However, we think this boom has run its course. Alongside a weak domestic consumer outlook, this should keep Iberian retail rents subdued for the rest of …
This page has been updated with additional analysis since first publication. Sentiment rebounds, nascent recovery may be underway The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally rose in August and …
Renewed surge in mortgage rates begins to take its toll The decline in mortgage approvals to a five-month low in July showed the renewed surge in mortgage rates since April has begun to take its toll. But given the lag between quoted mortgage rates and …
This page has been updated with additional analysis since first publication. Euro-zone sentiment weakens further The decline in the euro-zone’s Economic Sentiment Indicator (ESI) in August leaves it consistent on past form with GDP stagnating at best in …
This page has been updated with additional analysis since first publication. Higher interest rates are weighing more heavily on lending The drag on bank lending from higher interest rates grew further in July, particularly in the housing market. We think …
Absent major fiscal stimulus in China, global steel demand growth will be weak in the next few months. Accordingly, we forecast price declines in major steel markets towards year-end. Only when economic growth recovers and interest rates fall do we see …
29th August 2023
This page has been updated with additional analysis since first publication. MNB cuts rates again, but a short pause in the easing cycle may be coming The Hungarian central bank (MNB) announced another 100bp cut to its quick deposit rate (the key policy …
It has generally been a positive week for commodity prices. Most metals and agricultural prices rose on the week, in somewhat of a turnaround from recent trends. By contrast, energy commodities fell for the second consecutive week, as concerns about the …
25th August 2023
CBRT policy shift now firmly back on track There’s a lot of confusion about what drove Turkey’s central bank to deliver an unexpected 750bp rate hike this week and doubts remain about the policy U-turn. But at this point we’re minded to focus on the …
Worries that Germany is becoming the “sick man of Europe” again have resurfaced over the past few weeks. The term was first used in relation to Germany in 1999, at a time when it had been growing much more slowly than countries such as France and Spain …
This week’s bigger fall in UK rate expectations, bond yields and the exchange rate compared to elsewhere is largely due to the markets deciding that a weaker economy will trim inflation, meaning the Bank of England has less work to do. Market pricing is …
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% for the next 12 months. While transactions volumes have only seen a modest decline so far, …
Denmark’s economy has been among the fastest-growing since the pandemic and, although growth will slow in the coming months, we expect it to continue outperforming the euro-zone. Nonetheless, the DNB will probably keep its policy rates below those of the …
24th August 2023
CBRT delivers a shock interest rate hike The Turkish central bank’s much larger-than-expected 750bp interest rate hike, to 25.00%, at today’s meeting will go a long way towards reassuring investors that the shift back to policy orthodoxy is on track. The …
Having risen in value by much less than houses over the past three years, flats were selling at the biggest discount to houses on record at the beginning of the year. But higher mortgage costs are causing buyers to reassess what they can afford to buy, …
The German retail market has been one of the weakest in Europe since the beginning of 2022 and rental performance so far in 2023 has been well below the euro-zone average. But, with consumer confidence and high street footfall improving, vacancy …
The weaker-than-expected PMI data from European economies is consistent with our view that the euro and sterling will fall further against the dollar over the next couple of months. Earlier today, PMI data for August out of the euro-zone and UK came in …
23rd August 2023
The increase in the spot and particularly futures prices of European natural gas in the past few weeks suggests that there is an upside risk to our forecast for euro-zone inflation next year. However, prices would need to rise much further to …
Our latest Europe commercial property valuation monitor is embedded below: Property yields rose across all sectors and markets in Q2. However, this was somewhat offset by rises in bond yields in most countries. As a result, valuations remain stretched in …
This page has been updated with additional analysis since first publication. Higher interest rates dragging the economy into recession The fall in the activity PMI to below the boom-bust level of 50.0 in August supports our long-held view that the economy …
In an environment in which firms feel able to pass on higher energy costs in their selling prices, the latest leap in wholesale gas prices poses an upside risk to our forecast for core CPI inflation to fall to 2.0% by the start of 2025 and to our forecast …
This page has been updated with additional analysis since first publication. Germany leading euro-zone into recession August’s flash PMIs were worse than expected, particularly in Germany, and are consistent with our view that the euro-zone economy will …
A mild winter 2022/23 helped Europe dodge a bullet of high gas prices. Will the economy’s luck run out this winter, driving up demand and prices, or have the ripple effects of Russia's invasion of Ukraine changed the game? Our Commodities and Europe teams …
22nd August 2023
While difficult to quantify, we estimate that the growth of tourism added around 0.3% to euro-zone GDP growth in the first half of 2023. However, we think growth will be much slower in the second half of the year as the sector has now broadly regained its …
Russia, Turkey and Israel had a strong first half to the year, but growth across Central and Eastern Europe (CEE) remained depressed and we don’t expect a meaningful recovery until 2024. Inflation pressures are building in Russia and Turkey on the back of …
This page has been updated with additional analysis since first publication. Economy lacked momentum in July Poland’s industrial production and retail sales figures for July came in weaker than expected and suggest that the downturn in the economy …
This page has been updated with additional analysis since first publication. Limited scope for pre-election splurge despite borrowing undershoot July’s public finances figures continued the recent run of better-than-expected news on the fiscal position. …
Global aluminium supply slides into contraction Global aluminium production growth slowed for the seventh consecutive month and dipped into contractionary territory in July on the back of weakness in China. We think production growth will stagnate as …
21st August 2023
Overview – After a brief respite earlier this year, property yields are once again on the rise, driven by a further increase in gilt yields. We don’t expect a repeat of the surge seen last year, but we also think any compression beyond this year will be …
Price volatility in the wake of news of possible strike action at Australian LNG export terminals serves as a reminder that natural gas markets are still carrying the scars of Russia’s invasion of Ukraine. High volatility is likely to remain until …
The Bank of England has more work to do The Fed’s work may be done, but as this week’s UK inflation and labour market releases made clear, this doesn’t mean the Bank of England can relax. First came figures released on Tuesday showing that the 3myy rate …
18th August 2023
Long road ahead for Spanish politics Yesterday’s election of the Socialist (PSOE) candidate as President of the Congress of Deputies suggests that the PSOE has the momentum as Spain’s politicians try to form a new government. But it remains unclear …
The slowdown in rent growth in the first half of this year is likely to persist given the weak economic backdrop. Although the property price correction has slowed, we think stretched valuations will push yields higher and drive further capital value …
Property yields have risen less sharply this year, but there remains considerable uncertainty about where they will peak. We returned to our yield model for guidance and, while a re-specified equation supports our view that office yields will top out at …
This page has been updated with additional analysis since first publication. Under the weather The 1.2% m/m fall in retail sales volumes in July probably had more to do with the unusually wet weather than the impact of higher interest rates on consumer …
Mortgage arrears were still low in Q2, but the number of Buy-to-Let (BTL) mortgages in early arrears increased at an alarming pace. We suspect that will continue in Q3. A growing number of landlords inability to meet their mortgage costs is likely to lead …
17th August 2023
Norges Bank is very close to the end of its tightening cycle. After today’s 25bp hike, taking the deposit rate to 4%, we expect one final 25bp increase in September. We have then pencilled in a faster pace of rate cuts next year than policymakers …
Only one more Norges Bank hike to come Norges Bank is very close to the end of its tightening cycle. After today’s 25bp hike, taking the deposit rate to 4%, we expect one final 25bp increase in September. We have then pencilled in a faster pace of rate …
The support to industrial production from the end of major supply chain disruption has run its course. And while the drop in gas prices over the past year could give a boost to some firms, output expectations in the most energy-intensive sectors are …
16th August 2023
This page has been updated with additional analysis since it was first published. Weak manufacturing to continue to weigh on economic growth Despite euro-zone industrial production having increased in June on a monthly basis, it remained well below its Q1 …
Clouds lifting over CEE, but only slowly Q2 GDP figures for Central and Eastern Europe (CEE) generally came in below expectations and suggest that the region continued to suffer the ill-effects from high inflation and interest rates last quarter. While …
This page has been updated with additional analysis since first publication. Services inflation still uncomfortably high CPI inflation fell to a 17-month low of 6.8% in July, as the effects of the lower utility price cap kicked in. But with services price …
The decision by Russia’s central bank to increase its policy rate by 350bp, to 12.00%, at an unscheduled meeting today underscores the challenges that policymakers are now facing to maintain macroeconomic stability in an economy that is being distorted by …
15th August 2023
Russia’s central bank steps up to the plate, but more needed to stop ruble’s fall The Russian central bank’s 350bp interest rate hike, to 12.0%, at today’s unscheduled meeting is likely to be followed by further increases in the coming months. But there’s …
