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One consequence of higher interest rates is an increase in the losses that the Bank of England will make via the bonds it bought during its quantitative easing (QE) programme. This week, the Bank published an estimate that it could make a huge £150bn …
28th July 2023
H1 2023 was the weakest six months for European investment in over 10 years. And the difficult financing conditions and stretched valuations that have sapped investor sentiment are unlikely to relent much over the rest of the year. Further ahead, even as …
This page has been updated with additional analysis since first publication. Business surveys point to stagnation The small fall in the EC Economic Sentiment Indicator (ESI) in July leaves it consistent on past form with output stagnating and suggests …
Sentiment improves, but is still depressed The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally ticked up in July, but our regional measure still points to weak GDP growth at the start of Q3. Economic …
Germany still the weak link National data released so far suggest that the euro-zone economy held up better than we had anticipated in Q2, with Germany still the laggard among major economies. We continue to think that monetary tightening will take an …
Strong economic growth in France and Spain The big increases in Q2 GDP in Spain and particularly France suggest that the euro-zone has so far coped with policy tightening much better than feared. However, the France data were flattered by temporary …
The ECB’s decision to raise rates by 25bp today and Christine Lagarde’s guidance that another hike was a “decisive maybe” will not have surprised anybody. On balance, we think the Bank will probably nudge rates up to 4% in September or October and keep …
27th July 2023
ECB hikes and leaves options open As was universally expected, the ECB raised interest rates by a further 25bp today and indicated that further hikes are possible but not certain. At the press conference we expect the main message to be that policy will …
25bps hike and peak in sight Reverting to a 25bps hike rather than 50bps Rate hikes may come to a halt a bit sooner than most analysts and investors expect After a lengthy pause, rates to fall further than investors expect in late 2024 and in 2025 We’ll …
The continued rise in the valuations of “risky” assets relative to “safe” ones mostly seems to reflect growing confidence in the economic outlook. We think that optimism will be disappointed and that risk premia may rise again – and valuations may fall – …
26th July 2023
Tighter monetary policy has had a big impact on financial conditions in the euro-zone, but we think its effect on activity is still in its early stages . Even if the region falls into a mild recession, it will be some time before policymakers are …
Russia and Turkey have had a strong first half of the year, but growth across Central and Eastern Europe (CEE) remains depressed and we don’t expect a meaningful recovery until 2024. While inflation pressures are building in Russia and Turkey and further …
Data released this week show that tighter monetary policy has led to a sharp slowdown in money and lending growth, consistent on past form with falling GDP. Together with the latest business surveys, this supports our non-consensus view that the euro-zone …
The Israeli government’s decision to press ahead with its controversial judicial reforms won’t necessarily cause foreign investment into Israel to dry up, but the direction of policymaking threatens to push the economy onto a permanently lower growth …
25th July 2023
Global growth in steel output stagnating Global steel production growth picked up in June, albeit only to a pace consistent with stagnant growth. With the rise in output in China on shaky ground and weak demand beginning to weigh on supply in other …
This page has been updated with additional analysis since first publication. MNB may pause or slow its easing cycle after September Hungary’s central bank (MNB) announced another 100bp cut to its one-day quick deposit rate (the key policy rate at the …
Analysts are split on whether the BoE will repeat June’s 50bps rate hike at the August meeting or revert to the 25bps hikes now favoured by the Fed and the ECB. And the release of the BoE’s new Monetary Policy Report will provide some clues to just how …
This page has been updated with additional analysis since first publication. Germany still in recession at start of Q3 The bigger-than-expected fall in the German Ifo, together with the drop in the PMIs published yesterday, suggest that the German economy …
Euro-zone government bond yields have fallen further following the release of disappointing PMIs today. Given our pessimistic view of the economy, we suspect that they will generally end the year a bit lower still. As euro-zone PMIs for July came in …
24th July 2023
Italy has already accumulated so many delays in spending NextGenerationEU (NGEU) money that it will only be able to use a fraction of the funds and any boost to growth is likely to be much smaller than hoped. Meanwhile, timidness in implementing reforms …
New home construction has been surprisingly resilient to weaker demand so far this year. But that partly reflects activity being brought forward before building standards were tightened in June. With that boost now over and survey data indicating a …
This page has been updated with additional analysis since first publication. Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, at 10:00 EDT/15:00 BST on Thursday 27 th July . Register …
Another election likely after inconclusive poll The People’s Party (PP) won the most seats at yesterday’s general election but, even together with the far-right VOX, they achieved only 169 seats which leaves them seven short of a majority. And given that …
Occupier demand in Amsterdam has been more resilient than we expected so far this year. In tandem with supply constraints caused by construction delays, this suggests that prospects for rental growth are brighter than we had anticipated over the coming …
This page has been updated with additional analysis since first publication. Economy still in recession July’s euro-zone PMIs are consistent with our non-consensus view that the currency union’s economy will remain in recession. But they also suggest …
Despite the fall in CPI inflation from 8.7% in May to 7.9% in June (see here ), the UK is still lumbered with an inflation rate that is 1.4 percentage points (ppts) higher than in the euro-zone. And at 4.8ppt, the gap between UK and US CPI inflation …
21st July 2023
Russian FinMin throwing in the towel? A raft of comments from senior policymakers at the Russian Ministry of Finance this week highlight the pressures that the public finances are under and how policymakers are likely to tighten fiscal policy in response …
In a relatively quiet week for euro-zone economists, the most important release was the final inflation data for June. Unusually, these were revised slightly from the flash release as core HICP inflation is now estimated to have edged up to 5.5% rather …
After trailing the rest of Europe last year, the Dublin industrial market has had a change of fortune in 2023 as rent growth continued to improve. With industrial demand set to benefit from a relatively strong domestic economy, greater trade with Northern …
Inflation worries trigger bumper hike The much larger-than-expected 100bp interest rate hike (to 8.50%) by the Russian central bank underscores policymakers’ concerns about inflation risks. And while we don’t think monetary tightening will continue quite …
This page has been updated with additional analysis since first publication. Resilience in June, but Q2 was still weak June’s retail sales and industrial production data out of Poland suggest that the economy held up relatively well last month, but we …
This page has been updated with additional analysis since first publication. Unexpected borrowing undershoot as receipts rise sharply Note: Join our special online briefing after the Fed and ECB’s July decisions, and previewing the BoE’s August meeting, …
While the wholesale European natural gas price is now close to pre-energy crisis levels again, we don’t expect EU gas consumption to rise in response. Rather, we think that EU gas consumption has structurally fallen. This is the main reason why we think …
20th July 2023
ECB looks certain to raise the deposit rate to 3.75% next week. The September decision will be a close call but another 25bp looks most likely. President Lagarde will stress that rates will remain at the peak for a long time. There is little doubt that …
More evidence that inflation is falling back in most economies has pushed government bond yields down across developed markets (DMs) over the past couple of weeks. We think that disappointing growth, as well as central banks eventually cutting rates by …
19th July 2023
Despite today’s big reaction in markets in the UK to better-than-expected inflation news , we still think investors are overestimating the peak in interest rates there and underestimating how much monetary policy will be eased in 2024 and beyond. Indeed, …
We have made only minor changes to our latest global forecasts which still imply that property will underperform other assets in the short to medium term. Further out real estate returns are set to recover, but, with yield spreads more compressed than in …
Lower energy prices and the reinstatement of the EU’s fiscal rules will contribute to lower budget deficits in the euro-zone next year. Together with tighter monetary policy, this will help to dampen inflationary pressures and to reduce GDP growth. Over …
The lower-than-expected CPI inflation data for June probably signals the end of the upward march in mortgage rates. But mortgage rates are likely to plateau rather than fall as the Bank of England keeps interest rates high until next summer and lenders …
Despite the softer tone of the CPI inflation data for June released earlier today, we have raised our forecast for the peak in Bank Rate. Rather than rise from 5.00% currently to a peak of 5.25%, we now think Bank Rate will peak at 5.50%. That’s a bit …
Rate hikes from the Federal Reserve and European Central Bank at their July meetings look like done deals – it’s the messaging accompanying those decisions that may prove key to what the banks decide to do in September and beyond. Another increase also …
The latest data suggest that the euro-zone remained in recession in Q2. We think that the economy will continue to contract in the second half of the year as the impact of tighter monetary policy feeds through. Construction data for May were published …
Mortgage rates have risen to a level that could cause costs on a fifth of rental homes to exceed the rent. That is likely to lead to a significant number of forced rental property sales, which will undermine the tight supply conditions that have limited …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK inflation, growth and policy outlook in 20-minute online briefing at 9am BST today. Register here . Some good news, but we’re still raising our …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19 th July. Register here to join that 20-minute online briefing. Splitting real GDP growth into the sectors most and least sensitive to …
18th July 2023
Swiss inflation has fallen sharply this year to below 2% and we expect it to stay there for the foreseeable future. In contrast to the SNB’s view, we think second-round effects on wages will be quite limited. And as a result, we forecast the SNB to start …
Out of town retail has been among the hardest hit commercial sectors since 2020, but with considerable variation among subsectors. While a weak consumer backdrop will drag on near term rent growth across the board, further out we expect this variation to …
17th July 2023
Paying particular attention to pay growth Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday 19th July. Register here to join that 20-minute online briefing. We know that the evolution of wage …
14th July 2023
