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Outlook improved, but headwinds remain The rise in German industrial output in November suggests that industrial output has held up better than we anticipated in the fourth quarter in part because of an increase in production in energy-intensive …
9th January 2023
The past few weeks have brought the news that the UK economy is lagging even further behind its G7 counterparts. (See here .) One reason for this relative underperformance is real business investment, which accounts for 9.5% of real GDP and in Q3 was …
6th January 2023
While we think the hawkish ECB poses a near-term threat to euro-zone government bonds, we still expect their yields to be lower, in general, by the end of this year . Having climbed throughout December, developed market government bond yields have …
The narrative surrounding Europe’s energy crisis has completely shifted in recent weeks as warmer-than-normal winter temperatures have reduced heating demand and pushed gas prices down sharply. This will help to improve external positions and lower …
The property repricing in response to higher interest rates has not yet run its course. Coupled with a recession-driven slowdown in rent growth, this means 2023 is shaping up to be another bleak year for European real estate. Given the rapid rise in …
Inflation is on its way down Headline inflation in the euro-zone has probably passed its peak. (See here .) Admittedly, core inflation rose to a new record high in December, with both services and core goods inflation increasing in y/y terms. Core goods …
The recent plunge in wholesale gas prices means that utility prices for households may fall below the government’s price freeze in July. As a result, CPI inflation will be around 0.3 percentage points (ppts) lower than we previously thought in the second …
Headline index falls below 50 as recession hits property demand The headline CIPS construction index fell below 50 in December, indicating a contraction in activity, as the recession hit demand and developers’ concerns about capital values increased. With …
New year cheer but ECB will stick to hawkish script The fall in inflation and improvement in economic sentiment in December suggest that the euro-zone’s case of stagflation is not quite as acute as feared a few months ago. Nonetheless, a technical …
New year cheer but ECB will stick to hawkish script The fall in inflation and improvement in economic sentiment in December suggest that the euro-zone’s case of stagflation is not as acute as feared a few months ago. Nonetheless, a technical recession is …
House price falls already well advanced The further large fall in house prices recorded by Halifax in December suggests that the house price correction is further advanced than we previously thought. Indeed, while the Nationwide figures point to a …
After post-pandemic property rallies hit the skids last year, what will 2023 bring for UK and euro-zone markets? Economists from across our UK Commercial and Housing and Europe Commercial Property teams held a special briefing on what to expect in key …
5th January 2023
The 0.3% q/q contraction in Q3 left real GDP 0.8% below its Q4 2019 pre-virus level and the UK economy lagging even further behind its major counterparts. In contrast, GDP has risen above its pre-pandemic level in all G7 economies, including the US …
We have revised our European wholesale gas price forecast down and, as a result, now expect euro-zone inflation to fall more rapidly than we had previously anticipated. In turn, this means that real incomes and economic activity might be slightly …
The latest MSCI data show that prime property values underperformed the wider market last year. But with the rest of the market more vulnerable to the economic recession and as MSCI values catch up, relative performance is likely to shift in 2023. The …
December FOMC minutes may reveal impact of softer CPI prints on Fed thinking (19.00 GMT) We think the US trade balance narrowed dramatically in November (13.30 GMT) Sign up for our Drop In on the outlook for global inflation here Key Market Themes …
4th January 2023
Net lending rises further despite worsening outlook Net lending to property accelerated in November to an 11-month high. But given the worsening economic and property outlook we expect it will soon go into reverse. Indeed, investment activity is now …
Higher interest rates continue to weigh on the economy November’s money and credit figures showed further signs that higher interest rates are dampening activity, particularly in the housing market. This will be a constant theme over the year ahead, …
Approvals collapse as adjustment to higher rates begins in earnest The impact of the surge in mortgage rates following the “mini” budget on 23 rd September was realised in November as mortgage approvals collapsed. The modest drop back in fixed mortgage …
Higher interest rates continue to weigh on the economy November’s money and credit figures showed further signs that higher interest rates are dampening activity, particularly in the housing market. And this will be a constant theme throughout the year …
Further improvement, but recession still likely December’s final PMIs suggest the euro-zone economy held up better than we expected in Q4, but are still consistent with a mild recession. They also suggest price pressures remain very high. The upward …
London house prices are likely to continue to underperform even if the shift in buyer demand away from the capital due to remote working ends. More stretched house prices in the capital prior to the jump in mortgage rates means the impact of higher …
3rd January 2023
Plunge in inflation in December likely to reverse in January The sharp fall in German inflation in December was due to one-off energy subsidies so it will probably reverse in January. Headline inflation is still likely to decline rapidly in March, but we …
Drop in inflation in December likely to reverse in January The sharp falls in CPI inflation in several major German states in December suggest that inflation figures for Germany as a whole and for the euro-zone (due later today and on Friday, …
Falls in house prices will continue throughout 2023 The slowdown in house price falls in December is little comfort when leading indicators point to further sharp declines. Despite mortgage rates edging lower in recent weeks, we continue to think that …
30th December 2022
This week we learned that the economy contracted by more than we previously thought in Q3. The 0.2% q/q fall in real GDP in Q3 was revised down to a 0.3% q/q decline. More striking is that real GDP was a huge 6% below our pre-pandemic forecast in Q3. …
23rd December 2022
A ceiling agreed but with lots of caveats We don’t think the EU announcement of a cap on wholesale gas prices from February next year will have any practical impact. At first sight, the mechanism looks like a big deal. The ceiling of €180/MWh is much …
22nd December 2022
Jump in money supply won’t worry the SNB Swiss money supply data for November, released earlier this week, showed that M3 increased at its fastest year-on-year pace since February. (See Chart 1.) This could, at least in theory, encourage policymakers to …
Although prime property in Turkey saw strong rental gains in 2022, a slowing economy looks set to weigh on occupier demand and cause rent growth to decelerate next year. Meanwhile, the risk of a sharper depreciation of the lira risks pricing out local …
CBRT on hold … for now Turkey’s central bank (CBRT) stuck to its previous guidance today and left its policy rate on hold, at 9.00%, but there is clearly a risk that President Erdogan forces the CBRT to restart its easing cycle, particularly with the 2023 …
Even though we expect the Bank of England to raise interest rates further from 3.50% now to a peak of 4.50%, we doubt the recent increase in gilt yields will be sustained. Instead, we think yields may fall from 3.60% currently to 2.75% by the end of 2023 …
21st December 2022
The impending recession will hit jobs growth across the office-based sector. But the impact on office demand is likely to be greatest in markets that have a large exposure to the tech sector. This reflects that the recent pace of tech jobs growth looks …
Fiscal stimulus pushes borrowing to a record November high November’s public finances figures showed that government borrowing is rising fast. And with pressures from the weakening economy and most of the costs from the government’s energy price support …
The EU’s new policy to limit gas prices is unlikely to be activated next year. And with so many caveats built in, it seems the only thing countries agreed on was that a cap was indeed needed to show unity. We are sceptical that the EU’s mechanism to cap …
20th December 2022
MNB staying the course as inflation pressures persist Hungary’s central bank (MNB) left its base rate on hold again at 13.00% and is likely to use its communications later today to reaffirm its commitment to its market stabilisation tools to defend the …
Following on from our recent background note on the EU’s Carbon Border Adjustment Mechanism (CBAM) and the signing off on the tool by EU Ministers over the weekend, this Update examines which countries may be most affected by the eventual introduction of …
While we had expected the rise in risk-free rates and upcoming recession to boost yields, the speed at which they have increased has been surprising. All-property equivalent yields rose by a total of 78bps in October and November, reversing all the …
Chief Global Economist Jennifer McKeown and colleagues from across our macro services held a special briefing on what to expect from major DMs and EMs in 2023. In this 20-minute session, the team will be answered client questions as they discussed the …
The return of inflation for the first time in the inflation-targeting era has led to the biggest jump in Bank Rate and mortgage rates since the late 1980s. (See Chart 1.) The steady downward trend in mortgage rates from 6.5% in 2008 to 1.5% at the end …
19th December 2022
Click here to read the full report. Overview – We think the euro-zone is now at the start of a recession, driven by high inflation, tightening financial conditions and weak external demand, and anticipate two quarters of contraction followed by a gradual …
Click here to read the full report. Table of Key Forecasts Global Overview – We continue to expect the world to slip into recession in 2023 as the effects of high inflation and rising interest rates are felt. Our forecasts are below the consensus across …
Tight labour market suggests that wage growth will stay strong Euro-zone wage growth has accelerated this year and we expect it to stay strong. In turn, this will contribute to core inflation remaining above 2% in 2023. Data released this morning showed …
Sentiment recovers further, but recession still coming The further increase in the Ifo Business Climate Index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But …
Sentiment recovers further, but recession still coming The renewed increase in the Ifo Business Climate Index in December and the general improvement in the surveys over the past two months suggests the outlook for the German economy has improved. But we …
After a choppy few days in financial markets, the US dollar is ending the week a touch stronger against most other major currencies as risk sentiment has worsened sharply in the wake of the latest round of central bank meetings. We suspect this will …
16th December 2022
We expect the BoJ to leave its policy settings unchanged next week… (Tue.) …and we think central banks in Hungary, Czechia and Turkey will do likewise Indonesia’s central bank will probably slow its pace of tightening to 25bp (Thu.) Key Market Themes …
Hungary strikes last minute deal, but risks remain The EU’s approval of Hungary’s COVID-19 recovery plan this week is a welcome development for Hungary’s economy and financial markets, but it won’t immediately transform the near-term outlook. On Monday, …
Click here to read the full report. Overview – Property values in Scandinavia and Switzerland have taken a hit as yields jumped in recent quarters. With valuations still stretched, we are forecasting a further 50bps and 30bps of rises at the …
ECB a long way from pivot… Thursday’s ECB meeting has sparked significant turmoil in euro-zone financial markets. Ten-year Bund and BTP yields recorded some of their largest one-day rises in the past decade and are up ~25bp and ~50bp respectively from …
We think the three main economic themes of 2023 will be falling inflation, peaking interest rates and recession. We explained these forecasts in detail in our recent UK Economic Outlook , which carried the title a “A tough year”. (See here .) In short, …
