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We have revised up our forecasts for real GDP and no longer think the economy will be quite as weak. This has very little to do with the 0.3% m/m rise in real GDP in January released this morning. Most of that was a rebound after the widespread strikes …
10th March 2023
January’s strength won’t prevent contraction in GDP in Q1 The 0.3% m/m rise in real GDP in January (consensus +0.1% m/m, CE +0.4% m/m) will raise hopes that the economy will escape a recession in 2023 and will increase calls for the Chancellor to splash …
Lower inflation means Norges Bank can stick to 25bp hikes February’s decline in headline and core inflation takes some of the pressure off the Norges Bank and means that it is likely to hike by 25bp at the meeting in two weeks’ time. After surprising on …
Resurgence in activity unlikely to last The 0.3% m/m rise in real GDP in January (consensus +0.1% m/m, CE +0.4% m/m) leaves the economy in better shape than we had expected just a few months ago. But looking beneath the surface, the figures suggest the …
The Italian industrial market saw its sharpest fall in capital values on record last year, owing to a surge in yields in Q4. But with valuations still stretched and investor demand weakening, we think yields will climb higher. And with rent growth …
9th March 2023
50bp hike looks a done deal. New guidance likely to explicitly point to higher for longer policy rates. No more news on QT next week, but we expect it to accelerate in July. We expect the ECB to raise interest rates by 50bp next week and accompany that …
The numerous “plans for growth” that have been announced by the Government, the Opposition, and various commentators in recent months vary in their analytical rigour but all miss one crucial point: many of the reforms required to lift the UK’s pitifully …
Patches of positivity unlikely to last The slight recovery in the new buyer enquiries balance in February suggested that the reversal of the autumn spike in mortgage rates allowed a limited revival in demand. But with sales volumes falling and price …
With another 50bps rate hike at the European Central Bank’s March meeting looking like a done deal, all eyes will be on how policymakers signal the path ahead for monetary tightening. Will the resilience seen in some of the recent data be reflected in the …
8th March 2023
The National Bank of Poland (NBP) left its main policy rate on hold as expected today, at 6.75%, and we don’t think policymakers will rule out further rate hikes just yet (today’s statement gave little away in terms of guidance). But with inflation likely …
Recent evidence about the health of the euro-zone economy has been mixed. National figures released so far suggest industrial production rebounded in January but retail sales remained very weak. And while activity surveys now point to a small expansion …
Rates on hold, door for rate cuts this year remains open Poland’s central bank (NBP) left its main policy rate on hold as expected again today, at 6.75%, and we don’t think the NBP will rule out further interest rate hikes just yet. But with inflation …
We expect the Spring Budget on 15 th March to contain some giveaways confined to 2023/24. But a downgrade to the Office for Budget Responsibility’s (OBR) medium-term GDP growth forecasts will prevent an unwinding of the £54bn (1.8% of GDP) of fiscal …
A record amount of industrial space is currently under construction, which looks poorly timed given the upcoming recession. However, the sector is entering the downturn in a strong position with very low vacancy. And we expect the share of online retail …
Euro-zone flirting with recession Revised figures show that the euro-zone economy flatlined in Q4 last year and that domestic demand dropped sharply. There have been some positive signs in the past couple of months, but policy tightening is likely to …
Industrial rebound, but recession still coming The big rebound in German industrial output in January suggests that industry may continue to hold up well in the face of the energy crisis. However, with the renewed drop in retail sales pointing to …
Industrial rebound, but recession still coming The big rebound in German industrial production in January suggests that industry may continue to hold up well in the face of the energy crisis. However, with the renewed drop in retail sales pointing to …
What will UK Chancellor Jeremy Hunt deliver in his Spring Budget? Will he be able to splash any cash, will he hold back sweeteners until closer to the next general election, or will the OBR’s new economic forecasts tie his hands? Group Chief Economist …
7th March 2023
The substantial recovery in Halifax house prices in February added weight to the view that we will see a stand off between buyers and sellers that causes transactions to slump, but minimal price falls. That would be a historical anomaly, which is why our …
Construction activity rebounds The headline CIPS construction index rebounded back into expansionary territory in February and the forward-looking indicators also showed further improvement. Commercial developers may be taking advantage of lower input …
6th March 2023
Germany is more vulnerable than most advanced economies to a reduction in trade with China both because of the scale of trade and the use of Chinese-made inputs to its large manufacturing sector. We have highlighted in our Spotlight series that the …
Sales up in January but trend is still down January’s rise in euro-zone retail sales was not enough to offset December’s fall. And the low levels of household confidence suggest that consumption will decline in the coming months. The national-level data …
Brexit looking a bit brighter The economic developments this week were generally positive, starting with news that the Prime Minister, Rishi Sunak, struck a deal with the EU on trading arrangements for Northern Ireland, officially known as the Windsor …
3rd March 2023
With much of the global economy holding up surprisingly well and inflation not coming down as quickly as expected, investors are weighing up the risk that policy rates remain elevated for much longer than previously thought. This Update discusses what …
Another inflation surprise… The focus this week was on yet another higher-than-expected inflation print. The headline inflation rate edged down in February, but only to 8.5%, whereas a much bigger fall had been anticipated. And the core measure rose …
PMIs point to resilience, especially in services February’s final Composite PMIs suggests that economic activity in the euro-zone has been fairly resilient in February, with the indices for Spain and Italy, and for the services sector, particularly …
We think inflation in Turkey eased slightly to 54% in February (07.00 GMT) Final PMIs in Europe may confirm that activity is holding up better than expected (09.00 GMT) We expect the US ISM services index to have fallen back in February (15.00 GMT) …
2nd March 2023
The current economic downturn will mean that short-to-medium term property performance is under-par. But over a longer horizon, we expect real estate returns to reassert their traditional position somewhere between bonds and equities. Last year was an …
The account of the ECB’s last meeting is consistent with our view that the ECB will raise its deposit rate to 3.0% a fortnight today and continue hiking beyond that. In light of the data released since the last meeting, there are growing upside risks to …
A sharp increase in property yields in Q4 helped European property valuations improve for the first time in two years. That said, spreads over alternative assets remained very narrow by past standards and all markets besides Istanbul were still …
Strength of core inflation means ECB has a long way to go February’s increase in core inflation will reinforce ECB policymakers’ conviction that significant rate increases are needed. For some time we have been forecasting a 50bp hike at the meeting in …
Euro-zone HICP (Feb.) Strength of core inflation means ECB has a long way to go February’s increase in core inflation will reinforce ECB policymakers’ conviction that significant rate increases are needed. For some time we have been forecasting a 50bp …
The Israeli shekel has been amongst the worst performing currencies over the past month amid a rise in risk premia in Israel. We think it may remain under pressure against the US dollar over the coming months; but we doubt it will keep underperforming its …
1st March 2023
Terrible 2022 helps boost outlook for 2023 The latest IPF Consensus Survey showed a modest upgrade to forecasts for total returns in 2023, driven by an uplift to the capital value view. That looks to reflect the larger-than-expected fall in capital values …
Renewed rise in inflation will worry ECB The renewed rise in headline inflation in Germany, France and Spain in February suggests euro-zone inflation edged up this month, rather than falling as had been expected. With signs that underlying inflationary …
Higher interest rates hurt housing, but other borrowing remains strong While January’s money and credit figures suggest that higher interest rates are continuing to act as a drag on the housing market, they appear to be having less influence in other …
Net lending holds up as even as investment collapses Net lending to property was once again positive in January, even as commercial property investment collapsed in the final quarter of last year. Investors may be preparing to re-enter the market and …
Q4 spike in mortgage rates continues to depress approvals The spike in mortgage rates in October and November last year ensured that mortgage approvals remained at a similar level to the depths of the 2007-09 financial crisis in January. That could mark …
Higher interest rates hurt housing but not other borrowing January’s money and credit figures suggest that higher interest rates are continuing to act as a drag on the housing market, but they appear to be having less influence in other areas of the …
Industrial downturns in CEE bottoming out The manufacturing PM Is for February suggest that industrial sectors in Central and Eastern Europe are continuing to struggle, but there are tentative signs that the region may now be past the worst of its …
House prices continue to slide The further fall in house prices in February will keep optimism based on reports that demand has recovered in check. Indeed, even if buyer volumes have recovered, the amount they can spend on a new home has been reduced by …
We think Australia’s GDP growth softened a touch in Q4 (00.30 GMT) Germany’s HICP inflation probably fell in January (13.00 GMT) We expect the ISM manufacturing index for February to have remained weak (15.00 GMT) Key Market Themes We think the recent …
28th February 2023
Pandemic savings won’t rescue the economy The value of savings that households built up during the pandemic has been wiped out by inflation. Rising interest rates, together with a desire to rebuild the spending power of their savings, suggest that …
A widening in profit margins could mean that inflation is slower to fall back to the Bank of England’s 2.0% target than we expect. That would cause the Bank to raise interest rates even further than we currently anticipate and/or keep them higher for …
Energy Performance Certificates (EPCs) are the main benchmark for environmental standards in UK housing. There is evidence that they are improving efficiency in new-builds and new regulations will enforce change on rental properties, but this progress …
27th February 2023
Recovery in business sentiment falters The stabilisation of the EC’s economic sentiment indicator in February contrasts with the significant increases in the PMIs and provides some support for our view that the economy will struggle this year. It also …
The effects of tighter monetary policy are clear in the money and credit data. Households and firms have continued to lock their money up in longer-term deposits which are less likely to be spent, and lending growth has slowed very sharply. This paints …
The rise in prime property yields accelerated in Q4. Despite gains in all-property rents in most markets, this meant capital values fell across all sectors. Declines were particularly sharp in offices and industrial in Scandinavia and retail in …
24th February 2023
Russia’s economy defied expectations in 2022 Russia’s war in Ukraine, which marks its one year anniversary this week, fundamentally changed the geopolitical and economic landscape in the region. From a macroeconomic perspective, one of the more surprising …
The more hawkish tone in financial markets this week is justified. Prior to this week, investors seemed to be optimistic that the previous increases in interest rates would be enough to bring inflation back down to the Bank of England’s 2.0% target, and …
