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Rise in interest rates puts a dampener on construction activity The headline CIPS construction PMI dropped to 48.1 in January, from 53.3 in December, indicating the first contraction in activity since February 2024. The decline in the headline balance …
6th February 2025
Despite the recent weak news on activity and the uncertainty around the global outlook due to Trump’s US import tariffs, the stronger news on domestic price pressures means the Bank of England will probably continue to cut interest rates only gradually. …
5th February 2025
This is the first in a series of pieces that revisit our pandemic-era forecasts about the future of global real estate markets and cities and explore how they will evolve in the coming years. This dedicated page highlights key analysis from our earlier …
NBP a long way from resuming its easing cycle The National Bank of Poland (NBP) left its policy rate on hold again today, at 5.75%, and we think that interest rates will remain on hold throughout 2025. That’s a more hawkish forecast than the consensus …
Notwithstanding negative FX returns and a challenging external backdrop brought about by Donald Trump’s agenda, we think Turkish bonds and equities will continue to perform relatively well in 2025, as the continuation of orthodox policymaking in Turkey …
We held an online Drop-In session last week to discuss the outlook for interest rates in major advanced economies as the Fed hit the pause button while the ECB cut again. (See a recording here .) The key message was that the threat of US tariffs and the …
4th February 2025
We expect Germany’s next government to reform the national fiscal rule to allow some tax cuts and increased public investment. But it is likely to make slow progress on structural reforms such as digitalisation and improving the environment for start-ups. …
Overview – Our forecast that mortgage rates will fall further than widely expected suggests that a decent recovery in transactions will allow house prices to rise by around 3.5% this year and by 4.5% next year, which would be a bit more than the …
This weekend’s US trade policy announcements and Trump’s threats to impose tariffs on Europe raise the question of whether there is a bigger risk to the euro-zone than we had thought. This Update recaps on four key points about how the euro-zone economy …
3rd February 2025
January’s inflation data won’t change ECB policymakers’ minds about the likely near-term path for interest rates. The fact that services inflation remained high will mean that they will prefer to loosen policy in small steps. The small increase in …
Central Europe struggling as tariff threat looms The manufacturing PMIs in Central Europe rose slightly last month, but the big picture is that they remained at weak levels. And the threat of US tariffs on the EU poses an additional headwind for the …
Still on course for another large rate cut The sharp jump in the m/m rate of Turkish inflation, to 5.0%, was largely driven by one-off factors. And so long as the February CPI figures come in much softer (as we expect), we still think it’s most likely …
Recovery in mortgage lending will pause in Q2 Demand for mortgage credit jumped in Q1 in response to the drop in mortgage rates over the second half of 2023. But a rise in financial market interest rates this week, due to higher-than-expected inflation in …
1st February 2025
EU policymakers have stepped up their calls for progress towards Capital Markets Union and there will be steps in that direction in the coming years. But we aren’t holding our breath for major change. And even if policymakers do more than we anticipate, …
31st January 2025
Putin’s turn to up the ante We argued last Friday that President Trump’s comments on the war in Ukraine were likely to be met with a cold reception in Russia, dampening hopes of a quick end to the conflict. And an interview given by President Putin this …
An initially dry January for euro-zone watchers ended with a data deluge in the last few days which has underlined that the euro-zone economy is struggling and offers hope that inflation is easing. The most striking releases were Q4 GDP data published …
Metals flows adjust to tariffs & sanctions Industrial metals prices have been buffeted by news of potential trade disruptions this week, as fears of tariffs and sanctions loom large. President Trump has pledged to place additional tariffs on aluminium, …
Economies in Eastern Europe picked up a bit of momentum at the end of 2024, but we don’t think this marks the start of a sustained improvement. Timely indicators of activity have weakened in early 2025, and lacklustre external demand will remain a …
The Chancellor’s plans to “kickstart economic growth”, which she set out in a speech this week, probably won’t lift the economy out of its recent malaise in the coming quarters. But at the margin, the announcement of some policies and initiatives aimed at …
Euro-zone inflation easing in January National and state level inflation data published so far suggest that euro-zone inflation may come in a bit lower than anticipated. (Euro-zone data due on Monday 3 rd February). This would support those on the ECB …
This page has been updated with additional analysis since first publication. Higher mortgage rates starting to weigh on prices, but it won’t last Although the muted 0.1% m/m rise in Nationwide house prices in January was slightly worse than expected …
Even though we forecast the 10-year Treasury yield to end 2025 close to its current level, we anticipate that the 10-year Bund yield will fall over the rest of the year as the ECB, unlike the Fed, cuts policy rates further than currently discounted in the …
30th January 2025
Concerns about the impact of the Budget, coupled with higher interest rates, led to a moderation in commercial property demand according to the Q4 RICS commercial survey. Capital value expectations also declined and a dip in investment enquiries points to …
January’s EC survey points to continued weak GDP growth at best. While it also suggests that there are some upside risks to inflation in the near term, firms’ employment expectations and labour shortages are easing which should help to bring down services …
Farewell to Trudeau and his carbon tax Prime Minister Justin Trudeau's departure from office is likely to be swiftly followed by the removal of his Liberal party's signature 2019 federal carbon tax. With their "axe the tax" slogan, Canada's Conservatives …
It’s clear that after cutting its deposit rate from 3% to 2.75% today, the ECB expects to reduce rates further in the coming months. We think that weak growth and inflation will mean that the Bank has to lower interest rates further than most investors …
The latest RICS survey showed further improvement in occupier and investor demand in Europe. However, with the uptick in sentiment only small, the market looks to be struggling to gain momentum, supporting our view that the recovery in capital values this …
Bank to cut interest rates by 25bps at February’s meeting, from 4.75% to 4.50% The tail risks of both faster disinflation and slower disinflation have increased Rate cuts to stay gradual, but rates to fall to 3.50% in 2026 versus market pricing of 4.00% …
ECB has much further to go The ECB’s decision to cut its deposit rate from 3% to 2.75% today came as no surprise and the accompanying statement implies that more cuts are coming, as is widely anticipated. We think the Bank will have to lower interest …
Weak economy means ECB will keep cutting The stagnation in euro-zone GDP in Q4 supports our view that the region’s economic prospects are worse than most think. We expect this to prompt the ECB to cut interest rates by more this year than is discounted in …
Net lending to property records strongest year since 2008 Net lending to property had a strong end to 2024, with the total of £1.28bn in December the highest since September. At £11.5bn for the year, commercial property net lending had its strongest year …
This page has been updated with additional analysis since first publication. Downbeat outlook isn’t heavily weighing on households’ financial decisions December’s money and lending figures suggest the downbeat economic outlook isn’t weighing on households …
Signs of improvement, but growth still likely to underwhelm in 2025 GDP data released out of Hungary and Poland today were broadly in line with expectations and suggest that both their economies returned to positive growth at the end of last year, but we …
Germany, France and Italy all weighing on euro-zone growth With national data now available for all larger euro-zone countries, it looks as if GDP growth in the region slowed to 0.1% q/q or even zero in Q4 last year. (Euro-zone GDP data are out at 10.00 …
While there has not been much market reaction to the speech that UK Chancellor Rachel Reeves delivered today on how to “kickstart economic growth” , we are still quite optimistic about the long-term prospects for UK equities. Some of the key announcements …
29th January 2025
Euro-zone money and lending growth data paint a rosier picture of the economy’s near-term prospects than the latest business surveys and suggest that the impact of ECB rate cuts is feeding through. However, that won’t stop the Bank from cutting interest …
This page has been updated with additional analysis Riksbank makes final rate cut of the cycle We think that the Riksbank will keep its policy rate at 2.25% for the foreseeable future after delivering a 25bp cut today. While there is a lot of uncertainty, …
Spain’s strong growth showing no signs of abating The 0.8% q/q increase in Spain’s GDP in Q4 2024 was a bit stronger than expected as the economy brushed off the negative effects of the flooding in Valencia. The economy is likely to continue to increase …
Although European natural gas prices will still influence EU carbon prices in the near-term, investors’ recent optimism suggests that expectations for a tighter carbon market down the line are starting to drive a wedge between carbon and gas prices. The …
28th January 2025
MNB waiting patiently to resume the easing cycle The Hungarian central bank (MNB) left its base rate on hold again today, at 6.50%, and we think that the inflation backdrop will result in less easing over the rest of the year than most expect. Today’s …
German economy starts year on weak footing The Ifo Business Climate Index (BCI) remained in contractionary territory in January which supports the consensus and our own view that that Germany will eke out only a small expansion in GDP this year. The …
27th January 2025
Trump ups the ante against Russia Comments by President Trump that he would tighten US trade and sanctions policy against Russia if Putin does not agree to negotiate an end to the war in Ukraine are likely to have been received with anger in Moscow. The …
24th January 2025
In the first glimpse into how the economy has started the new year, this week’s data took another turn for the worse. First, according to the CBI Industrial Trends Survey (ITS) of the manufacturing sector, in Q1, the optimism, expected activity and …
Europe appeared to be out of President Donald Trump’s firing line this week, with the harshest comments reserved for Mexico and Canada. This contributed to the euro rising from 1.02 against the US dollar to 1.05. The currency also benefitted from the …
We forecast bond yields to fall over the rest of 2025 in Germany, the UK, and New Zealand, even though we think the relief rally in US Treasuries is over. And we anticipate yields to rise in Japan. The global sell-off in bonds seems to have paused. Bonds …
We think that next week the Riksbank will cut its policy rate for the final time this cycle, reducing it from 2.5% to 2.25%. After that, we do not see a need for policymakers to loosen policy any further as there are already emerging signs of an economic …
Week 1/208: A national emergency and Davos President Trump hit the ground running by declaring a National Energy Emergency on his first day in office. We covered the implications of this for energy markets in this in-depth report here . One of the key …
This page has been updated with additional analysis since first publication. Stagflation concerns remain at the start of 2025 Despite the small rise in the composite activity PMI from 50.4 in December last year to 50.9 in January, at face value it is …
