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The news on the economy was distinctly downbeat this week with evidence of a consumer slowdown mounting (see here and here ) and the IMF predicting that the UK economy will grow by just 1.2% in 2023, the slowest among G7 countries. But that did not stop …
22nd April 2022
We first said in late March that we thought the ECB was likely to raise rates as soon as July. This was because inflation had been higher than expected for several months in succession and we thought it would continue to surprise on the upside, while the …
The latest monthly MSCI figures indicate that commercial property is holding up well. Rental growth rose further in March, while annual total returns matched July 2010 levels, which were the highest since Q3 1994. Industrial continues to be the driving …
Boom time for Salmon prices In an otherwise extremely quiet week for tier-1 macroeconomic data releases, the publication of weekly salmon price data from Statistics Norway stood out. In short, it’s boom time for the fishing industry. The export price of …
The perfect storm of surging commodity prices due to the war in Ukraine and the hawkish shift by major DM central banks has pushed a few frontier markets to the brink of sovereign default . Sri Lanka has already announced the suspension of debt payments …
PMIs point to continued easing in economic growth The fall in the composite PMI in April suggests GDP growth has continued to slow as the cost of living crisis has intensified. But economic activity doesn’t appear to be collapsing. And, beneath the …
Services sector propping up activity, but for how long? The rise in the euro-zone Composite PMI in April suggests that the services sector rebound from the Covid restrictions earlier in the year is offsetting weakness in the manufacturing sector. But with …
Despite the permanent increase in working from home, the end of pandemic restrictions has triggered a resurgence in demand in London’s rental and house purchase markets. Annual inflation in the ONS House Price Index for London has already risen from 3.8% …
Solid expansion in Q1, but growth to soften this quarter Industrial production and retail sales figures in Poland remained incredibly strong in March and point to a solid expansion in Q1. A lot of this strength is unlikely to last as the effects of the …
Past delays in development projects mean that office completions will exceed demand in Budapest this year and next. As such, having held broadly steady in 2021, office vacancy is set to rise again and put downward pressure on rents over the next couple of …
Gloomy signs of spending crunch The hefty fall in retail sales in March marks the second consecutive month of decline and adds to signs that the real wage squeeze is hitting consumer spending. With CPI inflation already at a 30-year high and set to keep …
We think the recent upturn in office market performance is largely down to the one-off release of pent-up demand and remain downbeat about future prospects. With occupancy still languishing and remote working firmly established, we think that the risks to …
21st April 2022
Consumption to be a significant drag on growth The rise in consumer confidence in April was slightly better than expected. Nevertheless, confidence is still very low and points to household spending falling in April. That’s consistent with our assumption …
Having so far been a bastion of dovishness amongst G10 central banks, we think that the stage is set for the Riksbank to start to raise the repo rate next Thursday, and it will press on with further rate rises thereafter. But with “QT” likely to do some …
We don’t expect ongoing tightening by the Federal Reserve will see the valuations of emerging market (EM) equities or bonds plunge, even if they are unlikely to rebound much either. Sharp rises in bond yields in developed markets this year – amid …
Inflation hasn’t peaked yet Headline inflation rose to 7.4% in March and further increases are likely. This will put a big dent in consumer spending, so we think that 2022 will be a year of stagflation for the euro-zone. Data released this morning showed …
Overview – The Russian economy will collapse this year and we expect spillovers from the war in Ukraine to cause a recession in many of the smaller countries in the region, particularly Bulgaria and the Baltic States. Loose fiscal policy and strong labour …
20th April 2022
A win for Marine Le Pen would need to be followed by a strong showing for her party in June’s legislative elections if she is to implement most of her programme. A government of national unity or “cohabitation” would clip her wings, at least on domestic …
Despite facing very strong demand housebuilders appear reluctant to commit to new sites. This is because a shortage of materials is delaying completions, while rising interest rates and the end of the Help to Buy Equity Loan scheme mean demand is …
19th April 2022
ECB President Christine Lagarde suggested at today’s post-meeting press conference that the Bank would be sticking to its plans for policy normalisation, despite inflation surprising to the upside since the last meeting. She highlighted the hit to …
14th April 2022
Today’s ECB statement and press conference indicate that policymakers expect to end their net asset purchases early in Q3 and raise interest rates soon after that. With inflationary pressures still rising, we think they will lift the deposit rate sooner, …
Price pressures building This week brought March inflation releases from Norway, Denmark and Sweden. Norway’s inflation data were a little weaker than expected, with the headline rate at 4.5% and the core rate unchanged at 2.1%. (See here .) Those …
If Chancellor Rishi Sunak was hoping that the economy would provide some respite from the political hot waters that he’s found himself in recently then data released over the past week will have come as another blow. First came figures released on Monday …
Fiscal support may not prevent Q2 contraction Governments stepped up policy support this week to protect against the surging cost of living and, while the measures should help to shield households and firms from surging inflation, we don’t think they will …
Rising market rates tighten conditions Banks expect mortgage availability to fall back in Q2 as lenders push up borrowing rates to reflect increases in Bank Rate, but other lending criteria are expected to be stable or loosen. The availability of mortgage …
While economic growth is forecast to slow, limited supply and further strong growth in e-commerce-related demand mean Belgium industrial rental growth is expected to outperform its pre-pandemic average as well as most other euro-zone markets. Industrial …
Inflation at a 31-year high The stronger-than-expected increase in Swedish inflation in March is likely to give more ammunition to the hawks in the Riksbank, and lends support to our view that the Bank will start to raise the repo rate and press ahead …
Most EMs are not heavily dependent on Russia or Ukraine for their domestic food supplies, but there are key pockets of vulnerability due to large wheat, corn and vegetable seed/oil exports to Turkey, most of the Middle East and North Africa and parts of …
13th April 2022
High inflation means BoE will have to raise rates further than it expects The rise in CPI inflation in March from 6.2% to a new 30-year high of 7.0% was the sixth upside surprise in as many months and will pile more pressure on the Bank of England to …
Mounting signs of stagflation Final inflation data for Germany in March and the first survey of economic sentiment for April underline the acute problems which the German economy now faces. Energy inflation and underlying price pressures are rising even …
12th April 2022
Industry and retail sales on diverging paths Turkey’s activity data for February point to a growing divergence between industry, which is being supported by a weak lira, and retail sales which continues to struggle in face of the surge in inflation. On …
The Bank of Israel kick-started its tightening cycle today with a 25bp interest rate hike to 0.35% and we think it will deliver further hikes at its upcoming meetings, taking rates to around 2.00% in the first half of next year. This is currently more …
11th April 2022
A solid result for incumbent Emmanuel Macron in yesterday’s first round of the French presidential election has helped to allay fears of a Le Pen presidency. But the latest polls still point to a very tight race and the momentum is still with Marine Le …
Lower-than-expected inflation won’t stop Norges Bank hiking Although headline and core inflation came in below expectations in March, underlying price pressures are likely to push both measures up a bit in the coming months. Meanwhile, the Norges Bank is …
While prime industrial rental growth in the German markets is expected to slow in the next couple of years, it will remain above its past averages. But the risks are to the upside given the rise in land and construction costs, which are likely to further …
Recovery slowing and at risk of stalling The news that the economy was hardly growing at all in February suggests the economy had a little less momentum in Q1 than we had previously thought, and increases the risk of a contraction in GDP in the coming …
Largest monthly increase since the late-1990s The 7.6% m/m rise in consumer prices in Russia in March was the highest monthly increase since the 1990s. It pushed the headline inflation rate up to 16.7% y/y and we think it will rise towards 23% y/y in the …
8th April 2022
Earnings expectations for listed euro-zone companies look, as a whole, a bit optimistic to us given the economic impact of the Russia-Ukraine war and Western sanctions. This feeds into our view that the region’s benchmark equity indices will, in general, …
The government’s new energy strategy, revealed earlier this week, will do little to reduce the current upward pressure on inflation. The strategy commits to generating 95% of electricity from ‘low carbon’ sources by 2030, with additional targets to ramp …
Russia hit with new energy sanctions This week’s announcement that the EU will ban the import of Russian coal from mid-August will not have a major impact on Russian export revenues, but it marks a clear shift in the EU’s aim to target Russia’s energy …
A full embargo on Russian energy would force Germany to ration gas supplies to its most gas-intensive companies. This would have unpredictable knock-on effects which would cause a recession. While the short-term fallout for the wider economy would be …
The latest surveys suggest that the euro-zone economy was still growing at a decent pace in March but that firms, consumers and investors expect much worse to come. Table 1 shows some of the timeliest survey indicators immediately before the euro-zone’s …
This month’s French presidential election no longer looks like the shoo-in for incumbent Emmanuel Macron that it did only a few weeks ago. Right-wing nationalist Marine Le Pen’s chances have risen sharply over the past week or so and a surprise victory …
We think that a rebound in employment will help prime office rental growth in Barcelona and Madrid to outperform the euro-zone this year. But this is likely to be short-lived, as the shift to remote working weighs more heavily on office demand in Spain …
While the prospect of a euro-zone break-up looks more remote than during the 2017 French presidential campaign, the possibility of Marine Le Pen taking power is still a major risk to euro-zone financial markets. As we discussed here and here , the recent …
7th April 2022
Rising interest rates have put the outlook for property prices back under the spotlight. But, with lending practices much more restrained in this cycle and the market level loan-to-value ratio well below 50%, we don’t feel overly concerned at the prospect …
ECB will reiterate plan to end asset purchases in third quarter… …but will acknowledge that inflation is much higher than expected. We think it will raise the depo rate as soon as July and lift it to +0.25% by year-end. The Governing Council is likely to …
The risk of stagflation has risen substantially. The latest surveys suggest that the economy held up pretty well in March, but the forward-looking indicators paint a much gloomier picture of the months to come. The Sentix investor sentiment indicator …
Timely indicators suggest that Russian manufacturing contracted by around 20% y/y in March and that consumer spending fell by 10% y/y at the start of April. Russia’s economic downturn looks set to deepen in the coming months as the effects of sanctions, …
Modest growth before the war in Ukraine The small increases in euro-zone retail sales and German industrial production suggest that economic activity was growing at a modest pace in February. With much higher energy prices now weighing on manufacturing …
