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The jump in transactions during the pandemic was larger in London than other regions as the market didn’t experience the same drop in supply as elsewhere. That reflected many existing homeowners adjusting to remote working by moving further afield, giving …
25th January 2022
Euro-zone inflation would be even further above target if owner-occupied housing costs were included in the region’s headline measure. Their formal inclusion won’t take place for a few years yet, but the ECB has pledged to take them into account in the …
Economy stabilising The increase in the Ifo Business Climate Index (BCI) in January provides more evidence that, after contracting in late 2021, conditions have stabilised at the start of the year. With disruption from the Omicron wave likely to ease in …
Inflation a headache, but Chancellor still has wiggle room Stronger tax revenues were just enough to offset big rises in debt interest costs in December. But we don’t expect this to last: further rises in inflation will mean borrowing soon overshoots the …
Omicron hangover to be short-lived, signs of shortages easing The third consecutive decline in the composite PMI indicates that the Omicron variant weighed further on activity in January. But the recent fall in COVID-19 cases, relaxation of restrictions …
24th January 2022
Sluggish January, but outlook improving The small decline in the Composite PMI in January confirms that Omicron has taken a toll on the services sector, though Germany performed surprisingly well. We think governments will ease restrictions sufficiently …
#Commercial property ended last year strongly. Annual rental growth climbed to a five-year high, while annual total returns crossed the 20% level. This was largely the result of dynamism in industrial, though all sectors saw positive annual returns, even …
21st January 2022
Italy’s presidential election, which will begin next week, threatens to reignite political uncertainty that has been quiescent since Mario Draghi became prime minister last year. While we agree that losing Mr Draghi as prime minister would put the …
Consumer confidence proving to be resilient January’s broadly unchanged reading for consumer confidence suggests that household spending might be holding up fairly well, despite a surge in Covid cases. We expect consumption to recover quickly once the …
Ukraine’s markets in for a tough few months A positive reaction to today’s talks between the US and Russia may have brought some relief but, even if a renewed conflict doesn’t materialise, local markets are likely to face a difficult few months. Tensions …
The key event of this week (for us at least) was the release of our European Economic Outlook setting out our forecasts for 2022 and 2023. We think the euro-zone will come through the Omicron wave of coronavirus relatively well but think growth will be …
Denmark achieves a geranium “greenium” Denmark joined the growing list of countries to offer a green sovereign bond, on Wednesday. The country is far from a trailblazer in the area, with the Netherlands, Germany, and the UK all amongst those to have …
While Boris Johnson has survived another week without a formal challenge on his leadership, next week’s publication of the (delayed) report on “Partygate” by Sue Gray may well determine his fate one way or the other. We highlighted in last week’s UK …
Huge fall points to bigger Omicron hit The fall in retail sales volumes in December was bigger than expected and supports our view that the Omicron outbreak in the run-up to Christmas may have dragged down GDP by 0.5% m/m, if not more. The 3.7% m/m fall …
We expect UK retail sales to have fallen in December (Fri. 07.00 GMT) Japan’s headline inflation probably edged up to 0.8% last month (Thu. 23.30 GMT) Read our key calls for economies and markets in the year ahead here Key Market Themes For the first time …
20th January 2022
The long and detailed account of December’s Governing Council meeting underlines that there are significant differences of opinion about the inflation outlook. We suspect that the balance of opinion will shift in the coming months towards forecasting …
The looming squeeze on real wages means that the near-term outlook for consumption and GDP has weakened. That said, we don’t expect anything as bad as the squeeze in 2008-14. In fact, real household disposable income may well recover by early 2023. Real …
Overview – We expect regional GDP growth to come in below expectations this year as high inflation erodes households’ real incomes and policy becomes more restrictive. Despite this view on the growth outlook, we think that persistent capacity constraints …
The industrial sector had its best year in over three decades in 2021 as demand soared and supply struggled to keep up. Although we expect the sector to perform well again this year, we don’t think that yields can continue to fall at the rate seen in …
Turkey’s central bank (CBRT) followed kept its one-week repo rate on hold at 14.00% today and, even though inflation is likely to breach 40% in the coming months, President Erdogan is unlikely to permit interest rate hikes. We think it’s more likely that …
Core inflation to remain high Euro-zone inflation is likely to have peaked at 5% in December, with energy inflation set to fall sharply this year. But we think that core inflation will settle at around 2%, prompting the ECB to prepare the ground for …
After twelve years in the job, Øystein Olsen was never going to spring a surprise at his last meeting in charge of the Norges Bank. Instead, the Bank left its policy rate unchanged at 0.5% and reiterated that it “will most likely be raised in March”. We …
With the notable exception of Turkey, net capital outflows from emerging markets have eased over the past month. However, the global backdrop for EMs this year will be challenging, particularly for those countries where external vulnerabilities are high …
19th January 2022
A breakdown of house price growth over the past two years confirms that remote working has altered the nation’s housing needs. But what households can afford, rather than what they desire, will be a more important driver of house prices over the next few …
German inflation to remain uncomfortably high Final inflation data for December showed that the decline in Germany’s HICP inflation rate to 5.7% was due to energy and services. We expect both headline and core inflation to fall this year, but only to …
Target-busting inflation heading to 7% After rising from 5.1% in November to 5.4% in December, CPI inflation is now further above the Bank of England’s target than at any point since the UK first adopted an inflation target in October 1992. (See Chart 1.) …
OPEC under-production likely to continue OPEC continued to raise output by less than its target in December. However, the group is still steadily raising output, which is a key reason why we see the market moving into a surplus this year . The OPEC …
18th January 2022
The shift to current account surpluses in Indonesia and South Africa suggest that these economies may be better placed to weather any fallout from rising US interest rates than in the past. But current account deficits have become an increasing cause for …
While we now expect the ECB to start its tightening cycle earlier, we don’t think the change is significant enough to prevent further property yield compression over 2022-23, albeit at a slower pace than in 2021. We recently revised our ECB policy view …
Coping with furlough and Omicron, but real wages will fall further The labour market appears to have tightened after the end of the furlough scheme and at the start of the Omicron wave. So even though real wages are now falling and will decline further, …
The Riksbank has learnt from its past tendency to project rate hikes that never arrive. But the single repo rate rise by end-2024 that it currently projects is stretching the limits of plausibility in the other direction. Of course, policymakers will …
17th January 2022
Overview – Although the hit to households’ real incomes from a bigger surge in CPI inflation than most expect (to a peak of almost 7% in April) explains why we think GDP growth will be slower this year than the consensus forecast, we still think that the …
Having been hit hard in 2020, improving economic conditions supported flexible office take-up in 2021, albeit caution and consolidation limited the net increase in space. While we expect take-up to remain low compared to the pre-virus period, we think it …
Despite several events in the US this week which would usually point to a stronger dollar – the highest US inflation print since the early 1980s , hawkish comments from both Chair Powell and Vice Chair Brainard, and a sharp rise in short-dated government …
14th January 2022
The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The …
The Omicron variant of COVID-19 is causing new virus cases to surge in the emerging world. (See Chart 1.) Many EMs are reporting record daily cases or that new infections are rising sharply. South Africa ’s experience offers some hope – cases are now …
Russia-Ukraine tensions hit a new crisis point A tense week of negotiations between Russia, the US and NATO have ended with what now seems to be a more serious ratcheting up in tensions that is likely to weigh on local financial markets for some time. The …
It is striking how quickly the political momentum has shifted. This time last week, Prime Minister Boris Johnson was probably feeling smug about his decision not to ramp up the COVID-19 restrictions in the wake of the Omicron wave. This week, he has faced …
Real estate potentially has a significant role to play in helping achieve ambitious climate targets. We have estimated the size of the risks in the transition to net zero for the commercial property markets that we cover. This risk varies widely across …
Ha det bra, Governor Olsen You don’t have to be Sherlock Holmes to deduce that next Thursday’s announcement from the Norges Bank will be a non-event in terms of policy action. Having raised interest rates to +0.50% at the last meeting, in December , we …
Economy close to standstill in Q4 The latest activity data for the final quarter of last year are a mixed bag. The industrial production data for November published this week suggest that manufacturing output may have declined in the fourth quarter. (See …
Recent data have reinforced concerns about inflation risks in the UK. We remain of the view that property investments provide only limited long-term protection against higher prices, but of the individual asset types, we think industrial and residential …
Disappointing recovery Provisional data showing that Germany’s GDP increased by 2.7% last year and news that it shrank in Q4 underlines that its recovery has lagged many of its peers, including the US, France and the UK. We think that German GDP will …
More ammunition for the Riksbank’s hawks The increase in Swedish CPIF inflation in December will embolden the hawks at the Riksbank. While we expect energy effects will drop out this year, continued supply-chain problems and rising inflation expectations …
Omicron may drag GDP back below its pre-pandemic level Although the effects of the Omicron COVID-19 wave will probably mean that the economy falls back below its pre-pandemic peak by January after having surpassed it for the first time in November, that …
Norwegian policymakers will keep interest rates on hold, at +0.50%, next Thursday, before resuming their tightening cycle in March. We forecast one rate hike per quarter this year, which is one more than investors have currently priced in over the period. …
13th January 2022
We think that rate differentials and commodity prices will be the key factors driving the relative performance of six “high-beta” DM currencies in 2022, continuing last year’s trend. We expect all these currencies to lose ground against the US dollar this …
Credit availability to remain good, but mortgage rates to rise The Q4 credit conditions survey suggests that, while credit conditions will remain loose, scope for lenders to absorb further increases in interest rates into their margins has run out. A …
We expect policymakers in Denmark and Switzerland to match the 50bps of interest rate hikes that we now forecast in the euro-zone next year. And against the backdrop of rising global interest rates, we now think that the Riksbank will start a tightening …
We think that emerging market (EM) equities will continue to underperform their developed market (DM) peers over the next couple of years, even if that underperformance is far less stark than it was in 2021. EM equities underperformed those in the …
