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The latest data suggest that the upward pressure on wage growth from labour shortages has a bit further to run. Admittedly, the discovery of the Omicron variant has clouded the near-term outlook for wages and the labour market, with higher virus …
30th November 2021
After surprising on the upside this year, we think that the broad-based decline in Central and Eastern European (CEE) property yields will continue in 2022, albeit at a more modest pace. But with higher bond yields eventually weighing on valuations, we …
It is still very early days in assessing the effects of the latest Covid variant, but we suspect that Omicron has the capacity to cause a new decline in economic activity in the coming months but that it will probably have a relatively small impact on …
29th November 2021
There’s a lot that we don’t know about the new Omicron variant. But if it proves more virulent, the economic fallout would probably be largest in EMs in parts of Africa and South and South East Asia that have lower vaccination rates, more limited fiscal …
The restrictions announced by the government on Saturday in response to the new Omicron COVID-19 variant increase the downside risks to our GDP forecasts and the chances that the Bank of England delays increasing interest rates until next year. And …
Inflation peaks at 6% and will decline regardless of Covid The increase in German inflation to 6% on the HICP measure was partly due to statistical quirks which should be reversed next month. But even the national CPI measure of inflation rose to 5.2%. …
Higher alternative asset yields and falls in office and industrial yields contributed to a further deterioration in property valuations in Q3. (See Chart 1.) The decline in government bond yields since then, which has been reinforced by concerns about the …
Industrial sentiment picks up, but virus outbreaks weigh on services The EC’s Economic Sentiment Indicators for November showed a broad-based rise in industrial sentiment, but services sentiment softened further. With restrictions on activity being …
Development activity rises sharply in October A drop in repayments and rise in development activity resulted in positive net lending in October for the first time since March. Despite this turnaround, credit conditions will remain tight and uncertainty …
Dip in mortgage approvals after stamp duty holiday ends Mortgage approvals remained robust in October after the end of the stamp duty holiday, only easing back into line with their pre-pandemic average. With demand strong, we suspect that mortgage …
Sentiment high before Omicron news Despite the slight deterioration on the month, November’s EC business and consumer survey showed that economic sentiment in the euro-zone was high before the recent news about the Omicron variant. It also confirmed that …
Omicron darkens the outlook for spending The rise in consumer credit in October adds to evidence that economic activity fared well at the start of Q4. But that no longer offers much comfort in light of the discovery of the new Omicron variant. While much …
The most comprehensive statistics on housing supply confirmed that the pause in construction in Q2 2020 caused completions of new homes to drop back. Housebuilding activity has since recovered but materials shortages, the end of the Help to Buy Equity …
More upgrades to the consensus view, but heavily driven by 2021 The resilience of the commercial property market has led to further upgrades to the IPF Consensus view for this year, albeit still below our forecast. Beyond this year, we are more downbeat …
26th November 2021
Turkey tumult Safe to say that this week has been dominated by the collapse in the Turkish lira and we’ve been helping clients navigate through the crisis and its implications across our services. All of the research that we’ve published can be found here …
It is too early to judge how serious the B.1.1.529 variant will turn out to be (though see our initial thoughts here ) but it has already caused European equities to fall by over 2% as travel and energy stocks in particular have tanked on fears of new …
For most of this week our Europe economics team have been re-evaluating their forecasts due to the prospect of more COVID-19 restrictions on the continent. We weren’t. That’s because a combination of higher infections since the summer, high vaccination …
What could the SPR release mean for the Gulf? The US-led release of oil reserves did little to bring down the price of oil as President Biden would have hoped and we suspect that the move is unlikely to drastically alter the outlook for the Gulf …
25th November 2021
The account of October’s ECB meeting suggests that it is by no means guaranteed that net PEPP purchases will end in March. And even if they do, the Bank may well leave open the possibility of re-starting PEPP purchases later in 2022 if needed. Meanwhile, …
Over the last two years, serviced offices have seen more upheaval than most other real estate sectors. But there have been some encouraging signs over recent quarters and long-term trends may have moved in their favour, though we don’t expect improved …
Some commentators have pointed to the slump in the Baltic Dry Index as a sign that shipping bottlenecks are easing. But we think it is more a symptom of lower Chinese steel output and plunging iron ore prices . The Baltic Dry Index (BDI) is a composite …
Persistent supply shortages, fading reopening boosts and tighter financial conditions all pose headwinds to recoveries in Emerging Europe and Latin America over the coming quarters, while cooling construction activity looks set to weigh on growth in …
In comparison to the chaotic scenes in the Riksdag yesterday, the Riksbank’s November meeting was a more sedate affair. While the Bank is in no rush to raise the repo rate, the insertion of a rate hike into the end of its three-year projection period …
Spillovers to other emerging markets (EMs) from Turkey’s ongoing currency crisis have been limited so far and we think this will remain the case even if Turkey’s financial markets remain under pressure . Turkey’s financial markets generally have taken a …
24th November 2021
The Israeli shekel has appreciated sharply in the past few weeks, making it one of the best performing currencies during the pandemic. While we don’t expect this recent strength to continue in the very near term, we think that Israel’s macro fundamentals …
The Turkish lira’s sharp fall yesterday looks similar to the experience of sudden stops elsewhere. In those instances, central banks usually responded with interest rate hikes of around 600bp as well as other regulatory measures, which supported a …
Brexit is undoubtedly a factor behind the slower post-pandemic recovery in UK exports relative to elsewhere. But it doesn’t appear to be the sole reason. Instead, pandemic effects may explain at least some of the shortfall. That suggests some of the …
Estate agents undoubtedly have a very limited number of homes on the books. But the idea that the lack of supply is due to few homes being put up for sale is a misconception. High numbers of transactions inevitably mean that listings are higher than …
We have left our near-term forecasts for energy prices (which are historically high) unchanged after reflecting on the latest weather forecasts for the upcoming Northern Hemisphere winter. Temperatures are expected to be slightly higher than average over …
Inflation across Central and Eastern Europe (CEE) has continued to surge and now sits at its highest level in around 20 years. This can be partly attributed to global factors, such as rising energy prices and supply chain disruptions, which are eventually …
The sharp tightening of financial conditions in Latin America and Emerging Europe will add to headwinds facing both regions and feeds into our view that recoveries there are entering a slower phase. Financial conditions in Asia have tightened too, albeit …
Slowdown about to get much worse The fall in the Ifo Business Climate Index (BCI) for November was in line with expectations and suggests that the German economy was struggling even before the recent tightening of Covid restrictions. Things will be much …
The rebound in economic activity and robust investor demand paved the way for a continued improvement in Scandinavian and Swiss property markets in Q3. Office and industrial values rose further, as strong competition pushed down yields. (See Chart 1.) …
23rd November 2021
Germany’s worsening Covid situation means much of the country could be subject to much tighter restrictions soon, potentially knocking around 0.25%-pts off euro-zone Q4 GDP. Even if other countries impose less draconian rules, consumer caution might mean …
With the Turkish lira down by 9% so far today and 20% over the past week, the currency is now firmly in crisis territory. Higher inflation and tighter domestic financial conditions are likely to sap Turkey’s recovery. But given the small trade and …
European natural gas prices were in the news again last week, soaring by 18%. Given stocks are still low and there are few signs of extra flows from Russia, we think that prices will remain high in the near term . The European natural gas market has …
Signs of higher cost inflation add to Bank’s inflation concerns The composite activity PMIs hardly changed in November as the economy held up fairly well despite continued supply disruptions and shortages. Meanwhile, signs that price pressures continued …
The Turkish lira has plunged this morning after President Erdogan signalled yesterday that policymakers have no appetite to respond to the currency’s recent falls by hiking interest rates. Further falls in the lira are likely to lie in store and we think …
Recovery continues, but outlook darkening The unexpected rise in the euro-zone Composite PMI in November suggests that the region’s recovery has not lost further momentum. But with supply shortages still acute, Covid restrictions being tightened and price …
Economy starts Q4 on strong footing The latest data suggest that Poland’s economy started Q4 with solid momentum as industry and retail sales expanded strongly in October. We think that industry will continue to hold up well in the coming months, but …
Although the economic backdrop has recently become less favourable for UK asset prices, we expect that the economic recovery will regain some vigour in the second half of next year, that CPI inflation will fall close to the 2.0% target in late 2022 and …
22nd November 2021
The Bank of Israel (BoI) left its policy rate on hold at 0.10% as expected at its meeting today, confirmed that it will end its bond purchase programme next month and emphasised that it will continue to intervene in the FX market for as long as necessary. …
Turkey’s banks are generally in a good position to cope with sharp falls in the lira: they have large capital buffers to deal with a rise in non-performing loans, off-balance sheet instruments to mitigate the threat from currency mismatches on their …
CEE property values completed the final leg of their recovery in Q3, fully reversing the nearly 5.5% peak-to-trough drop in 2020. With rents barely moving on the quarter, falls in yields did all the heavy lifting in driving capital values higher. CEE …
This week showed that the energy crisis is not in the rear-view mirror just yet . Germany’s energy regulator suspended its certification process of the Nord Stream 2 pipeline on Tuesday, owing to issues regarding the organisational structure of the …
19th November 2021
Google mobility data show a much fuller recovery in visitors returning to retail and recreation than to the workplace. This supports our view that structural changes will weigh on the office sector more than retail over the next few years, helping to make …
Turkey roasted In a turbulent week for Turkey, we’ve written various pieces on our services looking at the implications so we’ll summarise the key points in this Weekly . We looked at how a sell-off in the lira could damage the economy and financial …
Overview – The economic recovery has stalled and the near-term outlook is softer. Meanwhile, higher inflation is expected to bring interest rate hikes as early as December 2021, though we think that the pace of tightening will be fairly gradual. The …
“Given these two-sided risks – weaker activity and higher inflation – the labour market story really is the crucial part of it, and we haven’t yet seen enough of that story, post furlough scheme.” ”Don’t forget what our framework is. It’s about inflation. …
After weeks of worrying about surging inflation and what the ECB will do next, developments this week were a stark reminder that the pandemic is far from over. The rapid deterioration in the Covid situation in Austria over the past week has driven the …
