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The MPC will probably revise up its near-term inflation forecasts. Only Saunders to break ranks to vote in favour of an early end to the Bank’s net asset purchases. The MPC is unlikely to signal interest rate hikes are getting closer. While the Bank of …
29th July 2021
Take-off in German inflation to be temporary The increase in German inflation to nearly 4% on the CPI measure was partly due to last year’s VAT cut and partly due to rising energy and food inflation, all of which should prove short-lived. Inflation is …
Office and retail pessimism eases, while industrial sentiment still buoyant Surveyors indicated that both occupier demand and investment enquiries improved in Q2 on the back of stronger industrial activity. Looking ahead, expectations for office and …
Resurgence of virus triggers some rise in consumer caution The money and credit data showed that consumers were willing to take on more debt in June. However, with consumers accumulating excess savings at a faster pace, there were signs that the …
Sentiment drops back, price pressures building The EC’s Economic Sentiment Indicators showed a surprising fall in regional sentiment in July, but we suspect that this was a blip rather than the start of a trend. We still expect growth to be strong in Q3, …
Recovery still going strong Economic sentiment in the euro-zone continued to improve in July as restrictions were lifted further. The EC Survey also showed that persistent input shortages are causing price pressures to grow across all sectors. That said, …
The Q2 data showed that pan-European (excl. UK) transactions improved after their Q1 lows. But international travel restrictions, structural shifts in the office and retail sectors and tougher credit conditions mean that the recovery in investment …
Rush for stamp duty relief drives borrowing to record high A surge in borrowing ahead of the tapering of the stamp duty holiday in July saw new mortgage lending set a fresh record high. Meanwhile, robust mortgage approvals pointed to activity remaining …
Swedish GDP growth set to accelerate further in Q3 The 0.9% q/q increase in Swedish GDP in Q2 was a touch weaker than our forecast (+1.0%) but stronger than the consensus (+0.7%). While the best of the rebound in the industrial sector may be behind us, …
Russia’s recovery continues at a solid pace in Q2 Russian activity data for June showed that the economy expanded at a solid pace in Q2, with overall GDP probably returning to just shy of its pre-pandemic level. While the re-opening boost will fade in Q3, …
28th July 2021
House prices lose a little momentum The drop back in the Nationwide house price inflation in July suggests that the tapering of the stamp duty holiday has taken a little heat out of the market. But as the tax break was just one of many factors that have …
Less favourable demand fundamentals and less scope for yield compression mean that European residential returns are likely to be lower in the coming years than over the previous decade. An analysis of the relative outlook across selected western European …
27th July 2021
The larger-than-expected 30bp interest rate hike by Hungary’s central bank (MNB) today was accompanied by hawkish comments that send a strong message about its intention to bring inflation back to its target. The tightening cycle is likely to be sharper …
We think that euro-zone headline inflation will rise further than most expect in the second half of this year. But rather than reaching the levels of around 5% seen in the US, it is likely to top out at about 3% before falling back sharply in 2022. The …
Economy still on track for strong recovery The small decline in the Ifo Business Climate Index in July suggests that the rebound in Germany may be losing some momentum. But Germany will still post very rapid GDP growth in both Q2 and Q3 and should regain …
26th July 2021
The ECB followed up on its new strategy this week by raising the bar for future interest rate hikes. (See here .) The key change is that the Governing Council now says it will leave policy rates at current rates or lower until it sees inflation reaching …
23rd July 2021
The acceleration in all-property capital growth in June reflected a sharp fall in yields and strong rental growth. But, even as a fast economic rebound boosts occupier demand in the coming months, we think this rate of growth in values will not be …
Next year’s games will be better for Team N&S While the Swedish women’s football team humbled the USA in the first game of their Olympic campaign this week, Switzerland and the Nordic countries don’t tend to excel in the summer games. Indeed, as shown in …
Recovery becoming more tepid The second consecutive decline in the flash composite PMI in July came as no surprise to us as we expected the pace of the economic recovery to naturally slow after the big gains following the reopening of retail and …
A rise in virus cases in Israel has prompted the government to re-impose restrictions on activity, including mask mandates and vaccine certification for large events. There are signs that the Pfizer vaccine may be much less effective at preventing …
Rising activity, rising inflation July’s euro-zone PMIs confirm that the economy is still rebounding rapidly and that price pressures are continuing to build. While the Delta variant poses a risk to our above-consensus GDP forecasts, it seems most likely …
Some signs of softening The underlying trend in retail sales volumes is a bit weaker than the 0.5% m/m rise in June suggests. And other evidence indicates that the resurgence in the virus and the “pingdemic” may have taken some oomph out of the overall …
The ECB followed through on its strategy review today by raising the bar for interest rate hikes in language which was probably a touch more dovish than expected. The Bank made no change to its guidance on asset purchases, but we think it will continue …
22nd July 2021
While the resurgence in COVID-19 cases that has recently weighted on UK equities, the pound and 10-year gilt yields (see Chart 1) is clearly a downside risk, our view that it won’t deal a big blow to the global or domestic economic recoveries suggests …
As elsewhere in mainland Europe, activity in Switzerland and the Nordic economies rebounded in Q2 as services sectors re-opened and the strength of global trade has buoyed exports. Our GDP forecasts for 2021 are generally above the consensus and output …
More remote working is pushing all occupiers to reassess their office space, but we think that rental growth for prime offices in Brussels should hold up better than the wider market. Following a strong start to the year, the recovery in occupier activity …
The pick-up in the euro-zone’s vaccine rollout means governments are unlikely to reintroduce significant new restrictions even as cases rise. So while the Delta variant might take some of the gloss off the recovery, it won’t derail it. But international …
21st July 2021
Overview – Rapid recoveries are underway across the region and GDP should return close to its pre-pandemic path sooner than in most other EM regions. While the spread of highly transmissible virus strains poses the greatest threat to the near-term …
After surging over the past year, the latest data provide signs that EM goods exports have now passed their peak. However, they are still likely to stay at elevated levels for some time yet. Our seasonally-adjusted measure of aggregate EM goods exports …
We think a reversal of the factors that have fuelled the recent surge in European natural gas prices, namely high LNG prices, constrained supply and depleted stocks, will bring prices back down to earth by early 2022. However, a strong economic rebound …
20th July 2021
While longer-term drivers are supportive of flexible offices, we think demand for space will be held back by the slow return of workers to the office, by more competition from home offices and by high levels of cheap, vacant traditional space. A year ago, …
Russian inflation shows no sign of letting up and looks set to remain above the central bank’s 4% target until at least the end of next year. With households’ inflation expectations also rising, we think the central bank will feel the need to step up the …
19th July 2021
Israel’s virus wave could be a warning for others The experience of Israel in recent weeks serves as a reminder that vaccine campaigns across Emerging Europe still have some way to go and that we are likely to have to learn to live with COVID long term. …
16th July 2021
Earlier today we published our European Economic Outlook , in which we revised up our euro-zone GDP growth estimates this year and next, to an above-consensus 5.0% and 4.5% respectively. The rebound will be faster in the core countries than in the …
The slow economic recovery, more remote working and a high supply pipeline are key reasons for our below-consensus forecasts for prime office rental growth in Lisbon in the coming years. As highlighted in a recent Update , we expect weaker growth in …
Overview – The euro-zone is on the way to an almost full recovery. We expect Germany to regain its pre-pandemic level of activity later this year and the tourist-dependent southern countries to do so next year. The Delta variant may lead to some voluntary …
You guessed it: no change at the SNB The Swiss National Bank is nothing if not consistent. It has left interest rates unchanged since 2015 and is not shy about using the “copy and paste” function in its press releases. So it seems only natural that …
In response to the jump in CPI inflation from 2.1% in May to 2.5% in June (see here ) and yet more signs that the labour market is bouncing back (see here ), two members of the Monetary Policy Committee (MPC) this week indicated that policy will need to …
Falling virus cases, strong economic recoveries and/or inflation worries prompted several more EM central banks – those of Czechia , Chile , Hungary and Mexico – to tighten monetary policy in the past month, joining Russia and Brazil. And a few others, …
15th July 2021
Still few signs of widespread pressures building The rise in headline inflation in Israel to a near 8-year high of 1.7% y/y in June was largely a result of base effects that pushed up food inflation. The muted 0.1% m/m rise in prices suggests that …
Governing Council will not change its key policy settings next week. However, it will amend its forward guidance to reflect its new, more dovish strategy. The new guidance will push back the likely timetable for any future rate hike. The ECB will set out …
Semiconductor shortages to weigh on auto production for some time The euro-zone’s industrial sector took a step backwards in May as the global semiconductor shortage hit auto production. Supply disruptions look set to drag on for a while yet, constraining …
14th July 2021
Decline in inflation will reassure Riksbank The further fall in Swedish headline inflation in June is at odds with the recent data from the US and the UK, but came as no surprise given the recent drop in electricity prices. And with non-energy inflation …
With price pressures in the construction sector likely to prove transitory, we think that the hit to activity will be small. That said, we expect construction activity to slow over the coming years on account of lower office completions as the sector …
While London rents are set to reverse some of the fall of the past year, we doubt the premium of rents in the capital over the national average will return to its pre-virus level. But outside London rental growth is set to accelerate sharply. London …
13th July 2021
Loose for (slightly) longer The ECB’s new symmetric 2% inflation target, with some tolerance for overshooting, is not as radical as it could have been, and does not grant the Bank as much flexibility as the Fed. But it is an important change that means …
9th July 2021
SNB policy tied to the ECB’s The adoption of a 2% inflation target by the ECB this week, and the announcement that the Bank will allow inflation to overshoot if needed, will not have been a he surprise to policymakers in Switzerland and the Nordics. …
While we don’t think that risky assets are in a systemic bubble, we suspect there is limited scope for further large increases in valuations to drive their prices higher over the next few years . Despite the fall in equity markets this week, the …
Subdued core inflation will not prevent September rate hike The small increase in headline CPI inflation and small decrease in the Norges Bank’s target measure of inflation will make no difference to the immediate outlook for monetary policy, not least …
Poland’s central bank left interest rates on hold today and, while it revised up its GDP growth and inflation forecasts, there was little sign in the accompanying press statement that the balance on the MPC has shifted further away from the ultra-dovish …
8th July 2021
