There are still plenty of downside risks to our below-consensus forecast that the economy will stagnate in 2024 with GDP growth of 0.0%. (See here .) But the news over the past week has highlighted three upsides. First, the slide in 2-year and 5-year …
5th January 2024
Will the BoK turn dovish? The Bank of Korea looks almost certain to leave interest rates unchanged at its meeting on Thursday. But with inflation falling and concerns about the economy mounting, we expect the central bank to strike a more dovish tone …
Argentina and the IMF to tango again? An IMF delegation is set to meet with Argentine officials in Buenos Aires today to discuss the country’s $44bn program that – in the Fund’s words – had “ gone off track ” in August under the previous Peronist …
Employment gains still dominated by non-cyclical growth The slightly bigger-than-expected 216,000 gain in non-farm payrolls (consensus estimate was 170,000) in December coupled with a second consecutive 0.4% m/m gain in average hourly earnings means that …
This page has been updated with additional analysis since first publication. Jump in wage growth a concern for the Bank The unchanged level of employment in December is consistent with the message from the business surveys that labour demand has weakened …
Data released this week support our key calls on the euro-zone for the upcoming year. First, the economy looks likely to be weaker than most anticipate. Although the final euro-zone Composite PMI for December, released on Thursday, was revised up from the …
Commodities Overview Chart Pack (Jan. 2024) …
Stubbornly high inflation pushed risk-free rates, and yields, somewhat higher than we had anticipated by the end of 2023. By contrast, rental growth proved surprisingly resilient even as the economy slowed to a crawl. But with economic growth set to be …
Our forecast of earlier Bank Rate cuts means that mortgage rates will be significantly lower than we had anticipated this year, which will lead to a stronger recovery in demand from mortgaged buyers. With little reason to think that demand from cash …
PSL injection to provide modest lending boost While bond yields in developed economies have regained some ground this week, the opposite has been the case in China, with the 10Y CGB yield dropping to a near four-year low of 2.52% today. This suggests …
This page has been updated with additional analysis since first publication. Jump in headline inflation is just a blip December’s jump in headline inflation in the euro-zone was widely anticipated and entirely due to a base-effects driven increase in …
Falling interest rates will herald the end of the commercial property downturn in 2024. However, owing to price declines in H1 we still think values will end the year lower. Our forecast for marginally positive euro-zone returns – while a considerable …
This page has been updated with additional analysis since first publication. Construction PMIs still subdued in December The rise in the headline CIPS construction PMI from 45.5 in November to 46.8 in December was driven by the increase in the housing …
Lower mortgage rates see house prices jump in December The big 1.1% m/m increase in the Halifax house price index confirms that falls in mortgage rates are translating into renewed increases in house prices. Given further recent falls in mortgage rates, …
Remittance inflows to remain robust The World Bank reported in its latest Migration and Development Brief that India remained the world’s largest recipient of remittances in 2023. Remittances jumped to US$125bn (3.4% of GDP) last year, from US$111bn in …
Manufacturers keep losing market share overseas Just as we predicted a few months ago, the outperformance of Japan’s stock market relative to US stocks has unwound as the yen has strengthened in recent weeks. (See Chart 1.) Chart 1: Yen/Dollar vs. …
A cooling economy will give the RBA cover Earlier this week, the Australian Financial Review published its quarterly survey of economists. By and large, the perception amongst forecasters seems to be that the RBA will retain its hawkish bias for the …
Energy prices will fall in 2024, although we think the big falls are now behind us. Supply has not been directly affected, but the Israel-Hamas conflict together with the tensions in the Red Sea have increased volatility in energy markets. We expect oil …
4th January 2024
The redirecting of trade ships away from the Red Sea and the associated rise in shipping costs are unlikely to lead to a resurgence in global inflation. However, if the warfare underpinning the disruption to shipping escalates into a wider regional …
While we estimate the US dollar remains only somewhat above “fair value”, the valuations of some other major currencies are at extreme levels. For these currencies – notably the Mexican peso and Czech koruna – we think reversion towards fair value could …
We expect the Japanese yen to make larger gains this year than the Chinese renminbi. The yen and the renminbi, which had rallied over November and much of December, have begun the year on the back foot. Soft PMIs in China earlier this week (even though …
While equities in China might make up some lost ground over the next few months relative to those in India, we suspect they’ll underperform over the longer term. In the fifteen years or so that preceded the COVID-19 pandemic, equities in China and India …
The run of softer-than-expected news on CPI inflation and wage growth means we now expect the Bank of England to cut interest rates sooner than before. Our forecast is that rates will be cut from 5.25% in June and will fall to 3.00% in 2025. The markets …
Egypt tightening the purse strings as IMF deal nears In Egypt, 2024 started off with a raft of price hikes as officials seek to tighten fiscal policy and warm relations with the IMF ahead of an anticipated enhancement of the current deal. The increases …
Office-based jobs contractions focused in Midwest and West Coast Total employment growth in November across our 30 metros was weak compared with the rest of 2023, growing by 0.3% 3m/3m once seasonally-adjusted. On average, office-based jobs contracted for …
In another year of upheaval for commercial property in Europe, our forecasts were broadly correct in terms of direction, but underestimated the severity of the downturn. Some, though not all, of this was the result of unexpected macroeconomic factors, …
Rebound in inflation won’t last The jump in Germany’s headline inflation rate in December came as no surprise as it was driven by energy price subsidies introduced more than a year ago. With core inflation continuing to trend down, it should not affect …
This page has been updated with additional analysis since first publication. Lower mortgage rates will ease the squeeze, but still some pain to come November’s money and credit data suggest that the recent falls in mortgage rates will stimulate new …
Strong November lending, but subdued investment volumes Net lending to commercial property increased for the ninth consecutive month in November, but that wasn’t reflected in investment volumes which dropped further. But throughout H1 2024 we expect …
Rise in mortgage approvals set to continue The rise in mortgage approvals in November was little surprise given the sharp drop back in mortgage rates since July. Given recent further falls in swap rates, mortgage rates are likely to continue to fall from …
Mexico has become an investor darling, with investment surging, GDP growth beating expectations and the currency climbing to multi-year highs. This turnaround in the economy’s fortunes has been pinned on the “nearshoring” of manufacturing supply chains, …
Output from Nigeria’s oil refinery sector has been in terminal decline, inflating the fuel import bill at a time when the economy is already suffering from a shortage of hard currency. The new Dangote refinery and President Tinubu’s broader plans to …
This page has been updated with additional analysis since first publication. PMIs point to recession The final Composite PMI for the euro-zone in December was revised up significantly from the flash estimate of 47.0 to 47.6, meaning that it was unchanged …
Australian household finances are in better shape than the plunge in the household savings rate would suggest. While we still think that GDP growth will slow more sharply than expected over the coming quarters, there’s a clear risk that households will …
Minutes more nuanced than expected, given post-FOMC hawkish chatter The minutes of the mid-December FOMC meeting were slightly more dovish that we were expecting – more in line with the message delivered by Fed Chair Jerome Powell in his press conference …
3rd January 2024
While SVB’s collapse in March and sharper rises in interest rates led to larger-than-expected falls in commercial real estate (CRE) values, our expectations for sector and regional winners were broadly correct. A year ago, we outlined our key calls for …
With most major bond and equity markets on track for a second down day to start the new year, it’s fair to say that financial markets have started 2024 with something of a mild hangover. While reading too much into the first couple of days in the working …
Interest rate cuts across advanced economies this year will give some boost to economic activity, although it will remain relatively subdued. Nonetheless, industrial metals demand growth will pick up. Supply growth will cap price rises for some metals, …
JOLTS data point to slower wage growth The further decline in job openings to 8.79 million in November, from 8.85 million, was a bit gloomier than expected given that the JOLTS measure had previously dropped below the level implied by the both more timely …
A version of this article appeared in the Globe and Mail on 3 rd January, 2024. Read that version here . The giant leap forward for artificial intelligence has inevitably led to concerns about the potential for mass unemployment. Tripping over …
This page has been updated with additional analysis since first publication. Modest rebound to end a dismal year Despite the modest rise in the ISM manufacturing index to 47.4 in December, from 46.7, the survey indicates that conditions in the factory …
It is no secret that strong immigration is pushing up rents but, as rent growth for new tenancies was little changed last year, this does not fully explain the surge in CPI rent inflation. The CPI measure is picking up unusually large rent increases on …
In a change to our previous forecast, we now think that the first interest rate cut from the Bank of England will happen in June this year rather than in November. We still think that interest rates will be reduced from 5.25% now to 3.00% in 2025. That’s …
Mortgage rates below 7% spur further recovery in mortgage demand Mortgage rates dropping below 7% were the catalyst for a marked uptick in mortgage applications for home purchase in December. The 7.1% m/m rise in mortgage applications for home purchase …
In the past few years, Egypt’s economy has been hit by the successive impacts of the pandemic, the war in Ukraine, and, more recently, currency devaluations. With further currency falls on the cards, high inflation, and tightening of fiscal and monetary …
Headline inflation picks up, but core inflation losing momentum The rise in Turkish inflation to 64.8% y/y in December was broadly in line with expectations and the breakdown provided some signs that underlying price pressures continue to soften. We think …
Note: Join our post-Taiwan election online briefing on Monday, 15th January to find out what the results mean for its economy and for US-China relations. Register here for the 20-minute session. In a busy electoral calendar, seven countries in Emerging …
This page has been updated with additional analysis since first publication. Factory activity likely to hold up well in 2024 The manufacturing PMI survey for December suggests that activity lost some momentum at the end of 2023. That said, we think that …
Will inflation continue its retreat into 2024? When will the Fed start easing policy, and by how much will it cut rates over the coming year? Our US team held an online briefing on the December CPI release and the outlook for inflation and Fed …
2nd January 2024
In a busy year for elections worldwide, Taiwan’s is likely to be among the most consequential. 2023 was probably Taiwan’s weakest year of economic growth since the Global Financial Crisis – and the coming year isn’t likely to be much better as external …
