Overview – The fiscal loosening announced in October’s Budget means inflation and gilt yields are now set to be higher than previously expected over the next few years. And with the spread of gilt yields over property yields currently narrow, that implies …
22nd November 2024
We remain sceptical that deregulation will provide a disinflationary boost to the economy’s supply side and we suspect that any reduction in government spending or headcount would turn out to be modest. Libertarian-minded Republicans have long-believed …
While it was widely expected that CPI inflation would rise above the 2.0% target in October, the rebound from 1.7% to 2.3% was stronger than most forecasters had anticipated. And our view is that CPI inflation will rise further, to nearly 3.0% in January …
Russia’s war in Ukraine escalates Tensions between Russia and Ukraine escalated this week, with the US shifting its strategy to give Ukraine the go-ahead to use Western-provided long-range weapons on Russian territory and Russia launching an …
Earlier this week, our markets team revised our bond yield forecasts, raising our 10-year US Treasury yield forecast on the back of Trump’s election, but generally lowering our forecasts for euro-zone yields. (See here .) We now forecast the 10-year …
The resilience of commodity trade: a history lesson The election victory of Donald Trump and the prospect of renewed trade restrictions has naturally sharpened attention on the potential impact of tariffs on trade flows, including on commodity trade. Our …
Consumption outlook improving fast The strong increase in retail sales volumes in September confirms that they grew by around 5% annualised last quarter, suggesting that household consumption growth picked up strongly. The October preliminary estimate …
Unsurprisingly, a second Trump presidency will support oil and gas production while rolling back environmental regulations. The fate of the Inflation Reduction Act is less certain, given that the support for manufacturing investment aligns with Trump’s …
Fall in inflation leaves door open for December cut The larger-than-expected fall in Mexican inflation in the first half of November, to 4.6% y/y, alongside easing core price pressures and the relative resilience in the peso mean that Banxico is likely to …
Our base case is that protectionist policies from the US next year will have only a small economic impact on Europe, but the fallout will vary between countries and there are risks of greater damage if the trade conflict escalates. Meanwhile, the EU will …
More policy support is needed When the Bank of Korea started its easing cycle in October , it pushed back strongly against the prospect of back-to-back rate cuts. Most analysts still expect rates to be left unchanged at 3.25% when the central bank meets …
Air pollution a modest but persistent headwind Even by India’s unenviable standards, there has been a marked deterioration in air quality over recent weeks. Air pollution in New Delhi has been above the government’s “severe” threshold for much of the …
This page has been updated with additional analysis since first publication. Budget and Trump may have triggered slowdown in activity At face value, the fall in the composite PMI from 51.8 in October to 49.9 in November suggests that real GDP growth is …
With the dust settling on Trump’s victory earlier this month, this Update takes stock of what has happened across currencies, bonds, and equities; the reasons for these moves; and what we think will happen next. As was the case after Trump’s win in 2016, …
Local governments ramp up support Efforts by the Ministry of Finance (MoF) to get local governments to make greater use of their existing fiscal space are starting to pay off. Data published this week showed that fiscal spending accelerated sharply in …
This page has been updated with additional analysis since first publication. Economy stalling again The slump in the euro-zone Composite PMI in November suggests that the economy is losing momentum in Q4 and supports our below-consensus growth forecast, …
This page has been updated with additional analysis since first publication. Slow start to the golden quarter, but the outlook is improving The bigger-than-expected 0.7% m/m fall in retail sales in October (consensus forecast -0.3% m/m) suggests that …
Risks are shifting towards more BoJ tightening The stars are aligning for our long-held view of another rate hike before year-end. For a start, the LDP/Komeito coalition and the DPP have agreed on a ¥13.9tn (2.3% of GDP) supplementary budget. The LDP …
Student numbers set to fall regardless The minutes of the November RBA meeting were rather hawkish. The Bank noted that even if inflation weakened more sharply than expected, it would “need to observe more than one good quarterly inflation outcome to be …
This page has been updated with additional analysis since first publication. Flash PMI points to continued rebound in activity The renewed rise in the composite PMI supports our view that activity will continue to expand at a robust pace in the remainder …
Pick-up in underlying inflation will prompt rate hike next month The slowdown in headline inflation in October was due to base effects from utilities prices. With underlying inflation climbing further above the Bank’s 2% target, the case for another rate …
21st November 2024
Spain’s economy is outperforming the euro-zone as a whole, and the difference is also evident in the labour market, which is still tightening at a decent pace. There now appears to be little slack left in Spain’s labour market and so we think an imbalance …
Romania will elect a new government over the coming weeks at a time when the economy is performing poorly, inflation is running above target, and macroeconomic stability depends on policymakers pushing through much-needed fiscal consolidation. The most …
Modest rise in homes sales does not mark the start of the recovery The modest rise in existing home sales in October reflects the earlier drop in mortgage rates over the summer and is unlikely to be repeated, as borrowing costs have since rebounded to 7%. …
The South African Reserve Bank’s decision to lower its repo rate by 25bp to 7.75% was not a surprise and Governor Kganyago sounded more optimistic that inflation is under control. Lingering concerns about the vulnerability of the rand and the growing …
Given our expectation that the Trump administration will push forward with plans to raise tariffs across the board, we have generally revised down our forecasts for stock markets outside the US. And with China being the main target of the trade war, we …
We don’t think the S&P 500’s AI tailwind has run out of puff yet, despite the seemingly lukewarm market reaction to Nvidia’s latest profit result. It’s tempting to see a warning sign for the broader market in the reaction to Nvidia’s latest profit …
Egypt’s policy agenda shifts to long term reforms With Egypt’s macroeconomic stability restored, officials are starting to turn their attention to longer term reforms and number one on the list appears to be reinvigorating the stalled privatisation drive. …
Interest rate cuts still a few months away (at least) The communications accompanying the decision by the Turkish central bank (CBRT) to leave its policy rate unchanged again today, at 50.00%, suggest that analysts’ expectations for an easing cycle to …
US President-elect Trump’s protectionist rhetoric may mean that African sovereigns are contemplating the loss of preferential trade access to the US via the AGOA scheme. We think the overall impact from such a move would be limited, but specific sectors …
The re-election of Donald Trump portends a radically different outlook for emerging markets, with some facing increased challenges from the president-elect’s policy pledges and others looking better placed to benefit from the fallout of an intensified …
Morocco’s weaker economic performance this year is likely to be a blip. Buoyed by low and stable inflation, looser monetary policy, and a burgeoning manufacturing sector, we expect Morocco’s economy to grow by around 5% in 2025 and 2026, which is faster …
Europe Commercial Property Chart Pack (Q4 2024) …
Friendshoring into India has for the most part been limited to high-end manufactured goods, but broader supply chain reconfiguration into the country could take place if the Trump administration imposes a 60% tariff on China. Trump has also been critical …
We have updated this page with additional analysis since first publication. Disappointing borrowing figures highlight Chancellor’s lack of wiggle room October’s disappointing public finances figures underline the fiscal challenge that the Chancellor still …
Our ANZ Chart Pack has been updated with the latest data and our analysis of recent developments. The Antipodean central banks will tread different paths on policy over the forecast horizon. With the New Zealand economy in a tailspin and inflation well …
Retail has suffered some severe blows over the last decade, but the nadir for the sector seems to have passed and for some time we have been talking about recovery ahead, albeit a weak one. In this note, we extend our analysis to the largest US city …
20th November 2024
Inflation has picked up in the UK but, unlike in the US, we doubt that any worries about stronger price pressures will be sustained. That’s why we still expect Gilt yields to fall. UK CPI inflation , released earlier today, went back above the Bank of …
The experience of the first Trump administration suggests that other countries will retaliate to the imposition of new US tariffs but in a way that is measured and minimises the risk of escalating tensions with Washington. The imposition of …
Our new forecast that Bank Rate will fall slower and not as far means that we now think mortgage rates will decline from 4.4% in October to 3.9% by the end of 2026, rather than to 3.5%. But we still think that mortgage rates will fall by more than most …
We held a series of client meetings in the US last week which focused on the implications of Trump’s victory in the US election and the spillovers to EMs. This Update answers some of the most frequent and important questions that came up. What impact will …
The slump in the participation rate this year at least partly reflects the cyclical weakness of hiring, which means that the labour market is weaker than the unemployment rate alone might suggest. The silver lining is that an eventual rebound in …
A year ago, we published an in-depth report arguing that the calm prevailing at the time around sovereign debt risks in Latin America wouldn’t last and that public debt dynamics would deteriorate. While there have been some positive stories (Argentina, to …
South Africa’s activity data for September points to a subdued end to Q3, but we think this softer patch will be short-lived as low inflation and the SARB’s easing cycle provide some support to demand. That said, tight fiscal policy will prevent the …
The jump in euro-zone negotiated wage growth in Q3, to a record high of 5.4%, was mostly due to one-off payments in Germany. Wage growth elsewhere was little changed. With headline inflation around 2% and the labour market loosening, wage growth is very …
The recovery in euro-zone real estate investment has been weak in 2024, with total activity in the first three quarters little changed on 2023’s near-record-lows. However, prospects for 2025 are brighter. We think investment will rise 25% y/y as interest …
China’s green export volumes rose in October and were just 3% shy of the record high reached in August. Chinese battery makers could be hit hard by President-elect Trump’s tariff proposals. But the surge in battery exports following the announcement of a …
