Recovery in mortgage lending will pause in Q2 Demand for mortgage credit jumped in Q1 in response to the drop in mortgage rates over the second half of 2023. But a rise in financial market interest rates this week, due to higher-than-expected inflation in …
11th April 2024
The Bank of England’s Q1 Credit Conditions Survey provides further evidence that the drag on activity from high interest rates is starting to fade. Looser credit conditions will soon aid the economic recovery. The fall in mortgage rates at the start of …
Capital flows into EMs have continued to rise in recent weeks, aided by robust global risk appetite. While yesterday’s strong US CPI release has clouded the outlook for Fed interest rate cuts and weighed on some EM currencies, we still believe booming …
Even if the US Federal Reserve leaves its policy rate unchanged for longer than we expect, our forecast that inflation in the UK will be lower than in the US suggests this won’t prevent the Bank of England from cutting rates from 5.25% to 5.00% in June …
Cautious optimism from surveyors on prices and activity The slight increase in the balances for past prices and new buyer enquiries in the RICS Residential Market Survey for March showed that demand remained robust, as mortgage rates stabilised after …
10th April 2024
Governor Tiff Macklem sounded relatively dovish in the Bank of Canada’s press conference today, leaving the door open to an interest rate cut at the next meeting in June. While the Bank left the policy rate at 5.0% today, the policy statement and …
After a period of relative calm, Italy’s fragile public finances are likely to come under the spotlight again before long. Budget deficits will be much higher than the latest government projections imply and Italy will probably face official EU procedures …
The incidence of sovereign debt distress has continued to decline across the emerging world in recent weeks, driven mainly by an improvement in global risk appetite and the corresponding narrowing of credit spreads. But in some cases, things appear to …
In light of our China team’s new non-consensus view that an aggressive slowdown in property sector construction seems almost inevitable in the years ahead, we have revised our price forecasts. We now expect prices to generally flatline in 2025, before …
A resurgence in hydropower in China this year combined with the continued rapid expansion of its wind, solar and nuclear power capabilities may pave the way for 2024 to mark the start of a steady decline in China’s coal demand. But a contraction in demand …
The Reserve Bank of New Zealand didn’t drop any hints as to when it might pivot to looser policy at its meeting today. However, as inflation risks recede, we still expect the Bank to start cutting rates by August. The RBNZ’s decision to leave rates on …
The latest consensus figures have moved closer to our own total returns forecasts for the next three years. But they continue to expect a lower path for Treasury yields implying a smaller cap rate rise than us, which we think underpins the divergence …
9th April 2024
Wheat prices have been in decline for most of the past two years. We think that they are now near their trough, but the prospect of another good global harvest in 2024/25 means that we shouldn’t see a notable uptick in prices any time soon. Wheat prices …
Media reports that Brazil’s government is already seeking to water down the latest fiscal rule (which has been in place for less than a year) reinforces the point we made when the rule was first unveiled that the Lula administration would be unable to hit …
After a historically weak 2023, there are early signs of a modest turnaround in world goods trade which we expect to endure. Meanwhile, global container shipping costs have halved – and those for commodity freight more than halved – from recent peaks, …
We think that reports of a wave of new resale supply coming onto the market are overblown. While the number of homes being listed for sale has increased compared to last year, it is still low by historical standards, as mortgage rate ‘lock-in’ continues …
The Q1 ECB Bank Lending Survey suggests that the drag on lending growth from tight monetary policy continued to ease. But the data remain consistent with broadly stagnant consumption and declines in investment. For the first time since late 2021, banks …
The slump in the yen has resulted in Germany overtaking Japan as the world’s 3 rd largest economy at market exchange rates. We expect Japan to overtake Germany yet again in the early 2030s as the yen strengthens and Japan benefits from higher productivity …
Falling full-time employment not a sign of weakness The rise in part-time employment is not a sign of economic weakness, but instead reflects the large inflow of prime-age women into the labour force, who have been the big beneficiaries of the …
8th April 2024
Uganda’s strong recent economic recovery is facing domestic and external headwinds, including international condemnation of the government’s Anti-Homosexuality Bill – and the associated impact on financing and trade – and upcoming EU deforestation …
The Bernanke review of the Bank of England’s forecasting and communications will probably recommend the Bank illustrates the risks around its forecasts using alternative scenarios rather than fan charts and places greater emphasis on supply and monetary …
Oman and Bahrain both recorded sharp increases in their government debt-to-GDP ratios in the second half of the last decade, but while Oman’s public finances have improved dramatically since then, Bahrain’s have not. In Bahrain, significant tightening …
The further slump in housing starts in Q4 was a surprise, but timelier data and leading indicators suggest activity has since begun to recover. We are therefore happy with our forecast of a gradual recovery in new home supply over the next two years. (See …
5th April 2024
US steelmakers are preparing for robust growth in steel demand over the next few years, however we think those expectations will fall flat. Steel demand from property construction is likely to fall further and we expect softer demand for consumer durables …
The RBI kept the repo rate on hold at 6.50% today as expected but the more interesting aspect was the slight dialling down of its hawkish rhetoric. With inflation grinding down towards the central bank's 4% target, we remain comfortable with our view that …
El Ni ño is causing severe drought across much of southern Africa, which is likely to weigh on GDP, push up inflation and strain balance sheets. South Africa has also suffered water shortages, albeit more as a result of creaking infrastructure than low …
4th April 2024
The continued surge in the stock market that we forecast is likely to drive household net wealth to a record high as a share of incomes and provide a tailwind to consumption growth. But that shouldn’t stop the Fed from gradually lowering interest rates if …
The CEE industrial market cooled in 2023 as economic activity stagnated. This year will herald an economic recovery but we don’t think it will be stop the rent growth slowdown. Demand is anticipated to rebound only tentatively and supply is still strong, …
Vietnam’s banks are likely to remain cautious this year and both credit and GDP growth are likely to come in below trend. The central bank will have to cut rates further to stimulate demand. The health of Vietnam’s banking sector worsened last year due to …
Taiwan’s chip industry has invested heavily in making its facilities resilient to earthquakes. Disruption to production is unavoidable when a large earthquake strikes, but firms are usually able to return to close to full operating capacity within days if …
3rd April 2024
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today confirms that policymakers have been spooked by the inflation surprises at the start of the year and has prompted us to nudge up our year-end rate forecast to …
ECB officials have stressed that evidence of easing wage growth will be key in determining the timing of the first rate cut. Accordingly, this Update assesses which of the euro-zone’s numerous wage measures investors should keep their eyes on. The main …
After a very weak 2023, Saudi Arabia’s economy should see a modest recovery this year as the Kingdom’s non-oil economy sustains its strong momentum and more than offsets the drag from the extended oil output cuts. Last month, the General Authority for …
We expect the RBNZ to hold rates steady at its meeting next Wednesday. But with the economy in a deep slump and inflation clearly on the way down, the Committee is likely to tone down its tightening bias. As inflation risks continue to recede, we expect …
The rise in the aggregate EM manufacturing PMI to a three-year high in March was largely driven by strength in Asian industry, with activity elsewhere weaker. While slower growth in DMs should weigh on activity in the months ahead, strength in domestic …
2nd April 2024
The February JOLTS data suggest that labour market conditions are now easing at a more gradual pace, but that isn’t a surprise when most indicators of slack have already returned to pre-pandemic norms. At 5.3% in February, the job openings rate has been …
March’s manufacturing PMIs provided further evidence that global industry is past the worst. And although higher industrial output has caused price pressures to increase in some advanced economies, it won’t prevent central banks from cutting interest …
The universal tariff which Donald Trump has proposed, along with other likely spillovers from his trade policies, may result in a hit to the euro-zone economy of up to half a percent of GDP. The damage would be bigger if this triggered a transatlantic or …
The strong showing for the opposition in Turkey’s local elections on Sunday highlights the extent of voter frustration with high inflation and we think that it should be interpreted as a positive for investors by strengthening policymakers’ commitment to …
China’s PMI surveys in March are consistent with some improvement in economic activity and solid commodities demand. We think that government stimulus will continue to boost economic activity in the coming months and in turn support the prices of most …
While the number of “green” jobs in the UK rose strongly in 2022, it’s worth noting that green workers were still outnumbered by estate agents! Market forces are facilitating the transition to a greener workforce, but policies to make the labour market …
Slowdown in house price growth has further to run Australian house prices continued to pare their gains last month. And a further loss of momentum appears likely in the near term, especially given that the RBA is unlikely to come to the housing market’s …
Once the Bank of Japan starts to reduce its huge holdings of Japanese Government Bonds (JGBs) in earnest, we think that commercial banks will once again become major holders of JGBs. Insurance firms may lift their holdings a touch further as well, but we …
The Bank of Canada’s quarterly business and consumer surveys remain consistent with weak GDP growth and generally show that inflation expectations are normalising, but the latter are still too high and raise the risk that the Bank will wait to see …
1st April 2024
The PMIs from Emerging Asia remained weak in March. We think manufacturing sectors across most of Asia will struggle in the near term but activity in Korea and Taiwan is likely to remain strong. The weighted average headline PMI for Emerging Asia rose …
This report was first published on Monday 1 st April covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd April. More signs of a cyclical upturn Sizeable rises in the …
Click below to visit our Shipping Disruption Dashboard, which we have updated and extended to include analysis of the Baltimore port closure. Explore the dashboard … Shipping Disruption Dashboard: New Charts on …
28th March 2024
The collapse of the Francis Scott Key bridge in Baltimore this week is unlikely to have a large impact on global energy flows. For oil, flows of crude and refined products to or from Baltimore are tiny. More coal is exported from Baltimore, but the scale …
February’s money and credit data suggest that the effect of tighter monetary policy has eased slightly. But the data are still very weak and we think that rate cuts later in the year will lead to only a gradual rebound. The narrow (M1) money supply …
We continue to think that policymakers in China and Japan will do enough to keep their currencies from weakening much further, but the risk of a break lower in one, or both, is increasing. Push-back from the authorities in China and Japan has stabilised …
27th March 2024