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The losses which central banks are now incurring on the bonds they bought via their quantitative easing (QE) programmes are not a big cause for concern. These losses will not compromise central banks’ ability to operate monetary policy. And while …
25th January 2023
The flash PMIs for January provide further evidence that the euro-zone economy has so far avoided the deep downturn that most economists anticipated, whereas the US and UK surveys still point to recessions in both cases. Supply shortages have become less …
24th January 2023
Recent data have shown that activity in the US is weakening as we had expected while that in the euro-zone has been surprisingly resilient. The resilience seems to reflect a combination of supply and demand factors, including easing shortages, lower gas …
The theme of global economic fracturing, which was the focus of our Spotlight Series of research last September, is at the centre of economic discussion in 2023, including at Davos. We held an online drop-in session yesterday to update clients on our …
19th January 2023
Housing downturns are well underway in many countries and house prices and activity generally have further to fall. Construction activity is already suffering as a result. While it is hard to detect any major adverse effect on household spending, this …
16th January 2023
Disruption from China’s reopening is fading faster than we had expected and we have revised up our forecast for growth there from 2.0% to 5.5%. This means that global GDP growth will be stronger than we had expected this year and energy inflation will …
12th January 2023
The shift toward living with COVID will put some upward pressure on prices in China. But the uptick in inflation will not be as large as that seen in many other countries as they emerged from COVID controls over the past couple of years. While the initial …
9th January 2023
Developments of the past two weeks reinforce the message that the world economy is headed for recession and disinflation in 2023. With the full effects of policy tightening yet to be felt, and re-opening disruption to China’s economy set to linger, things …
4th January 2023
December’s flash PMIs suggest that the economic downturn in Q4 in Europe might not be as bad as previously feared. But the PMI fell sharply again in the US. And the surveys are still consistent with GDP in advanced economies contracting in Q4. But at …
16th December 2022
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Our latest Global Economic Outlook can be found here . Our 2023 prognosis may be a gloomy one, but there are reasons to expect …
15th December 2022
While food inflation has surprised to the upside in major DMs, it seems to be at or near a peak. We expect a combination of base effects and an easing of underlying price pressures to drag on food inflation in 2023. Food inflation soared in the past …
2nd December 2022
The latest manufacturing PMIs suggest that global industrial production is contracting, albeit with some signs of a slowdown in the pace of contraction in Europe. Product shortages have diminished almost everywhere, with any disruption related to China …
1st December 2022
We hosted an online Drop-In yesterday to discuss China’s COVID outbreak and its domestic and global implications. This Update answers several of the questions that we received, some of which we couldn’t fit in during the event and some that we are …
30th November 2022
Over a year ago, we warned that surging shipping costs posed an upside risk to inflation going into 2022, and it looks like these risks did indeed materialise. But now that global shipping costs have collapsed, we expect them to drag down on inflation …
25th November 2022
November’s flash PMIs were a mixed bag, with unexpected increases in Europe and a sharp fall in the US. However, the headline indices are now at levels consistent with falling activity in all major advanced economies. And the surveys continue to suggest …
23rd November 2022
Recent monthly data from the advanced economies have tended to exceed analysts’ gloomy expectations. This is partly due to an easing of supply shortages, which could offer some further support to output and spending in the near term. However, this …
The October inflation data highlighted a contrast between the US and Europe, with core price pressures easing materially in the US but staying stronger in the euro-zone and UK. We think this will be an enduring feature of relative inflation prospects in …
18th November 2022
This week’s G20 summit in Bali, Indonesia, has so far exceeded low expectations. There is broad condemnation of the war in Ukraine and bilateral talks between China and the US seem to have been amicable. But with the meeting dominated by geopolitical …
15th November 2022
Although credit growth in advanced economies remained strong in September, it has largely been used to help economies cope with the effects from rising costs and inflation. But lending criteria is now tightening and demand for loans – particularly …
The impending global recession will see sluggish growth or outright contractions in GDP in most major economies, with Europe faring the worst. Accounting for changes in trend growth over time, we think that the depth of the global downturns in the 1990s …
7th November 2022
The latest manufacturing PMIs are consistent with a significant downturn in global industry. As higher interest rates take a further toll on demand, shortages should continue to alleviate, helping to ease price pressures. However, as the PMIs suggest, …
2nd November 2022
Russia’s decision to withdraw from the Black Sea Grain Initiative will exacerbate sky-high prices and tight global supply, and adds to the likelihood that prices hover around historical highs for the next few months. To recap, the Kremlin announced at the …
1st November 2022
October’s flash PMIs provided further evidence that several of the major advanced economies are heading into recessions. The surveys suggest that activity was already contracting at the start of Q4. And apart from during the initial COVID outbreaks, new …
24th October 2022
Strictly speaking, recent measures by the Bank of England do not qualify as so-called “fiscal dominance”. But this could be the thin end of the wedge, and not just for the UK. While we are a long way off central banks in developed economies directly …
13th October 2022
The dollar’s appreciation is bad news for the global economy, as it will weigh further on demand for traded goods and add to global inflationary pressures. It is another reason why we expect the global economy to fall into recession next year, and risks …
12th October 2022
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
China’s economy has essentially stalled. This does not mean that aggregate growth in the rest of the world will automatically slow, but there will be winners and losers at a country level. Recent economic news from China has been dismal. (See here .) We …
With pr ic e pressures still strong, the looming global recession is unlikely to derail central banks’ tightening plans in the months ahead. While the RBA quoted the deteriorating global outlook when it recently decided to slow the pace of rate hikes in …
6th October 2022
The latest manufacturing PMIs suggest that global industry has already weakened significantly and is set to perform worse in the coming months as high inflation and rising interest rates take their toll. While higher commodity prices caused price …
3rd October 2022
It is now clear that central banks in advanced economies will raise interest rates even further than our above-consensus forecasts had implied, making the current tightening cycle the most aggressive in three decades. While this may be necessary to tame …
27th September 2022
Another month, another batch of PMIs pointing to Q3 GDP having fallen in major advanced economies. Yet despite the deterioration in real activity, as well as some further signs that pipeline price pressures are easing, September’s PMIs will do little to …
23rd September 2022
The fall in the global manufacturing PMI in August implies that global industrial activity is contracting, and the further decline in the new orders and export orders sub-components suggests that things will only get worse. The good news is that weak …
1st September 2022
August’s flash PMIs suggest that activity has weakened considerably, and, at face value, suggest that both the US and euro-zone have fallen into recession. What’s more, the forward-looking components of the PMIs point to further falls in output ahead. The …
23rd August 2022
In addition to revealing that higher interest rates had barely affected household and corporate finances, national accounts data for Q1 suggested that, with the exception of households in a handful of medium-sized economies, private sectors are …
19th August 2022
Given that unemployment rates have usually risen significantly in recessions, it is tempting to conclude that history is about to repeat itself, to the frustration of policymakers seeking soft landings in labour markets. But the pandemic has produced …
15th August 2022
Taiwan matters far more to the world economy than its 1% share of global GDP would indicate. A further escalation in cross-strait tensions that cut Taiwan’s export off from the rest of the world would lead to renewed shortages in the automotive and …
8th August 2022
July’s fall in the global manufacturing PMI supported other evidence that the industrial sector is in or close to recession and the forward-looking indicators point to further weakness to come. At least the weakness of demand has caused backlogs of work …
1st August 2022
We held an online Drop-In event yesterday to discuss our Q3 Global Economic Outlook and the forecasts within it (see an on-demand recording here ). This Update addresses several of the client questions that we did not have time to answer during the event. …
28th July 2022
The news today that Gazprom will further reduce its natural gas supply to Europe increases the likelihood of recessions in the euro-zone, UK and parts of Emerging Europe. It also supports our view that inflation pressures will be relatively persistent in …
26th July 2022
Another month, another set of downbeat PMIs for advanced economies. The demand indicators weakened markedly in the US and the euro-zone for the second month in a row, crossing over into recessionary territory. The flipside of the softer demand is that …
22nd July 2022
We held a Drop-In earlier today to discuss recent developments in Sri Lanka, where the economic and political crisis is going from bad to worse. This Update answers several of the questions that we received. How bad is the economic situation? In a …
14th July 2022
Even though workers are accepting cuts in their real pay, nominal wage growth is still above “acceptable” rates for central banks in DMs of 3% to 4%. This underlines why interest rates need to head into restrictive territory to weaken economic activity …
5th July 2022
Policymakers will have breathed a small sigh of relief at the latest manufacturing PMI surveys because they contained lots of signals that global goods price inflation will ease later this year. Demand softened, backlogs cleared, delivery times improved, …
1st July 2022
The consumer recovery in advanced economies has been characterised by particularly strong spending on goods and a weaker pick-up in services demand. There are signs that goods spending is now flattening off as households are able to buy more services. But …
30th June 2022
Having held up better than much of the data in recent months, the S&P Global PMIs have finally taken a considerable leg-down in the US and euro-zone. While the PMIs are still consistent with economic expansion rather than recession in Q2, they nonetheless …
23rd June 2022
There is still scope for an improvement in labour supply in the US, UK and euro-zone, which might over time alleviate some of the tightness in their labour markets. But it could yet take a long time to materialise. Unemployment rates are now back at, or …
We held a Drop-In yesterday to discuss recent developments in central banking and related financial market implications. This Update answers several of the questions that we received, some of which we couldn’t fit in during the event and some that we are …
17th June 2022
Housing markets are now showing signs of starting to weaken. While the consensus is that house price inflation will merely slow, we expect outright prices to fall in several of the most vulnerable markets. We have highlighted before which housing markets …
13th June 2022
The latest manufacturing PMIs suggest that industrial activity weakened a touch in May. But while the forward-looking components of the surveys imply that weaker demand will weigh on output in the months ahead, there were some further signs that …
1st June 2022
It remains a mixed picture when it comes to how well the labour force is recovering in the wake of the pandemic. The recent improvement in some countries supports our view that much of the pandemic-related drop may be reversed eventually. But this could …
31st May 2022