Global recession seals real estate downturn In line with changes in our global economic view, we have made significant downgrades to our commercial real estate forecasts for the next couple of years. As a result, we now expect a much bigger drop in property values next year that will cause annual returns to be negative in all our key markets. In view of the wider interest, we are also sending this UK Commercial Property Update to clients of our US and Europe Commercial Property Services. 8th November 2022
Fracturing and financial flows The trend towards ever more “financial globalisation” has already decelerated and will probably slow further as the global economy fractures and policymakers favour resilience over efficiency. While a disorderly rupture of financial relations remains unlikely, links between the US and China will weaken. 6th October 2022
Housing downturns starting to take toll on economies 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 probably just reflects time lags. We continue to think that weak housing markets will contribute to the recessions that we expect in most major DMs this year. Drop-Ins: Property markets in 2023: We’re holding two special 30-minute briefings on the 2023 housing and commercial property outlooks on Tuesday, 17th January, covering first the UK and Europe and then the US. Click below to register for either or both sessions: UK/Europe outlook (09:00 GMT/17:00 SGT) US outlook (11:00 EST/16:00 GMT) 16th January 2023
A year of disinflation Inflation is finally falling and we envisage further sharp declines in almost all economies during 2023. In most cases, this disinflation will be more dramatic than either the consensus of economists or central banks predict. A large part of the fall will be down to energy and food effects and the key question is whether underlying inflation will also decelerate. But with economies sliding into recession and unemployment likely to rise, we suspect that core price pressures will ease, allowing central banks to end or even start to reverse their policy tightening. Note: We’ll be answering your inflation questions and discussing the key takeaways from this report in a special Drop-In on Thursday, 5th January at 10:00 EST/15:00 GMT. Register here. 3rd January 2023
What lower gas prices mean for the euro-zone We have revised our European wholesale gas price forecast down and, as a result, now expect euro-zone inflation to fall more rapidly than we had previously anticipated. In turn, this means that real incomes and economic activity might be slightly stronger, though the impact will probably be quite small. We still think that the ECB will raise its deposit rate to a peak of 3% this year, but lower gas prices increase the chance that the Bank starts loosening monetary policy a bit sooner than we had expected. Drop-Ins – The World In 2023 (10-11 January): Will 2023 be another rollercoaster year for economies and markets? Join our senior economists for these special briefings on 10th and 11th January to find out what to expect in the coming 12 months. Register now. 5th January 2023
Broad-based decline in core inflation coming soon Despite the unanticipated strength in recent months, there are still good reasons to expect core inflation to fall markedly next year. That moderation will not require a deep recession and/or significant rise in the unemployment rate, although we do expect weak demand and easing labour market conditions to play a supporting role. Most of the coming decline in core inflation is already “baked into the cake” – private sector rent measures and other housing indicators point to a significant drop back in shelter cost inflation, while CPI medical care services will fall as the ridiculous spike in health insurance prices is reversed. The stronger dollar, easing supply shortages and collapse in transportation costs all but guarantee a slump in core goods inflation. We expect core CPI inflation to be below 2.5% by end-2023 and core PCE inflation to be around the 2% target. Both measures should fall below 2% in 2024. 2nd November 2022
China commodity imports set to rebound this year Commodity imports generally rose in December, but fell in 2022 as a whole. In a possible sign of optimism around reopening, soybean imports skyrocketed. China’s unexpectedly swift switch to living with COVID should see commodity imports, particularly crude oil, recover this year. 13th January 2023
A lower gas price forecast, but prices to stay high European natural gas prices have halved over the past month as usage stayed low and LNG imports hit record highs. Barring dramatically colder weather, EU gas storage looks set to be in a more comfortable position than we had expected. As a result, we have revised down our end-2023 gas price forecast. Drop-Ins – The World In 2023 (10-11 January): Will 2023 be another rollercoaster year for economies and markets? Join our senior economists for these special briefings on 10th and 11th January to find out what to expect in the coming 12 months. Register now. 6th January 2023
The World in 2023: Property prices to plunge Property markets rebounded strongly after 2020, in part boosted by favourable structural shifts brought on by the pandemic. But they have hit the buffers in recent months. And fortunes are likely to deteriorate further next year, which we expect to be the worst for real estate prices since the end of the GFC. In view of the wider interest we are also sending this UK Commercial Property Update to clients of other Property Services. 15th December 2022
Investment set for weak H1 before picking up in late-2023 We expect the slowdown in investment activity in the second half of 2022 to persist into the first half of 2023. But we think transactions will begin to recover later this year once interest rates have topped out and much of the valuation adjustment has come through. 20th January 2023
Emerging Europe Chart Book Growth outlook brightens, but tough times still ahead The growth outlook for 2023 across Central and Eastern Europe has brightened a bit over the past month. Wholesale European natural gas prices have continued to fall sharply and survey measures of... 26th January 2023 · 14 mins read
Emerging Europe Economics Weekly Russia’s shrinking surplus, Israel’s political risks The focus in the media this week on Russia’s record current account surplus in 2022 misses the huge deterioration in that surplus at the end of the year. We think the balance of payments will be... 20th January 2023
Long Run Update Pouring cold water on the “petroyuan” The process of “global fracturing” that we outlined in our annual Spotlight series last year will remain the dominant macro theme for the next decade. But speculation that it will result in the rise... 17th January 2023
Emerging Europe Data Response Russia Consumer Prices (Dec.) The softer-than-expected inflation reading in Russia in December, of 11.9% y/y, is likely to be followed by further sharp falls in the coming months towards 4% as last year’s surge in prices passes... 13th January 2023
Emerging Europe Economics Weekly Disinflation takes hold in CEE, Russia’s budget pressures This week brought the clearest evidence yet that the disinflation process in Central Europe is underway as most economies experienced a broad-based easing of price pressures in December. This is... 13th January 2023
Emerging Europe Economics Weekly Europe’s energy crisis losing its bite The narrative surrounding Europe's energy crisis has shifted in recent weeks as warmer-than-normal winter temperatures have reduced heating demand, gas stocks have remained at high levels and gas... 6th January 2023
Emerging Europe Economics Weekly Sanctions biting in Russia, three key themes for 2023 The fall in the ruble this week is a sign that the new sanctions on Russia’s oil exports are beginning to bite and, if the currency continues to fall, interest rate hikes may come back onto the table... 23rd December 2022
Emerging Europe Chart Book CEE central banks still a long way from turning to cuts Central banks across Central and Eastern Europe have left interest rates on hold over the past month or so but their communications have continued to strike a relatively hawkish tone. Hungary’s... 19th December 2022
Emerging Europe Economics Update Russia: shrinking CA surplus to erode sanctions resilience A widening of Russia’s budget deficit next year to 2.5% of GDP will increase pressure on the government to keep a firm grip on non-military spending. But it should be able to finance the shortfall... 14th December 2022
Emerging Europe Economic Outlook Winter recession in motion Emerging European economies are set for recessions this winter as the impact of high inflation, tight financial conditions and weakening external demand take their toll. Our GDP forecasts for 2023 are... 12th December 2022
Emerging Europe Data Response Russia Consumer Prices (Nov.) Russian inflation fell further last month, to 12.0% y/y, and the breakdown provided further signs that demand remains very weak. But this won’t offset the central bank’s concerns about pro-inflation... 9th December 2022
Commodities Weekly Wrap We will know more about oil supply next week Commodity prices generally rose this week as Fed Chair Jerome Powell’s comments that smaller interest rate rises were likely led to a depreciation in the US dollar. Prices were also supported by news... 2nd December 2022
Energy Update Unpacking the G7 oil price cap ahead of 5th December There are only a few days to go until the next packages of EU sanctions on Russia targeting its oil trade come into force. There are a few key details still left to be finalised, but it seems to us... 2nd December 2022
Emerging Europe Data Response Manufacturing PMIs (Nov.) The manufacturing PMIs for November were a mixed bag, but suggest that weakening demand and the fading boost from easing supply shortages has begun to take a heavier toll on industrial sectors in... 1st December 2022
Emerging Europe Data Response Russia Activity Data (Oct.) The October retail sales and industrial production data for Russia tell more of the same story: an economy that has passed the worst of the downturn, but that is desperately struggling for momentum... 30th November 2022
