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
Commodities Economics Chart Book Too soon for a sustainable rally We think prices will ease back in the coming months as optimism about China’s reopening is tempered and slower economic activity in advanced economies weighs on demand. However, the prospect of Fed... 3rd February 2023 · 13 mins read
Commodities Weekly Wrap Russian petroleum product exports to struggle The EU’s ban on imports of Russian petroleum products will come into force on Sunday, which could raise EU fuel prices and weigh on Russia’s product exports. However, we suspect Russia will offer... 3rd February 2023
Commodities Weekly Wrap Commodity prices poised to take a breather After rising sharply for much of this year, the Lunar New Year holiday in China meant that commodity prices generally took a bit of a pause this week. The only exceptions were natural gas prices... 27th January 2023
Commodities Update Futures Market Monitor (Jan. 2023) This is the first edition of a new monthly publication in which we will outline the latest moves in commodity futures markets and assess how they relate to our own view on fundamentals. Specifically... 25th January 2023
Commodities Weekly Wrap Spotlight shifts to developed economies The end of China’s zero-COVID policy continued to support most commodity prices this week, with many industrial metals prices extending their recent rallies. Economic activity appears to be recovering... 20th January 2023
Commodities Update Lula unlikely to herald new era for biofuels The election of left-wing candidate Lula for a third term as Brazil’s president is unlikely to accelerate Petrobras’ sluggish shift towards large scale biofuel production. We expect proposed oil... 18th January 2023
Commodities Update Higher price forecasts due to China reopening China’s rapid reopening and the likelihood of policy stimulus there has improved the macro-economic backdrop for commodities in 2023. But with developed economies in recession, and a somewhat stronger... 16th January 2023
Commodities Weekly Wrap China reopening to boost commodity prices The dismantling of China’s zero-COVID policy has come quicker than we and many had expected. Whereas we previously thought the first quarter would bring the worst of the economic disruption from... 13th January 2023
Commodities Weekly Wrap New year, same trends Most commodity prices declined this week, with energy prices falling especially sharply. Unseasonably mild weather in Europe and the US weighed on heating demand, prompting a plunge in gas prices. The... 6th January 2023
Commodities Weekly Wrap All eyes will remain on China It was a fairly quiet week in commodity markets. The only notable move was a slump in natural gas prices. The EU eventually agreed its long-discussed natural gas price cap early in the week, but it... 23rd December 2022
Commodities Weekly Wrap Huge risks associated with China reopening The raft of inflation data and central bank policy decisions were key drivers of prices this week, but to some extent China stole the show. We now think that a dismantling of the zero-COVID policy is... 16th December 2022
Commodities Outlook The global recession isn’t done with commodities yet Tight financial conditions and China’s biggest COVID outbreak yet mean global economic growth will slow further in the first quarter of next year, dragging most commodity prices lower. The slowdown... 16th December 2022
Commodities Update The World in 2023: The outlook for commodity prices We think most commodity prices will ease back in early 2023, at the height of the global recession and monetary tightening in many major economies. That said, we expect a relatively shallow recession... 16th December 2022
Commodities Weekly Wrap Revising down our oil price forecasts for 2023 A few weeks ago, we flagged the growing downside risks to our oil price forecasts due to weak Chinese demand. Despite the loosening of China’s COVID restrictions since then, we think the end to the... 9th December 2022
Commodities Economics Chart Book Falling Russian supply to keep oil prices high in 2023 We think slower global economic activity and a somewhat stronger US dollar will weigh on commodities prices in the coming months. However, the recession should prove relatively shallow and we expect... 5th 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
