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
India Economics Update Finance Ministry strikes a delicate balance Finance Minister Nirmala Sitharaman appears to have successfully demonstrated her long-term commitment of reining in the fiscal deficit while still providing support to the economy in today’s FY23/24... 1st February 2023 · 3 mins read
India Economics Weekly What to expect from the Union Budget For watchers of India’s economy, next week is one of the most significant of the year as Finance Minister Nirmala Sitharaman delivers the Union Budget for FY23/24 on Wednesday. This is the last full... 27th January 2023
UK Data Response Public Finances (Dec.) December’s worse-than-expected public finances figures suggest the Chancellor will wait until closer to the next election before announcing any significant tax cuts and/or spending rises. 24th January 2023
Canada Chart Book Surveys point to much slower employment growth The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a... 23rd January 2023
Australia & New Zealand Economics Weekly Strong income growth in New Zealand won’t last The resignation of New Zealand’s Prime Minister opens the door for the opposition to return to power, who have signalled looser policy at a time when government spending is already around record highs... 20th January 2023
India Chart Book Global fracturing: India tilts further away from China India has historically remained unaligned geopolitically but we made the case last year that, in a fracturing global economy, it was more likely to lean towards a US-led bloc and away from a China-led... 18th January 2023
US Economics Update Risk of debt ceiling crisis is rising Raising the federal debt ceiling later this year will require bipartisan compromise, most likely involving measures to reduce the budget deficit modestly. But a deal probably won’t be reached until... 17th January 2023
Africa Economics Weekly South Africa’s ruling party policies stuck in old ways At a key policy conference, South Africa’s ruling party officials offered little by way of new ideas to address the country’s mounting economic challenges. And some fresh proposals risk making matters... 13th January 2023
Middle East Economics Weekly What do the latest falls in the EGP mean for Egypt? The Egyptian pound has pared its losses after sharp falls against the dollar on Wednesday in a sign that, just like 2016, the currency may have overshot. The central bank may sense an opportunity to... 12th January 2023
Africa Economics Update Runners and riders in Nigeria’s upcoming elections In the first instalment of our Election Watch series ahead of the late-February polls in Nigeria, we assess the economic policies proposed by key candidates. The elections offer a chance to depart... 12th January 2023
Euro-zone Chart Book Worst case scenarios avoided, but outlook still poor There has been a further slight improvement in prospects for the euro-zone in recent weeks. Business surveys suggest that activity is no longer contracting sharply, headline inflation seems to be past... 10th January 2023
UK Economics Update Shift to a bigger state won’t curtail GDP growth While the shift towards higher taxes and spending after the pandemic appears to be here to stay, there is little to suggest an expanded state would curtail GDP growth. But without supply-side reforms... 10th January 2023
Africa Economics Weekly What lies in store in 2023, Ghana’s latest debt-move The new year has started with economies in Sub-Saharan Africa bracing for disruptions due to the end of zero-COVID in China and a looming global recession. While these are likely to pass by mid-year... 6th January 2023
UK Economics Update Cooling wholesale gas price to aid the economy The recent plunge in wholesale gas prices means that utility prices for households may fall below the government’s price freeze in July. As a result, CPI inflation will be around 0.3 percentage points... 6th January 2023
Middle East Economics Weekly Fears EGP fall will trigger sovereign debt crisis overdone The latest fall in the Egyptian pound sends a strong signal that the authorities are committed to the shift to a more flexible exchange rate. And while the weaker currency poses a threat to the... 5th January 2023
China Chart Book Three years on It is three years since a cluster of cases of severe pneumonia started to draw attention in Wuhan. Chart 1 maps economic developments in China since then. The blue bars show cumulative growth since... 4th January 2023
