Can the world cope with higher interest rates? We expect the most aggressive policy tightening cycle in decades to cause a slowdown in global economic growth, not a severe downturn. The biggest risk is that inflation stays higher for much longer than we anticipate, causing central banks to raise interest rates well beyond neutral levels to quash it. We judge that an extra ~100bp of hikes beyond our forecasts might be enough to cause downside risks to crystallise. 1st June 2022
Russia’s economy is wounded, not screaming in pain Western sanctions have caused activity in certain sectors of Russia’s economy to collapse, but activity has held up reasonably well in key areas such as oil production and less import-dependent manufacturing. What’s clear, though, is that the full effect of sanctions will take years to feed through. This underpins our view that sanctions have severely reduced Russia’s medium-term growth potential. EM Drop-In (4th August, 10:00 ET/15:00 BST): Join our monthly online session on the big issues in emerging markets. In this 20-minute briefing, the team will be answering your questions about debt risks amid global tightening, the latest on the inflation outlook and much more. Register now. 3rd August 2022
Weighing up the relative prospects for stock market sectors We think the macroeconomic backdrop that we envisage is consistent with certain “defensive” sectors of the S&P 500 – utilities, healthcare and consumer staples – outperforming over the rest of this year. 17th August 2022
Private sector well placed for higher rates in major DMs 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 generally well placed to cope when debt service costs rise. 19th August 2022
Is there really such thing as a ‘jobful’ recession? While history shows that recessions can begin even while employment is still rising, the current rate of payroll employment growth is far too strong to be consistent with an economic downturn. By the same token, although we think an outright contraction will be avoided, any recession over the next couple of years would almost certainly coincide with a decline in employment and rise in the unemployment rate. 11th August 2022
We’re less upbeat about OPEC oil supply Concerns about the demand outlook have dragged the Brent crude oil price towards $90 per barrel this week. But, the supply-side concerns which pushed the price over $120 per barrel not too long ago haven’t entirely vanished. Indeed, following the OPEC+ meeting this week, we are now less upbeat on supply. Oil and the Gulf Drop-In (9th Aug): What’s the outlook for oil prices and what does that mean for Gulf economic outperformance? Join economists from our Commodities and Emerging Markets teams for this 20-minute briefing. Register now. 5th August 2022
Gloomy outlook for use of agriculturals in industry Deteriorating global economic growth over the coming quarters will weigh on industrial demand for cotton, natural rubber and lumber. That said, high oil prices will offer some support to cotton and natural rubber prices, and our expectation for rate cuts in the US in late 2023 could boost the price of US lumber. 10th August 2022
The six major markets will not be the only losers Pandemic-accelerated migration patterns were already driving outperformance in the southern states. But they have also brought the poor performance of weaker markets to the fore. With those structural changes likely to continue to play out over the next few years, we expect metros such as Detroit, Indianapolis and Minneapolis to underperform in the coming years. 10th August 2022
Global trends point to a more difficult decade ahead Commercial property wasn’t initially hit by the worsening in economic conditions at the turn of the year, but there are now growing signs of anxiety. Not only that, but even if the economic gloom is short lived and any downturn is mild, we expect structural factors to make for a listless global real estate recovery. In view of the wider interest, we are also sending this UK Commercial Property Update to clients of our European and US Commercial Property Services. 12th August 2022
Canada Economics Weekly Record immigration won’t make the Bank’s job easier The accepted wisdom is that strong immigration reduces the pressure on the Bank of Canada to raise interest rates, as it will eventually help to ease labour shortages. But the immediate impact has... 30th September 2022 · 6 mins read
Euro-zone Data Response Euro-zone Flash HICP (Sep.) & Unemployment (Aug.) The jump in the euro-zone’s headline inflation rate in September into double digits will be of grave concern to the ECB. Despite the weak economic outlook, we expect the Bank to prioritise inflation... 30th September 2022 · 2 mins read
Japan Economics Weekly Upcoming travel subsidies a flash in the inflation pan The government announced this week that it will once again be providing travel subsidies, this time under the National Travel Discount (NTD) program, from 11th October through December. Prefectural... 30th September 2022 · 7 mins read
Japan Data Response Labour Market, Retail Sales & Activity (Aug. 22) The unemployment rate dropped to a four-month low in August and a continued rise in the job-to-applicant ratio suggests that the labour market will continue to tighten. Meanwhile, both industrial... 30th September 2022 · 4 mins read
US Employment Report Preview Sharper slowdown to come We expect non-farm payrolls to have risen by a solid 275,000 in September, but a much sharper slowdown looks likely as the Fed’s aggressive tightening feeds through. 29th September 2022 · 4 mins read
US Commercial Property Data Response US Metro Employment (Aug.) The greater number of metros seeing a decline in total jobs in August comes as little surprise given the slowdown in the national data this month. But for the major six metros and poorer performing... 28th September 2022 · 2 mins read
Global Inflation Watch Inflation to fall more slowly in Europe than in the US There has been growing evidence that pipeline price pressures have eased, underlining our view that inflation will fall sharply next year. Commodity prices and shipping costs have fallen, product... 23rd September 2022 · 16 mins read
Australia & New Zealand Chart Book Housing downturn will weigh on activity before long The 1.7% q/q rise in New Zealand’s production GDP and the 0.9% q/q rise in Australia’s GDP in Q2 were among the strongest increases among major advanced economies. (See Chart 1.) However, GDP growth... 22nd September 2022 · 11 mins read
UK Markets Can the government hit a new 2.5% growth target? In his mini-Budget slated for next Friday, the new Chancellor reportedly intends to set an official target of raising real GDP growth to 2.5% a year. But with productivity growth and labour force... 16th September 2022 · 6 mins read
China Data Response China Activity & Spending (Aug.) China’s economy held up slightly better than anticipated last month, but momentum still weakened relative to July amid renewed virus disruptions and factory closures due to power shortages. September... 16th September 2022 · 3 mins read
Euro-zone Data Response EZ Hourly Labour Costs (Q2) The pick-up in euro-zone hourly wage costs in Q2, along with a big upward revision to Q1, on the face of it suggests that pay pressures in the region continued to build. The detail provides a more... 15th September 2022 · 2 mins read
Australia & New Zealand Data Response Australia Labour Market (Aug. 2022) While the first rise in Australia’s unemployment rate since last year’s Delta lockdown should be followed by a renewed fall, it will encourage the Reserve Bank of Australia to slow the pace of... 15th September 2022 · 2 mins read
Australia & New Zealand Rapid Response Australia Labour Market (Aug. 22) 15th September 2022 · 2 mins read
Canada Economics Update Is the government to blame for labour shortages? The public sector has been responsible for almost 90% of the rise in total employment since the pandemic and now accounts for the largest sustained share of employment since the early 1990s. The... 13th September 2022 · 4 mins read
UK Data Response Labour Market (Jul./Aug.) With further evidence that the weaker economy is leading to a cooling in labour demand, the renewed fall in the unemployment rate to a new 47-year low of 3.6% was driven by a shortfall in labour... 13th September 2022 · 3 mins read
