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 Markets Economics Update Geopolitical tensions beginning to enter debt talks Investors’ concerns about sovereign debt risks in frontier markets have eased a touch recently but several countries, particularly Tunisia and Pakistan, remain on the path to default. The latest (and... 7th February 2023 · 5 mins read
Africa Economics Weekly South Africa’s sorry state of the nation South Africa’s upcoming State of the Nation Address will undoubtedly focus on addressing the deepening energy crisis. But there’s little that the authorities can do to ease power cuts in the near-term... 3rd February 2023
Emerging Europe Economics Weekly Czech-China tensions, Poland’s birth rate slumps The increase in tensions between the newly elected Czech president and Chinese authorities this week highlights the risk of a fracturing of economic ties between the two countries. For Czechia, China... 3rd February 2023
China Economics Weekly Fiscal support on its way, IPO reform largely cosmetic Government bond issuance, a timely proxy for the fiscal stance, fell year-on-year last month. But all the signs are that this will be temporary, with borrowing likely to ramp up in the coming months.... 3rd February 2023
Africa Economics Update Unpacking Nigeria’s economic challenges In the latest of our Election Watch series ahead of Nigeria’s polls, we dissect the near-term economic challenges facing the next administration. Boosting oil production, overhauling the foreign... 3rd February 2023
Middle East Economics Weekly Egypt privatisations, Saudi tourism, Lebanon re-pegs Egypt’s privatisation drive appears to be stepping up a gear in 2023 with plans to sell stakes in twenty companies which, if these materialise, will boost long-term economic prospects. But it remains... 2nd February 2023
Emerging Europe Economics Update The economic risks of Israel’s new government Concerns over democratic backsliding and an escalation of the Israeli-Palestinian conflict associated with Israel’s new far-right government won’t necessarily mean that foreign investment into Israel... 1st February 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
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
Euro-zone Economics Weekly Recession postponed or even cancelled We suspect that the resilience of the economy in late-2022 was due to the combination of lower energy prices, increased government support and easing supply problems in industry, while the drag from... 20th January 2023
Latin America Economics Weekly Brazil’s riots, Peru turmoil, Mexico’s USMCA win Brazil’s financial markets have recovered after an initial drop following the riots in Brasília last Sunday, but we think there are reasons for caution. This is all coming at a time when the economy... 13th 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
China Economics Update A faster-than-expected turnaround We had expected disruption from China’s reopening wave of COVID infections to weigh heavily on activity well into Q1. But there is mounting evidence that much of China’s population has already been... 12th January 2023
Emerging Markets Economics Update A look ahead to EM elections in 2023 In this Update, we take a look at the key elections that are scheduled across the emerging world this year. The most notable ones are in Argentina, Nigeria and Turkey, where opposition victories could... 10th January 2023
