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
Middle East Chart Book Door still open for fiscal loosening in the Gulf The slide in the price of oil since November has a little further to go in early 2023 and, while we think prices will recover later in the year, hydrocarbon revenues in the Gulf will be lower than... 21st December 2022 · 10 mins read
Middle East Economic Outlook Oil sectors to fuel Gulf slowdown Growth across the Middle East and North Africa is set to slow sharply, and by more than most expect, next year. Oil output cuts will weigh on the Gulf even as fiscal policy stays loose. And while IMF... 13th December 2022
Middle East Economics Weekly OPEC+ meeting, Qatar-Germany gas deal It seems likely that OPEC+ will opt to continue with October’s agreement to cut output quotas by 2mn bpd when the group meets on Sunday. That said, there are further signs that the group will become... 1st December 2022
Middle East Economics Weekly OPEC+ tensions, US-Saudi relations, Saudi-Argentina The volatility of oil prices has highlighted the uncertainty over the current OPEC+ oil output agreement and adds to our view that, with tensions already reportedly strained between members, the... 24th November 2022
Middle East Chart Book North Africa turns to IMF to ease external strains Economies across North Africa have endured severe balance of payments strains this year and governments in Egypt and Tunisia finally secured staff-level agreements with the IMF over the past month... 23rd November 2022
Middle East Economics Weekly Egypt-UAE wind farm, Dubai property, Egypt downgrade Egypt’s announcement at COP27 of plans to build one of the largest onshore wind farms is a positive move to increase renewables usage that will improve energy security and support the balance of... 10th November 2022
Middle East Economics Weekly Saudi banking sector, UAE-Saudi quarrel, COP27 The surge in Saudi interbank rates in recent weeks could cause credit growth to slow more quickly than we currently expect. Elsewhere, reports point to growing discontent in the UAE with Saudi Arabia... 3rd November 2022
Middle East Rapid Response PMIs (Oct.) October’s batch of PMIs picked up in most of the region but there remains a stark divergence in growth prospects between the Gulf and non-Gulf economies. 3rd November 2022
Middle East Chart Book Oil output cuts to drive sharper Gulf slowdown OPEC+ cut its oil production quotas by 2mn bpd in November and strong compliance with the agreement will hit GDP growth in the Gulf economies harder than other members of the group. The result is that... 26th October 2022
Middle East Economics Weekly OPEC+ decision fallout, Egypt’s IMF deal The decision by OPEC+ to cut oil production quotas by 2mn bpd from November will fall disproportionately on the Gulf members - Saudi Arabia, the UAE and Kuwait. This clearly presents a downside risk... 6th October 2022
Middle East Chart Book Egypt: the pound, central bank, and the IMF The Egyptian pound has continued to weaken as the central bank has taken tentative steps towards a more flexible exchange rate, and we think that the currency needs to weaken further to address the... 29th September 2022
Middle East Economics Weekly UAE oil capacity, Egypt FX restrictions, Saudi-rupee trade The UAE is seeking to raise oil production capacity more aggressively than previously planned as it aims to get ahead of peak oil demand and capture oil market share. Elsewhere, Saudi Arabia also... 22nd September 2022
Middle East Economics Weekly MPC meetings galore, Tunisia shortages and debt default Central banks in the Gulf are set to hike interest rates next week in line with the Fed, and we think that the Central Bank of Egypt will join the party and resume its tightening cycle next Thursday... 15th September 2022
Middle East Data Response PMIs (Aug.) August’s batch of PMIs showed that activity in the Gulf economies pulled further ahead of their non-Gulf counterparts even as external demand has weakened on the back of softer global growth... 5th September 2022
Middle East Chart Book Inflationary pressures building Headline inflation has risen further across the region in recent months. This has been most pronounced in the non-Gulf economies which have been particularly exposed to spillovers from the war in... 30th August 2022
Middle East Data Response PMIs (Jul.) July’s batch of PMIs were a mixed bag, but the readings reinforce our view that activity in non-oil sectors in the Gulf remains strong. Meanwhile, there were further signs that price pressures are... 3rd August 2022
