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
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 · 6 mins read
Australia & New Zealand Economics Weekly Leading indicators flashing red in New Zealand New Zealand has been the canary in the coalmine for the global economy in recent years so the plunge in the ANZ activity outlook to the second-lowest level on record is cause for concern. Meanwhile... 23rd December 2022
Australia & New Zealand Chart Book Full impact of higher interest rates hasn’t been felt yet According to RBA estimates, household interest payments jumped from 5.1% of disposable income in Q1 to 6.9% last quarter and we expect them to reach 12.5% by end-2023. With household debt around... 21st December 2022
Australia & New Zealand Economics Weekly More stringent price cap still not a disaster The proposed price caps for natural gas are more stringent than we had thought because the government intends to regulate prices for the foreseeable future. However, we still think that the impact on... 16th December 2022
Australia & New Zealand Data Response New Zealand GDP (Q3 22) The huge jump in Q3 GDP will prompt the Reserve Bank of New Zealand to press ahead with another 75bp hike in February, adding to our conviction that a recession lies ahead. 14th December 2022
Australia & New Zealand Economic Outlook Central banks will reverse course as growth stalls Soaring interest rates and weak real income growth will result in a more pronounced slowdown in economic activity in both countries than most anticipate. With New Zealand’s central bank determined to... 12th December 2022
Australia & New Zealand Economics Weekly Too early to declare victory on inflation The financial markets have scaled back their expectations for the peak in the cash rate following soft data on consumer spending and inflation. But while inflation will peak at slightly lower levels... 2nd December 2022
Australia & New Zealand Economics Weekly New Zealand will enter prolonged recession We already predicted that New Zealand would enter recession a month ago and the RBNZ’s determination to push the economy off a cliff to get inflation under control means the downturn will be even... 25th November 2022
Australia & New Zealand Economics Update RBNZ will probably lift rates to 5.5% The Reserve Bank of New Zealand hiked the overnight cash rate by 75bp as most had anticipated but signalled a much higher peak in the OCR than in August. We’re now forecasting another 75bp hike in... 23rd November 2022
RBNZ Watch Rates will peak at 5.0% but will be cut by end-2023 With the labour market and inflation going from strength to strength and the next meeting three months away, we expect the Reserve Bank of New Zealand to hike the overnight cash rate by 75bp at its... 16th November 2022
Australia & New Zealand Economics Weekly Resilience in consumption won’t last The RBA Deputy Governor this week noted that the Bank is getting closer to the point where it can stop tightening, which creates some downside risks to our above-consensus interest rate forecasts... 11th November 2022
Australia & New Zealand Data Response Labour Market (Q3 2022) New Zealand’s labour market remained very tight last quarter and coupled with the continued strength in inflation. the RBNZ will probably hike by 75bp in a couple of weeks. 1st November 2022
Global Economics Update Timing and nature of “pivots” will vary The dovish tilt among central banks has led to more talk of “pivots”, but this will mean different things for different banks. The ECB may be shifting to a slower pace of tightening, but the peak in... 1st November 2022
Australia & New Zealand Economics Update 5% peak in OCR will worsen housing downturn This publication has been resent due to an error with the previous email. The continued strength in inflation will encourage the Reserve Bank of New Zealand to hike the overnight cash rate by 75bp... 20th October 2022
Australia & New Zealand Data Response Consumer Prices (Q3 2022) The much stronger than expected rise in consumer prices in Q3 will encourage the Reserve Bank of New Zealand to hike rates by another 50bp at its November meeting and poses upside risks to our view... 17th October 2022
