The AI revolution should deliver substantial productivity gains in the coming decade, particularly in advanced economies. But with working age populations falling in key areas and China’s economy in structural decline, we expect global growth to slow …
20th February 2024
Better news on core inflation While the larger-than-expected drop in headline inflation in January was partly driven by weaker than expected energy inflation, the Bank of Canada will be pleased to see the more marked easing in its measures of core …
Production growth to remain subdued in 2024 Global aluminium production was unchanged in January compared to December. This reinforces our view that production growth will soften this year. According to the International Aluminium Institute, global …
The main spillover to the global economy, so far, from the Israel-Hamas conflict has been major disruptions to shipping, but there has been a bigger and broader economic impact in the MENA region. While the effects on the Gulf economies has been and will …
Euro-zone construction output picked up in December, but remained well below last year’s peak. We expect it to drop again in 2024, in part due to a continued dismal performance by the sector in Germany. Data released today showed that euro-zone …
Data published today show that negotiated wage growth in the euro-zone remained strong at the end of last year. But these data won’t stop the ECB from cutting interest rates in April – as we are forecasting – as long as other indicators continue to point …
GDP has fallen for two consecutive quarters but we don’t think the economy is in recession and should return to growth this year. While the gap between nominal wages and inflation is closing fast, the wage-price virtuous cycle will receive a boost when …
This page has been updated with additional analysis since first publication . PBOC eschews broad-based cuts, steps up property support Today’s 25bp cut to the 5-year LPR is clearly aimed at supporting the housing market. On its own it will not revive new …
RBA’s talk of tightening is just bluster The minutes of the RBA’s February meeting showed that uncertainty remains the name of the game. However, we think that the incoming data should give the Board greater conviction that it has done enough to subdue …
Following the huge fall in multi-family starts in January, we suspect the apartment sector will continue to be a drag on new development this year. But construction of single-family dwellings will remain strong. In January, housing starts suffered their …
19th February 2024
We think that corporate credit spreads will narrow a bit more in the US and Europe. Along with lower “risk-free” rates, this will in our view contribute to pushing yields down this year. Credit spreads in the US and Europe have generally fallen since 19 …
The decline in mortgage rates since last summer will allow more first-time buyers to enter the market and lead to a further pick up in mortgage lending. With supply still tight, we think that will cause a 3% increase in prices this year. The large rise in …
Deep contraction highlights the extent of the conflict damage The 19.4% q/q annualised contraction in Israeli GDP in Q4 was much worse than had been expected and highlights the extent of the hit from the Hamas attacks and the war in Gaza. While a recovery …
The 2024 National People’s Congress (NPC) will take place against a backdrop of acute concern about the Chinese economic outlook. This annual legislative session is the moment the government unveils the year’s policy priorities, including official growth …
Fall in Swedish core inflation supports case for May rate cut The underlying measure of inflation fell further in January and supports the case for the Riksbank to ease monetary policy soon. We expect the first rate cut in May. Data released by the …
Japan’s industrial production data don’t fully take into account the influence of falling prices and have systematically underestimated the strength of manufacturing output. The upshot is that rather than losing importance, Japan’s industrial sector is …
Thailand’s economy contracted in Q4 due to weaker domestic demand. Looking ahead, we expect steady, if unspectacular, growth this year with a further rebound in tourism and strong government spending set to support demand. The 0.6% q/q fall in GDP was …
PPI a kick in the teeth for inflation doves Mea Culpa The much stronger-than-expected 0.5% m/m increase in core PPI in January came as a hammer blow for PCE estimates, since the overshoot was mostly in the portfolio management and health care-related …
16th February 2024
The plunge in natural gas prices breathed some life into what was otherwise a relatively quiet week in commodity markets. Prices have fallen heavily in most major gas markets as stocks remain high for this time of the year. In the US, the House of …
In a week in which UK and Japanese data both confirmed two consecutive quarters of contracting GDP, Group Chief Economist Neil Shearing explains why the concept of “recessions” can be unhelpful in understanding the state of economies. He also tells David …
Signs of healthy growth going into the first quarter support our view that the Bank of Canada will probably wait until June to pivot to rate cuts. Signs of positive activity in the first quarter The latest January data has brought signs that growth could …
We think Japan’s stock market will take a turn for the worse before long, weighed by what we expect will be a rebound in the yen. And while that nonetheless could mean decent returns in US dollar terms, we doubt Japan’s equities will keep up with those in …
The theme of the week has been one of diverging inflation stories which have helped boost the US dollar. These divergences came not just between economies (hot in the US and cold in the UK, for example) but also within economies, with mixed messages from …
Ratings downgrade highlights realities in Israel The decision by Moody’s to deliver Israel’s first credit rating downgrade in its history late last week is a warning sign to policymakers that the strength of the public finances should not be taken for …
Little change in confidence The surge in consumer confidence due to falling inflation expectations has stalled, with confidence little changed in February. However, with plenty of downward pressure on inflation in the pipeline, there is scope for …
Can Milei tame inflation? The jump in inflation in Argentina to 254% y/y in January underscores the scale of the challenge the Milei administration faces stabilising the economy. The rise (from 211% y/y in December) reflected the full impact of the 50%+ …
This week we held a Drop-In on commercial property distress across the US, UK and Europe. Clients can access a recording here and find related analysis on our dedicated landing page . This Update provides answers to several questions on the UK and …
Multi-family starts slump to lowest level since 2020 Housing starts fell by the largest amount since April 2020 in January, led by a huge drop in multi-family starts. We suspect the multi-family sector will continue to be a drag on new development this …
It’s debatable whether the 0.1% q/q and 0.3% q/q contractions in real GDP in Q3 and Q4 2023 should be labelled as a recession given the falls were so small. While it satisfies the usual definition of a recession being two consecutive quarters of falling …
The German Economy Minister Robert Habeck admitted this week that the economic situation was “dramatically bad” and said the government would reduce its 2024 growth forecast from 1.3% to 0.2%. The new forecast is a bit lower than the Bundesbank’s latest …
Will the Bank of Korea turn dovish? The BoK looks almost certain to leave interest rates unchanged at its meeting on Thursday. Instead, the focus will be on the tone of the statement. We expect the central bank to start sounding more dovish, as concerns …
South Africa's Finance Minister Enoch Godongwana faces an uphill task in next week's Budget to convince investors that the government will be able to place the public finances on a sustainable footing. Mr. Godongwana will start his speech in parliament …
Tightening cycle comes to a close, but rates to stay high Russia’s central bank (CBR) left its policy rate on hold at 16.00% as expected today and we think that inflation pressures will prevent it from cutting interest rates for most of this year. Today’s …
Farmer protests won’t lead to big fiscal giveaways Widescale farmer protests have returned and have dominated the headlines this week. Farmers are currently marching from neighbouring states towards New Delhi in demand of higher prices for key crops; …
The Czech economy has had the weakest performance of any EU country since the pandemic, and we think that growth will disappoint expectations again in 2024. This will keep inflation contained and put pressure on the central bank to loosen monetary …
This page has been updated with additional analysis since first publication. Strong rebound suggests the retail recession will soon be over The 3.4% m/m rebound in retail sales volumes in January suggests the retail recession, and perhaps the economy …
Services inflation will slow sharply Australian labour market data published yesterday garnered considerable attention, largely because they showed that the unemployment rate overshot analyst expectations and jumped to a two-year high of 4.1%. However, we …
Japan’s economy is not in recession The preliminary estimate of Q4 GDP showed the second consecutive contraction in output, but we doubt it will scupper the BoJ’s plans to end negative interest rates. For a start, the quality of Japan’s preliminary GDP …
We expect India’s stocks, bonds, and currency to rally over the remainder of this year. It’s been a strong start to the year for India’s financial markets. The MSCI India Index of the country’s equities has been the strongest performer of MSCI’s large …
While we expect the office and multifamily sectors to account for the lion’s share of distressed assets over the next couple of years, there is an important distinction between the two. Unlike multifamily, we expect impacts on offices to be widespread, …
15th February 2024
We think that global growth will undershoot consensus expectations in 2024 as various props to growth from 2023 fade and as the lagged effects of past rate hikes continue to feed through. Among the advanced economies, the US will continue to outperform …
Although house prices continued to fall in January, lower mortgage rates are beginning to support affordability and stimulate home sales. With the sales-to-new listing ratio now pointing to positive house price inflation, we expect house prices to be …
Weaker economic data from the US have bolstered our view that the Federal Reserve will be able to cut rates by more than investors currently expect. As a result, we continue to think that Treasury yields will generally fall by the end of the year. …
Higher aluminium prices and lower production costs should incentivise Europe’s smelters to restart some production in both 2024 and 2025. The introduction of CBAM in 2026 means prices will then probably trade at a premium to other regions, particularly as …
Weak end to 2023 The stagnation in Colombia’s GDP in Q4 confirmed that the economy remained very weak at the end of last year and we think the recovery this year will be slower than most anticipate. At the margin, the weakness of the latest activity …
Saudi’s loose fiscal stance to continue (for now) Data released yesterday confirmed that Saudi Arabia ran a budget deficit over 2023 as a whole and, as the government maintains high spending levels despite lower oil prices, the Kingdom will run larger …
Trump's second term: Key insight into Trump's policies …
Adverse weather hits manufacturing & mining, but boosts utilities Adding to the weaker news on retail sales, manufacturing output declined by 0.5% m/m in January although, as with the former, the unseasonably severe winter temperatures and snow storms in …
South Africa’s fiscal strains have seen the government explore tapping revaluation gains on the country’s FX reserves held at the SARB. Utilising these funds to pay down the government’s debt would help to improve South Africa’s fiscal health. But there’s …
