Fresh reports that President Trump will not impose tariffs on Day 1 mean that his inauguration has, quite fittingly, coincided with a volatile day across financial markets. Although we suspect that a fair degree of volatility will persist for a while yet, …
20th January 2025
The Bank of Canada’s latest business and consumer surveys support our view that GDP growth will pick-up this quarter and suggest there are some upside risks to our forecast for another 75bp of interest rate cuts this year. That said, given the threat of …
We know that the economy flatlined or suffered a small contraction in Q4. But that would have been much worse if not for what appears to be a rise in government spending, which will play an important role in driving GDP growth throughout 2025 too. With …
Capital outflows from EMs have picked up again over the past few weeks amid a strengthening of the US dollar and broad increases in bond yields, but also country-specific issues – most notable declining optimism about the outlook for India’s economy and …
Saudi Arabia’s government has been the largest EM issuer of hard currency debt over the past few years and this Update considers what will happen to the Kingdom’s public debt burden under different scenarios for oil prices. The overall conclusion is that …
China’s exports of the “New Three” ended last year at a new record high as US firms continued to ramp-up imports of Chinese-made batteries. Meanwhile, the backdrop of heightened tariffs and slowing green transitions in developed countries has resulted in …
Weeks of speculation have been building to the moment at midday DC time today when Donald Trump will, for a second time, place his hand on the Bible and swear to faithfully execute the office of the president. His return to the White House should finally …
Group Chief Economist Neil Shearing calls in from Singapore to The Weekly Briefing from Capital Economics to talk about what’s known and unknown about Donald Trump’s policy agenda just days before he is sworn in again. He discusses the tone set by Trump's …
17th January 2025
Despite further large swings in bond markets this week, moves in currency markets have for the most part remained relatively muted ahead of Donald Trump’s inauguration next week. The dollar is broadly flat on the week as a whole, even after a relatively …
Equities in Europe have done well so far this year, but we expect them to trail those in the US over the rest of 2025, as the US imposes universal tariffs and enthusiasm about AI returns. This would also mean “big-tech” sectors returning to the front of …
Dovish SARB on the cards even with weak rand The rand’s recent weakness has raised worries in the market that the SARB’s easing cycle will slow. While the risks to our forecast for the repo rate are certainly tilted to the upside, we still think a …
The federal government is planning to fight US tariffs with tariffs, but reports this week suggest that those would cover a far smaller value of goods than the US is likely to hit. The government has also failed to muster enough support from the …
Peso a Damocles sword over stabilisation process This week’s CPI data marked another victory for Argentinian President Javier Milei. Inflation came in at 2.7% m/m in December, the third consecutive sub-3% reading, prompting the government to announce a …
Real economy still firing on all cylinders The strong December employment figures were followed by news this week of solid gains in control group retail sales, industrial production and housing starts. As a result, we now estimate that fourth-quarter GDP …
The Chancellor was able to breathe a sigh of relief this week after favourable CPI inflation prints for December in both the UK (see here ) and the US (see here ) led to a reversal in last week’s leap in gilt yields. In fact, the 28 basis points (bps) …
Manufacturing output rebounds The strong rise in industrial production in December is consistent with the recent improvement in the survey evidence. However, we do not think this marks the beginning of a sustained recovery in the manufacturing sector. The …
US sanctions on Russian energy cause a stir Oil prices had a strong start to the week following the news of further US sanctions against Russia's oil sector. We outlined our thoughts here but in short, the disruption from these sanctions could take time …
Jump in starts consistent with growing optimism among builders The large rebound in housing starts and continued resilience of building permits in December provides some support to our forecast that starts will remain solid in the first half of the year. …
With commercial property capital values stabilising and credit conditions easing, the stage was set for a decent recovery in investment this year. However, the recent rise in gilt yields has cast a shadow over the outlook and a fall in UK REIT pricing …
Oil prices up, but inflation will still fall We now think that headline inflation will be a touch higher this year than we previously expected, but it will still probably average around 2% and the core rate will keep falling. So this doesn’t change our …
Korea: political crisis weighing on growth The political crisis in Korea is continuing to drag on, with no clear sign of when or how it will come to an end. President Yoon Suk Yeol was arrested this week on charges of insurrection following his …
The latest data suggest that resilient consumer spending supported GDP growth in the US towards the end of last year, while activity in other advanced economies remained weak. Industry continues to struggle in DMs, while in China it is benefiting from …
Services inflation in the euro-zone was stuck around 4% last year but we remain convinced that it will decline significantly in 2025. Data released today confirmed that euro-zone headline inflation rose from 2.2% in November to 2.4% in December. The core …
Biden's final export control crackdown In the final days of his administration, Biden has (yet again) ramped up US export controls in a bid to slow China’s development of advanced AI. The new Interim Final Rule on Artificial Intelligence Diffusion …
Israel & Hamas: an end to the war The ceasefire deal agreed between Israel and Hamas this week, if it sticks, would represent a major de-escalation in the region. It’s a multi-phase deal that will involve the exchange of hostages and prisoners, eventually …
More rupee weakness a sign of shifting priorities Data released this week showed that headline consumer price inflation fell from 5.5% y/y in November to 5.2% y/y in December. (See Chart 1.) Our initial response to the data can be read here . Food …
The Shape of the Fractured World in 2025 The share of the fracturing global economy that is accounted for by China and its geopolitical allies contracted in 2024, leaving it under a third the size of the US bloc at the start of 2025. This fall was in part …
Tighter fiscal policy to weigh on growth Economic growth in Malaysia softened in Q3 and we expect a year of fairly subdued growth ahead as tight fiscal policy weighs on demand. According to the advanced estimate published today, GDP growth eased to 4.8% …
This page has been updated with additional analysis since first publication. Disappointing Q4 not a sign of things to come December’s 0.3% m/m fall in retail sales volumes was worse than expected (consensus forecast +0.4% m/m, CE 0.0% m/m) and rounded off …
Bank wary of triggering another market rout A flurry of communication by the Bank of Japan has resulted in the financial markets pricing in an 80% chance of a rate hike at next week’s meeting. We and two-thirds of economists polled by Reuters agree that a …
We think Treasury yields will fall over the remainder of this year, but that the yield curve could nonetheless continue to steepen. The sell-off in Treasuries has gone into reverse in the back half of this week, as the December CPI print seemingly …
Fiscal-driven recovery will be short-lived The economy ended 2024 on a stronger note, thanks to tailwinds from recent policy easing. Increased fiscal spending should continue to provide a near-term prop to activity, but this won’t prevent growth from …
Upcoming inflation data will be pivotal Data released this week broadly support our view that the Reserve Bank of Australia won’t be in a rush to start cutting rates. Indeed, yesterday’s blockbuster jobs report only adds to the evidence that the …
Six months since its formation, South Africa’s Government of National Unity (GNU) has fostered a lot of goodwill in the market. Loadshedding is seemingly a thing of the past, logistics constraints have eased, and the fiscal position has improved. But …
16th January 2025
The Israeli cabinet’s decision to delay a vote on approving the ceasefire with Hamas adds a high degree of uncertainty as to whether it will take e ffect on Sunday, as intended. If a ceasefire can stick, it could lead to a sustained improvement in the …
Higher bond yields a risk to fragile recovery The rise in house prices in December builds on November’s gain, providing some support to our view that house prices will rise by a healthy 4% this year. That said, with the sales-to-new listing ratio dropping …
Strong control group bodes well for Q4 GDP The 0.4% m/m increase in retail sales in December was a little weaker than expected, with the consensus forecast as high as 0.6%, but this was actually a strong report that boosts our fourth-quarter GDP growth …
NBP keeps rates on hold, probably for the whole year The National Bank of Poland (NBP) left its policy rate on hold again today, at 5.75%, and the inflation backdrop is likely to prevent the restart of the easing cycle for some time. We don’t expect …
Gaza ceasefire: economic spillovers to fade Israel and Hamas provisionally agreed to a ceasefire deal on Wednesday. Israel’s PM Netanyahu today has accused Hamas of reneging on part of the deal. But if this can be overcome, it represents a major …
We think China’s 10-year government bond yield will fall to fresh record lows over the coming year, partly because the other investment options available to Chinese investors look increasingly unappealing. Chinese government bond yields are around record …
December’s weaker-than-expected inflation outturn won’t sway Norges Bank: we still expect it to wait until March to start cutting interest rates. We suspect that it will then lower rates gradually, once per quarter, until the key policy rate reaches 3% in …
The Bank of Korea today left its main policy rate unchanged at 3.00%, but with the economy struggling and inflation under control, we doubt it will be long before the central bank resumes its easing cycle. The decision not to cut interest rates for the …
Economy still at risk of contracting in Q4 While the smaller-than-expected 0.1% m/m rebound in GDP in November (consensus and CE forecast +0.2% m/m) offset the 0.1% m/m decline in activity in October, it’s clear that the economy has a bit less momentum …
Higher mortgage rates appear to be weighing on housing demand December’s RICS survey suggests that the relief rally after the Budget may have started to fade at the end of last year and the recent rise in mortgage rates have finally began to weigh on …
