Fed slows pace of rate cuts The minutes of the Fed’s early-November FOMC meeting, when it slowed the pace of policy loosening with a smaller 25bp cut, tell us little about whether to expect another smaller quarter-point cut at the upcoming policy meeting …
26th November 2024
We aren’t convinced the outperformance of US small-cap (SC) equities since Donald Trump’s victory on 5 th November sets the tone for the first half of 2025. We doubt they will start to fare better than large-cap (LC) equities over a sustained period until …
Even if the government’s easing of planning rules were to mean that at least 300,000 new home approvals in England were granted a year, the number of construction workers would need to rise significantly. We estimate about 500,000 extra construction …
House price growth picks up momentum in the summer The second consecutive moderate 0.3% rise in house prices in September reflects the market picking up momentum over the summer as mortgage rates fell. However, timelier indicators, like the sales-to-new …
Hurricanes and elevated mortgage rates hit sales The large fall in new home sales in October was to be expected given the disruption from hurricanes Helene and Milton, as well as the rise in mortgage rates last month. While sales should rebound this …
Latin American (LatAm) markets have been generally resilient in the aftermath of the US election, possibly because investors were already pessimistic about the region’s prospects. But we think domestic and global headwinds will translate into LatAm assets …
25bp hike probably the last of this cycle The Central Bank of Nigeria opted for a smaller-than-expected hike in its policy rate of 25bp to 27.50%, at its meeting today and, with Governor Cardoso sounding optimistic that the effects of petrol price hikes …
President-elect Donald Trump’s first threatened tariffs since the election are designed to extract concessions on drug trafficking and illegal border crossings, which means it may be possible for the countries targeted – Canada, Mexico and China – to head …
Amid the Trump Trade, capital outflows from EM financial markets have persisted over recent weeks. Looking ahead, we expect the US dollar to strengthen further, suggesting that outflows will continue. This will not be a problem for most EMs, but those …
Inflation jumps, Selic heading higher The rise in Brazil’s headline inflation rate, to 4.8% y/y, in the first half of November was partly driven by a further increase in underlying core services inflation and means that Copom is likely to raise the Selic …
Economy bounces back at the start of Q4 The stronger-than-expected Polish activity data for October suggest that the contraction in the economy in Q3 wasn’t the start of a renewed trend. With fiscal policy set to remain loose over the coming year and …
India’s stock market has had such a good few years that it started to raise concerns about whether it was in a “bubble”. And as it’s come under pressure recently, some have speculated that the bubble is bursting. For our part, we think that there are …
The spread between 10- and 2-year Treasury yields has ‘inverted’ again, partly because the nomination of Bessent as US Treasury secretary has eased fiscal concerns. But we forecast the curve to steepen by more than most expect over 2025 as the Fed …
25th November 2024
The latest activity data have brought further evidence that India’s economy is going through a soft patch. But given the strength of the recent inflation data, we now expect the RBI to keep rates on hold until April. For India, the direct impact of a 10% …
BoI on hold as upside inflation risks remain The Bank of Israel (BoI) left its policy rate on hold again today, at 4.50%, and the accompanying communications suggest that the risk of a return to interest rate hikes has receded over the past month. Even …
All-property values are down 18% from their mid-2022 peaks. And with appraisal-based cap rates still set to tick higher, we expect further small falls in values. That should take the peak-to-trough decline to over 20% by end-2025. At the sector level, we …
Residential construction employment has been performing much better than the slump in construction over the past year might have implied. We suspect that is because job losses in the new home construction sector have been concentrated among undocumented …
Given the considerable uncertainty surrounding what policies president-elect Donald Trump will enact during his second term, there is a temptation to read a lot into his Cabinet nominations, but we would caution against that. Following his comprehensive …
Currencies across Latin American have held up well in the wake of the US election, but we think that they will come under pressure as the dollar strengthens on the back of Trump’s policy proposals. The Mexican peso looks particularly vulnerable to sharp …
We discussed the global impact of higher tariffs in a Drop-In on Tuesday, 26th November. Click here to watch the 20-minute online briefing. In this Focus, we construct a framework to explore the channels through which an import tariff works, which we use …
Donald Trump’s latest threat to impose massive tariffs on China, Mexico and Canada are a reminder that this is a very real threat to the global economic outlook. In this special briefing, our senior economist team answered questions from the audience as …
Growth picks up, but outlook remains challenging Nigeria recorded a surprise pick-up in GDP growth to 3.5% y/y in Q3 as stronger growth in the non-oil economy more than offset a slowdown in the oil sector. We expect growth to remain soft until the …
Europe Commercial Property Valuation Monitor (Q4 2024) …
Shock victory for far-right candidate raises risks for Romania The surprise lead for an independent far-right candidate, Călin Georgescu, in the first round of Romania’s presidential election raises the risk of an abrupt shift towards more populist …
This page has been updated with additional analysis since first publication. German economy still in the doldrums The fall in the Ifo Business Climate Index (BCI) in November left it even deeper into recessionary territory and is consistent with our view …
News of who’s in – and who’s out – of Donald Trump’s government, and what that means for the US and the rest of the world, continues to swirl. While Trump’s choice of Scott Bessent for Treasury Secretary is reassuringly orthodox, there is still …
Discussion on the latest episode of The Weekly Briefing from Capital Economics attempts to avoid any mention of Donald Trump – and fails almost immediately. But Group Chief Economist Neil Shearing’s point is that there is a lot going on in the world …
22nd November 2024
SARB: lower CPI target poses upside risk to rates The SARB seemed optimistic when cutting its repo rate by 25bp to 7.75%, this week and, while we expect further easing, the growing likelihood that the inflation target will be lowered in the coming months …
The US dollar has rallied further this week as investors have continued to price in the implications of a second Trump term and digest weak economic data in key trading partners. This rally has taken the DXY Index to its highest level since November 2022 …
November’s weaker-than-expected Flash PMIs for the euro-zone prompted investors to lower their policy rate expectations. Even so, we still expect more easing than implied in money markets, so we think Bund yields will fall a bit further. The euro-zone …
The recent stronger price and activity data, along with the announcement this week of a sales-tax break over the festive period and stimulus cheques to come next year, means we now think the Bank of Canada will cut interest rates by 25bp at its December …
The latest flash PMIs suggest that while industry continues to struggle across advanced economies, services activity is now slowing in Europe too. While reduced political uncertainty seems to have lifted business sentiment in the US, the PMIs suggest that …
Overview – The fiscal loosening announced in October’s Budget means inflation and gilt yields are now set to be higher than previously expected over the next few years. And with the spread of gilt yields over property yields currently narrow, that implies …
We remain sceptical that deregulation will provide a disinflationary boost to the economy’s supply side and we suspect that any reduction in government spending or headcount would turn out to be modest. Libertarian-minded Republicans have long-believed …
While it was widely expected that CPI inflation would rise above the 2.0% target in October, the rebound from 1.7% to 2.3% was stronger than most forecasters had anticipated. And our view is that CPI inflation will rise further, to nearly 3.0% in January …
Earlier this week, our markets team revised our bond yield forecasts, raising our 10-year US Treasury yield forecast on the back of Trump’s election, but generally lowering our forecasts for euro-zone yields. (See here .) We now forecast the 10-year …
Russia’s war in Ukraine escalates Tensions between Russia and Ukraine escalated this week, with the US shifting its strategy to give Ukraine the go-ahead to use Western-provided long-range weapons on Russian territory and Russia launching an …
The resilience of commodity trade: a history lesson The election victory of Donald Trump and the prospect of renewed trade restrictions has naturally sharpened attention on the potential impact of tariffs on trade flows, including on commodity trade. Our …
Mexico: meeting fiscal targets will be a tall order Mexico’s draft 2025 budget had been widely anticipated given the recent sharp deterioration in the country’s public finances – the deficit is set to come in at a multi-decade high of 5.0% of GDP this …
Consumption outlook improving fast The strong increase in retail sales volumes in September confirms that they grew by around 5% annualised last quarter, suggesting that household consumption growth picked up strongly. The October preliminary estimate …
Unsurprisingly, a second Trump presidency will support oil and gas production while rolling back environmental regulations. The fate of the Inflation Reduction Act is less certain, given that the support for manufacturing investment aligns with Trump’s …
More policy support is needed When the Bank of Korea started its easing cycle in October , it pushed back strongly against the prospect of back-to-back rate cuts. Most analysts still expect rates to be left unchanged at 3.25% when the central bank meets …
Air pollution a modest but persistent headwind Even by India’s unenviable standards, there has been a marked deterioration in air quality over recent weeks. Air pollution in New Delhi has been above the government’s “severe” threshold for much of the …
Our base case is that protectionist policies from the US next year will have only a small economic impact on Europe, but the fallout will vary between countries and there are risks of greater damage if the trade conflict escalates. Meanwhile, the EU will …
Fall in inflation leaves door open for December cut The larger-than-expected fall in Mexican inflation in the first half of November, to 4.6% y/y, alongside easing core price pressures and the relative resilience in the peso mean that Banxico is likely to …
This page has been updated with additional analysis since first publication. Budget and Trump may have triggered slowdown in activity At face value, the fall in the composite PMI from 51.8 in October to 49.9 in November suggests that real GDP growth is …
With the dust settling on Trump’s victory earlier this month, this Update takes stock of what has happened across currencies, bonds, and equities; the reasons for these moves; and what we think will happen next. As was the case after Trump’s win in 2016, …
Local governments ramp up support Efforts by the Ministry of Finance (MoF) to get local governments to make greater use of their existing fiscal space are starting to pay off. Data published this week showed that fiscal spending accelerated sharply in …
This page has been updated with additional analysis since first publication. Economy stalling again The slump in the euro-zone Composite PMI in November suggests that the economy is losing momentum in Q4 and supports our below-consensus growth forecast, …
