According to Halifax, house prices are up by 20% compared to 2019 even after their recent falls. But adjusted for inflation they slipped to a seven-year low in August. High mortgage rates point to a further fall in prices in both real and nominal terms. …
7th September 2023
The Budapest office market has underperformed in recent years, with rents lagging the rest of the region. While some weakness is likely for the rest of this year, the outlook is improving. With a more limited supply pipeline and improving demand, Budapest …
Stagnant in Q2, likely to contract in Q3 The downward revision to the euro-zone’s second-quarter GDP data means the economy is now thought to have essentially flat-lined since the fourth quarter of last year. With business surveys having turned down …
This page has been updated with additional analysis since first publication. The decision by Malaysia’s central bank (BNM) to leave the overnight policy rate unchanged at 3.0% came as no surprise. Despite the poor near term outlook for economic growth, …
Largest annual fall since 2009 The steep fall in the Halifax House Price Index in August confirmed that the further leg down in house prices we have been forecasting has materialised. If we are right to think that mortgage rates will remain around current …
Fall in German industrial production even worse than it looks Aggregate German industrial output fell sharply again in July and the fall was even larger if the construction and energy sectors are excluded. We expect production to drop further in the rest …
This page has been updated with additional analysis since first publication . Export volumes are likely to soften before long China’s export values continued to contract in August, but this mostly reflects lower prices. Export volumes continued to hold …
Net trade set to become a drag on Q3 GDP growth Following the sizeable 0.8%-pts boost to GDP growth in Q2, the July trade figures suggest that net exports will provide a drag in the third quarter. The trade surplus fell from a downward-revised $10.3bn in …
M1 narrow money continues to contract at a double-digit annual pace, as higher interest rates temper demand for low-return deposits. Broader money growth is not faring quite as badly, since higher rates are also boosting demand for savings deposits and …
6th September 2023
China’s announced support for the property sector and the extent of fiscal stimulus is modest, but it will help to support base metals demand in the coming months. Accordingly, we expect prices to tread water over the rest of 2023. Prices should rise in …
Higher interest rates lead to forecast downgrades The latest IPF Consensus Survey showed a reversal of last quarter’s forecast upgrades, bringing the consensus view more in line with our own. The surge in interest rates thanks to high inflation is behind …
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today supports our view that, once the large falls in inflation are behind us in early 2024 and the economy recovers, the easing cycle is likely to shift down a gear. We …
Excluding China, aggregate EM GDP growth held up surprisingly well in Q2. That said, we think growth will weaken in most major economies in Q3 and remain subdued over the coming quarters before a modest recovery takes hold in the second half of 2024. Our …
The Bank of Canada accompanied its decision to leave interest rates unchanged with a pledge to hike again if needed, but we doubt it will need to follow through. With recession risks rising and labour market conditions loosening, we continue to think that …
The worsening economic growth backdrop suggests to us that interest rate expectations for cyclically sensitive developed market (DM) economies are too high. We expect them to fall and drag bond yields sharply lower over the next couple of years. Earlier …
The higher share of floating rate mortgages in Italy and Spain means that household interest spending in both countries has risen much further than in Germany and France. Interest spending is also set to keep rising much more quickly in Italy and Spain in …
The latest real estate data suggest that the current drop in capital values in the euro-zone will be as bad as the post-GFC correction. But market sentiment has been less negative this time, particularly for occupiers, which we think largely reflects the …
Bank maintains hawkish bias, but next move likely to be a cut The Bank of Canada accompanied its decision to leave interest rates unchanged with a pledge to hike again if needed, but we doubt it will need to follow through. With recession risks rising and …
Modest rise leaves index at subdued level The rise in the ISM services index to a six-month high of 54.5 in August, from 52.7, is a further sign that activity growth is holding up in the third quarter. That said, a weighted average of the two ISM surveys …
Energy prices will remain historically high over the remainder of this year. OPEC+ output cuts, which have kept the oil market constrained, will continue until the end of the year, while demand in the US and China has held up. The natural gas market …
The German government is unlikely to announce the kind of big stimulus package that some are calling for. However, fiscal policy will remain much more supportive than it was before the pandemic. The German economy has struggled since the pandemic. In Q2, …
South Africa’s economy has one of the weakest growth records of any EM over the past decade and its post-pandemic recovery has been particularly disappointing. At the heart of the problem are major structural impediments to growth that stretch far beyond …
NBP starts it easing cycle with a bang The National Bank of Poland (NBP) kicked off its easing cycle today with a much larger-than-expected 75bp cut to its main policy rate, to 6.00%. We will firm up new interest rate forecasts after Governor Glapinski’s …
BC port workers’ strike weighs heavily on imports As the BC port workers’ strike weighed far more heavily on imports than exports, the trade data suggest that there are modest upside risks to the preliminary estimate that GDP was unchanged in July. That …
Trade deficit widens, as consumer goods imports rebound Net external trade is on track to provide a modest positive contribution to third-quarter GDP growth, despite the widening in the monthly trade deficit to $65.0bn in July, from $63.7bn. Exports …
A growing number of indicators suggest that the labour market is no longer much tighter than it was in 2019 and that, as a result, wage growth is also likely to slow towards pre-pandemic levels soon. This suggests that most of the required adjustment in …
Mortgage rates continue to weigh on demand Mortgage applications for home purchase continued to slip in August, recording the largest monthly fall since February. This latest drop has kept mortgage applications at their lowest level since 1995. While we …
This page has been updated with additional analysis since first publication. Edge down points to period of weakness Euro-zone retail sales fell in July and, in our view, will keep declining over the rest of the year as the effects of tighter monetary …
This page has been updated with additional analysis since first publication. Construction PMIs weaken as new orders fall back The fall in the headline CIPS construction PMI from 51.7 in July to 50.8 in August left it just above the 50 “no-change” mark. …
The relaxing of planning rules governing new onshore wind installations in England marks a shift away from the de facto ban that was put in place in 2015. But raising the bar for objections to land-based turbines won’t put an end to green-related …
This page has been updated with additional analysis since first publication. Stronger-than-expected GDP growth won’t prompt RBA to resume rate hikes While GDP growth held up better last quarter than the RBA had anticipated, we doubt this will encourage …
Denver’s poor jobs market performance over the last year appears to have been driven by a combination of a downsizing in Central Bank staff and layoffs in its large telecoms sector. But the former’s weakness is likely to be short-lived and the latter has …
5th September 2023
Sharp falls in inflation mean that the economies of Central and Eastern Europe (CEE) are on the cusp of a broad-based monetary loosening cycle. That said, we think that the legacy of the inflation shock over the past two years will be more persistent …
We doubt the strong gains in Japan’s equity market this year mark the start of a significant reversal of its decades-long underperformance; we expect it to lag the US market over the next couple of years, both in local-currency (LC) and US$ terms. Today’s …
Having ballooned during the post-pandemic recovery, Colombia’s current account deficit has started to narrow and should continue to do so in the coming quarters. This, alongside the shift in financing towards more stable FDI inflows, leaves the peso less …
The adoption of remote work meant central London was left out of the COVID-19 house price boom. But with house prices in outlying towns and rural areas around the capital starting to stagnate too, there are tentative signs that the relative …
This page has been updated with additional analysis since first publication. Industry set to drag on growth in Q3 The larger-than-expected 0.6% m/m decline in Brazilian industrial production in July, taken together with weakness in some of the surveys for …
Rising interest rates have pushed down commercial property equities, which implies capital values will come under further downward pressure. That said, the large correction in equities seen in 2022 meant annual growth has now levelled out. That suggests …
This report has been updated with additional analysis and a chart of the key data. Gulf non-oil sectors cooling off, Egyptian inflation pressures still building August’s batch of PMIs for the region showed that activity in non-oil private sectors in the …
Final PMIs underline that outlook has deteriorated The final PMIs published today were revised down from the already-low levels reported in the flash measure two weeks ago. The Services Business Activity PMI slumped compared to July, and although the …
Better-than-expected Q2, but outlook remains tough The 0.6% q/q rise in South Africa’s GDP in Q2 was stronger than expected but more timely indicators point to a weak start to Q3. And the backdrop of severe power cuts, tight policy and worsening terms of …
The jump in inflation in August was driven by temporary factors and we don’t think this marks the start of a sustained rise in inflation, especially since core inflation continued to drop back. Nevertheless, the rise in inflation last month reduces the …
At first glance, the rise in corporate profits to a record-high last quarter suggests that greedy firms are driving up consumer prices. However, we still think that most of the increase in inflation reflects surging import costs. Most importantly, the …
The RBA retained its tightening bias when it kept interest rates unchanged at 4.10% today. However, we think the Bank’s next move will be a rate cut, perhaps as early as the first quarter of next year . The Bank’s decision to keep the cash rate unchanged …
RBA is done tightening and will cut rates earlier than most expect The RBA retained its tightening bias when it kept interest rates unchanged at 4.10%, but we think the Bank’s next move will be a rate cut, perhaps as early as the first quarter of next …
New measures to support China’s struggling property sector seem to have sparked some renewed optimism in the country’s financial markets. We think there are three points to note. First, despite the rally, investors still seem quite downbeat on China. The …
4th September 2023
The Bank of Israel (BoI) left its policy rate on hold again today, at 4.75%, and while our baseline forecast is that the tightening cycle is now over, the BoI’s hawkish comments support our view that it won’t turn to interest rate cuts until Q2 next year …
Swiss economy set to continue flatlining Weak manufacturing and investment weighed on the Swiss economy in Q2, leaving GDP unchanged from the previous quarter. We think activity will be sluggish for the rest of the year as the effects of monetary …
