We’ve become a bit more confident in our forecast that the Bank of England will raise interest rates from 5.25% now to a peak of 5.50%, rather than much further, as higher interest rates appear to be weighing more heavily on activity. The peak in UK …
31st August 2023
Sub-Saharan Africa is set to record its weakest growth (outside the pandemic) since 2016 this year as the drags from domestic headwinds are exacerbated by a less favourable external environment. Our GDP growth forecasts across the region are generally …
This page has been updated with additional analysis since first publication. September rate decision hangs in the balance The small upside surprise to euro-zone headline inflation in August was entirely due to energy, while the core rate edged down. We …
Double-digit inflation will prevent September rate cut The fact that Polish inflation remained in double-digits in August, at 10.1% y/y, means that an interest rate cut at the central bank’s meeting next week now seems very unlikely. That said, we think …
This page has been updated with additional analysis since first publication . Rapid Q2 growth likely to trigger another large rate hike The bumper Turkish Q2 GDP growth figure of 3.5% q/q, taken together with more timely figures for Q3 confirms that …
Australia’s energy-sector woes On Monday, union representatives at Chevron’s Gorgon and Wheatstone LNG plants announced their intention to take industrial action starting September 7 th . A union document suggests that members will engage in rolling work …
Government extending gasoline subsidies Japan’s government this week confirmed that the gasoline subsidies that were scheduled to expire in September will be extended until year-end, though gasoline prices will now be capped at 180 yen/litre instead of …
This page was first published on Thursday 31 st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Friday 1 st September , and Caixin Services and Composite PMIs on Tuesday 5 th September. Note: We discussed the China …
This page has been updated with additional analysis since first publication. Resilience of business investment poses upside risks to growth We don’t think the ongoing strength in private fixed investment will last. However, the balance of risks to our …
Note: We’ll be discussing the China growth/stimulus question, the BOJ’s policy outlook, Indian food price inflation and more in our monthly Asia Drop-In on Thursday, 31 st August . Register here to join the online briefing. This page has been updated with …
This page has been updated with additional analysis since first published. Signs of softening activity at the start of Q3 The latest activity data for Russia for July suggest that retail sales maintained solid momentum while industry has come off the boil …
30th August 2023
Stronger-than-expected inflation data from Germany and Spain today add to the uncertainty surrounding the near-term path of ECB policy. On balance, we think that the ECB will raise rates once more in this cycle and that government bond yields will fall by …
Higher gasoline prices mean CPI will surprise to the upside of the Bank’s forecasts But GDP growth is slowing and labour market conditions are loosening Bank can afford to wait for more data and is unlikely to hike again Inflation has surprised to the …
Seattle sees record decline in information jobs in July Employment growth in July was near the average seen in 2023 thus far, at a seasonally-adjusted 0.5% 3m/3m across the 30 metros we cover. But the disappointing performance of information jobs …
History suggests that dollarisation, which is at the heart of Argentine presidential candidate Javier Milei’s policy platform, is a surefire way to get inflation under control. But whether this translates into broader macro stability would hinge on …
Big gap between GDP and GDI persists Second-quarter GDP growth was revised down marginally to a still-healthy 2.1% annualised from 2.4%, but the alternative GDI (gross domestic income) measure suggests the economy expanded at a much slower 0.5% annualised …
On the face of it, Morrocco’s public finances are starting to look alarming. The budget deficit has widened and the public debt-to-GDP ratio has jumped by over 10%-pts in less than three years. But a deeper dive suggests that there isn’t cause for …
Inflation still stubbornly high August’s slightly higher-than-expected inflation rates in Germany and Spain mean euro-zone HICP inflation may not fall as far as we had anticipated (data due tomorrow) and marginally raise the chance of another rate hike in …
A strong rebound in tourism has bolstered retail rents in Spain and Portugal over recent quarters. However, we think this boom has run its course. Alongside a weak domestic consumer outlook, this should keep Iberian retail rents subdued for the rest of …
GDP growth has slowed sharply across most of Emerging Asia since the middle of last year and looks set to remain weak over the coming quarters, as tight monetary policy at home and subdued activity abroad weigh on demand. We anticipate below-trend and …
This page has been updated with additional analysis since first publication. Sentiment rebounds, nascent recovery may be underway The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally rose in August and …
China’s energy demand has been a bright spot in the gloom of an ailing property sector and disappointing economic growth. We think China’s crude oil and natural gas demand will rise further next year, however, coal consumption should fall as hydropower …
Net lending to commercial property was positive for the fifth consecutive month in July although, at £297m, the increase was the smallest since lending contracted in February. Both standing and development lending fell back, with the latter contracting by …
This page has been updated with additional analysis since first publication. Euro-zone sentiment weakens further The decline in the euro-zone’s Economic Sentiment Indicator (ESI) in August leaves it consistent on past form with GDP stagnating at best in …
Renewed surge in mortgage rates begins to take its toll The decline in mortgage approvals to a five-month low in July showed the renewed surge in mortgage rates since April has begun to take its toll. But given the lag between quoted mortgage rates and …
Rapid fall in inflation and weaker-than-expected wage growth mean RBA is done hiking Looming recession should prompt the Bank to ease policy earlier than most expect We’re moving forward our forecast for the first rate cut from Q2 2024 to Q1 All of the …
This page has been updated with additional analysis since first publication. Higher interest rates are weighing more heavily on lending The drag on bank lending from higher interest rates grew further in July, particularly in the housing market. We think …
This page has been updated with additional analysis since first publication. Rapid fall in inflation may prompt earlier rate cuts The sharp fall in inflation in July confirms that the RBA is done tightening and raises the chances that the Bank will start …
Absent major fiscal stimulus in China, global steel demand growth will be weak in the next few months. Accordingly, we forecast price declines in major steel markets towards year-end. Only when economic growth recovers and interest rates fall do we see …
29th August 2023
We expect the gap between high yield (HY) credit spreads in the euro-zone and the US to narrow over the rest of this year as spreads in both economies climb. The option-adjusted spreads (OAS) of HY corporate bonds in the euro-zone have climbed to their …
The July JOLTS data cast further doubt on the idea that the Fed will need to keep rates high for longer. With the job quits rate now below its pre-pandemic peak and the job openings rate also rapidly approaching that level, labour market conditions have …
Equities in Europe, the Middle East and Africa (EMEA) have returned little in US$ terms so far this year. While they may fare better next year, we doubt they’ll outperform the wider emerging equity market. Equities in EMEA, although marginally ahead of …
June saw house prices rise again for the fifth month in a row The limited supply of existing homes for sale helped house prices rise for the fifth consecutive month in June, according to Case-Shiller. Given the sizeable increase in prices in Q2 and that …
The SAVE student loan plan eases the burden on low-income households and should reduce the economic impact as repayments resume in October. Nonetheless, with the hit to disposable incomes just one of several headwinds in the fourth quarter, it is still …
This page has been updated with additional analysis since first publication. MNB cuts rates again, but a short pause in the easing cycle may be coming The Hungarian central bank (MNB) announced another 100bp cut to its quick deposit rate (the key policy …
Despite the slowdown in EM GDP growth in Q2, there’s little sign that labour markets are softening. Wage growth remains alarmingly strong across much of Latin America and Central Europe (CEE). That supports our view that, while central banks in these …
The effects of tighter monetary policy are very clear in the latest money and credit data, reinforcing our view that the euro-zone economy will perform worse than most analysts expect in the coming quarters. Data released yesterday showed that the sharp …
Our China Activity Proxy (CAP) suggests that China’s economy regained some ground in July, following a contraction in June. But the big picture is that output has levelled off recently and that the economy could tip into a downward spiral unless policy …
This page has been updated with additional analysis since first publication. RBA will look past upswing in retail sales We don’t believe that the healthy uptick in retail sales in July represents a second wind for the Australian consumer. Accordingly, …
28th August 2023
PMI and other data released this week have added to evidence of the relative strength of the US economy amid a weakening global backdrop, shifting yield gaps in favour of the greenback and pushing it higher against most major currencies yet again. (See …
25th August 2023
After a relatively cautious speech at Jackson Hole from Fed Chair Jerome Powell and data this week which cast doubt on the idea of an economic resurgence, we still aren’t convinced that the rise in market interest rate expectations for the next few years …
Market participants have taken Fed Chair Powell’s much-anticipated keynote speech at the Jackson Hole conference today as somewhat hawkish, even if the fallout, so far, is some way from the violent market moves which followed his remarks at last year’s …
South Africa fiscal concerns build Growing concerns about the direction of South Africa’s public finances have caused the yield curve to steepen as risk premia have risen, a trend that may continue as next year’s election approaches. Short-dated local …
The worst Canadian wildfires on record appear to be behind much of the recent weakness in GDP and, with more areas now under evacuation orders, the data are likely to remain weak in the coming months. Broader negative impact than 2016 wildfires Worst “on …
It has generally been a positive week for commodity prices. Most metals and agricultural prices rose on the week, in somewhat of a turnaround from recent trends. By contrast, energy commodities fell for the second consecutive week, as concerns about the …
CBRT policy shift now firmly back on track There’s a lot of confusion about what drove Turkey’s central bank to deliver an unexpected 750bp rate hike this week and doubts remain about the policy U-turn. But at this point we’re minded to focus on the …
Solid growth not yet prompting Fed rethink Fed Chair Jerome Powell underscored the FOMC’s commitment to data dependence in his Jackson Hole speech today, but there was no suggestion that signs of economic resilience have already prompted Fed officials to …
