We no longer expect the economy to enter a recession across the second half of the year. But with external demand set to remain soft and real household incomes declining for a while yet, the recent strength in activity won’t last. And with plunging import …
16th August 2023
This page has been updated with additional analysis since first publication. Services inflation still uncomfortably high CPI inflation fell to a 17-month low of 6.8% in July, as the effects of the lower utility price cap kicked in. But with services price …
The Reserve Bank of New Zealand left rates on hold, as was widely expected. However, the minutes of today’s meeting were unambiguously on the hawkish side, with the Committee indicating the need to keep policy settings restrictive for a protracted period. …
RBNZ signals extended pause All 29 of the analysts polled by Reuters, including ourselves, correctly predicted the RBNZ’s decision to leave the OCR unchanged at 5.50%. The minutes of the meeting reiterated the RBNZ’s tightening bias. The Committee appears …
Entering a period of weakness The larger-than-expected 1.0% q/q contraction in Colombia’s GDP in Q2 is likely to be followed by further weakness over the coming quarters. We expect this to prompt BanRep to join other central banks in the region in …
15th August 2023
The difficulties facing China’s economy and financial system continue to dominate much of the headlines. So far, the gloom has not made a major dent in the optimism reflected in global markets, although that could yet change. Another round of …
Given the dominance of coal in China’s energy mix, a medium-sized electric vehicle (EV) produced there currently starts life with a “carbon debt” almost twice that of an equivalent internal combustion engine (ICE) vehicle. However, the greater efficiency …
The crises unfolding in Argentina, Russia, as well as in China’s property sector, this week may rumble on for some time. And in the case of China’s property downturn, there are likely to be spillovers to other EMs, particularly metals producers. But these …
On the back of the remote work revolution, US downtowns have seen reduced office-led footfall and rising crime rates. Cities will need to be proactive to drive conversion to alternative use and to find ways to regenerate what were often thriving areas …
Encouraging signs under the surface This page has been updated with additional analysis since first publication. While the continued above-target gains in the CPI-trim and CPI-median core measures may cause some concern for the Bank of Canada, there were …
This page has been updated with additional analysis since first publication. Consumer resilience continues The 0.7% m/m jump in retail sales in July suggests that tighter monetary policy is still having remarkably little impact on real economic activity, …
The decision by Russia’s central bank to increase its policy rate by 350bp, to 12.00%, at an unscheduled meeting today underscores the challenges that policymakers are now facing to maintain macroeconomic stability in an economy that is being distorted by …
Inflation rises again, CBN has more work to do Nigeria’s headline inflation rate rose again to an almost-18 year high of 24.1% y/y, as the removal of fuel subsidies and the devaluation of the naira continue to push up prices. This fresh increase in …
Emerging economies whose currencies have fallen by 15% or more against the dollar in a single day – as the Argentine peso did yesterday – have fallen into recession in more than 80% of cases in the last 30 years. Sovereign debt defaults occurred after …
We think that Arabica and Robusta coffee prices will remain historically high over the next 12 months or so, but especially the Robusta price owing to greater El Niño-related supply risks. With that said, we forecast that global coffee supply will …
Property developers on the brink. A slip into deflation. Activity at a standstill. Markets are growing nervous as bad news piles up around the Chinese outlook, but how grim is the economic situation? Is another recession on the cards? Are defaulting …
Inflation across Emerging Asia should continue to decline over the coming months. However, the risks are to the upside amid uncertainty over the outlook for food prices. And while we are sticking with our forecast that more Asian central banks will lower …
Interest rate-sensitive activity in advanced economies has fallen, but is still holding up rather well given how much interest rates have risen. This is partly due to the rebound in auto sales and more recently mortgage approvals. But we still think …
This webpage has been updated with additional analysis, as well as a Chart and Table of key data. Inflation slows to weakest pace in a year and will ease further Saudi Arabia’s headline inflation rate eased from 2.7% y/y in June to 2.3% y/y in July, the …
Russia’s central bank steps up to the plate, but more needed to stop ruble’s fall The Russian central bank’s 350bp interest rate hike, to 12.0%, at today’s unscheduled meeting is likely to be followed by further increases in the coming months. But there’s …
This page has been updated with additional analysis since first publication. Accelerating wage growth supports the case for one more rate hike The fall in employment in the three months to June and further rise in the unemployment rate will be welcomed by …
Unchanged inflation points September rate hike The unchanged readings for both headline inflation and the Riksbank’s target variable suggest that a further interest rate hike in September is highly likely. Headline inflation came in at 9.3% in July, …
Most of the plunge in import volumes last quarter reflects lower energy imports. With the Ukraine war rekindling concerns about energy security and energy prices remaining stubbornly high, import volumes may continue to fall in future even if domestic …
This page has been updated with additional analysis and charts since first publication. Growth has slowed to a crawl All the main activity indicators undershot consensus expectations in July, with most either stagnant or barely expanding in m/m terms. And …
This page was first published on Tuesday 15 th August, covering the reduction to the Medium-term Lending Facility rate. We added commentary following the cut to the 1-year Loan Prime Rate on Monday 21 st August. LPR follow-up disappoints after largest MLF …
This page has been updated with additional analysis since first publication . Underwhelming wage growth bolsters case for RBA to stay put The sluggish pace of wage growth in Q2 reinforces our view that the Reserve Bank of Australia won't lift interest …
This page has been updated with additional analysis since first publication. Above-trend growth won't be sustained Japan’s economy expanded at an extremely rapid pace last quarter, but we expect a renewed slowdown across the second half of the year. The …
While economic activity was generally more resilient than feared in the first half of 2023, we expect global growth to disappoint in the coming quarters. We doubt that another bout of policy stimulus will radically improve the outlook for China’s economy, …
14th August 2023
We don’t think the ongoing troubles in China’s property sector mark the beginnings of a financial crisis, but do expect them to be a drag on returns from the country’s stock market over time. News that Country Garden – a large Chinese property developer – …
Oil output cuts fuelled Saudi Arabia’s economic downturn in the first half of 2023 and the drag from the oil sector appears to have intensified more recently. Taking together with signs that activity in the non-oil sector is cooling, the Kingdom’s …
PASO election tips economy deeper into crisis The news just out that Argentina has devalued the peso by around 20% against the dollar (to 350/$) and hiked the policy interest rate by 21%-pts to 118% underscores that the economy is lurching towards an even …
In contrast to shops and retail warehouses, the nascent recovery in shopping centre rents has already faded. The shift to remote work and greater exposure to online competition has led to relatively weak sales of the type of goods shopping centres offer, …
Total rise in July hides slowdown in commercial lending July saw the amount of outstanding debt secured against real estate rise (albeit marginally) after a sharp drop in June, driven by a strong rebound in residential lending. Across the commercial real …
The immediate global economic and market fallout from troubles at Chinese property developer Country Garden seems likely to be limited. Foreign exposure to China’s property sector has fallen sharply over recent years and policymakers should step in to …
This page has been updated with additional analysis since first publication. An inflation shocker Headline consumer price inflation accelerated to a 15-month high of 7.4% y/y in July amid the surge in food price inflation. While the RBI expects the sharp …
Surveys show that most people in the UK want action to tackle climate change but many do not have the appetite to pay for it. And given that the fiscal firepower and political will to grease the wheels of the green transition are both in short supply, …
Core inflation has been falling for around a year in the US and we suspect that it won’t be long before it starts falling in the euro-zone too. However, while core goods inflation in the euro-zone is likely to follow that in the US by dropping sharply, we …
The surprisingly strong showing for far-right self-proclaimed “anarcho-capitalist” Javier Milei in Argentina’s primary elections (known as the PASO) suggests that there is popular appetite for a shock-therapy style approach to deal with the economy’s …
Having spent the past year worrying over runaway inflation in the major advanced economies, markets are now having to contend with the apparent threat of deflation in China. July’s 0.3% y/y fall in China’s consumer price index and 4.5% y/y drop in …
Although central banks in both Australia and New Zealand are unlikely to drop their hawkish bias anytime soon, we suspect that their tightening cycles are now over. The RBNZ has already succeeded in sending New Zealand into a recession, which is only set …
With more poor economic data out of China and US yields again threatening to push towards new highs, it is little wonder that the yen and the renminbi have come under renewed pressure. While we still think both currencies will rebound later this year, our …
11th August 2023
This page has been updated with additional analysis since first publication . A strong recovery, but Russia’s economic vulnerabilities are increasing The better than expected pick-up in Russia’s GDP growth in Q2, to 4.9% y/y, confirms that the economy had …
In spite of last week’s weak US payrolls report and this week’s soft CPI data, the dollar has, on net, risen against all other major currencies this week. This may be partly a result of hawkish comments from Fed officials in the aftermath of the CPI …
Natural gas prices were the biggest mover in commodity markets this week, jumping higher on the back of news of potential industrial action at LNG plants in Australia. We don’t think gas prices in Europe are likely to return to their peaks of last year , …
Nigeria’s naira gap evidence of Buharinomics Two months on from the naira’s devaluation, the gap between Nigeria’s official and black market exchange rates is widening again. This suggests that the CBN is, once again, propping up the naira and adds to the …
Falling expectations drag down confidence The University of Michigan consumer sentiment index stalled in August, with the index slipping back to 71.2, from 71.6. With tighter credit conditions and a weaker labour market likely to weigh on confidence …
A fork in the road for Argentina Sunday’s open, simultaneous and compulsory primary elections (PASO) should give a first sign of whether Argentina will buck the regional political trend and shift to the right at the presidential election in October. All …
Inflation and activity data at odds Core price pressures collapsing It might seem a little premature to be celebrating when annual core CPI inflation was still as high as 4.7% in July, down only trivially from 4.8%, but don’t be fooled by the strong …
Although export volumes fell for the second month running in June, the strength of imports suggests that domestic demand is holding up and the Bank of Canada will be pleased to see that import prices continue to fall. Export volumes weak, but imports …
Exports may be weaker than they appear China’s exports fell 14.5% y/y in July, undershooting the analyst consensus. But given the sharp fall in export prices recently, what’s more surprising to us is that export values haven’t fallen even more. On paper, …
