Brazil and Chile spring dovish surprise The decisions in the past week by central banks in both Chile and Brazil to cut interest rates confirm that Latin America remains at the front of the pack in this global monetary cycle. Having been among the first …
4th August 2023
Inflationary pressure dissipating ULC growth slowdown adds to disinflation pressure The news that average hourly earnings growth increased by 0.4% m/m in July, and 4.4% over the past 12 months, might seem like a problem for the Fed. With productivity …
Economies aren’t doing what Economics 101 says they should be doing, with disinflationary evidence piling up, even as labour markets remain in relatively good shape. Group Chief Economist Neil Shearing talks to David Wilder about the sell-off in the bond …
CEE easing cycles around the corner Expectations for the start of monetary easing cycles in Poland and Czechia were strengthened this week after the publication of weaker-than-expected Polish inflation figures for July and the shift in language at the …
Overview – Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5.5% and 6.0% for the next 12 months. That will price many buyers out of the market, and …
The outlook for global agricultural supply has deteriorated since the start of the year as a result of extreme weather, the end of the Black Sea Grain Initiative, the prospect of an El Niño weather event and rising agricultural protectionism. We have …
The US government losing another one of its “AAA” ratings after Fitch Ratings’ downgrade decision Wednesday is more symbol than substance. But three key related points are worth highlighting. First, the market reaction differs significantly from that of …
Speeding up bond issuance is a start but not enough Following last week’s dovish Politburo meeting readout, regulators have reportedly told local officials that they have until the end of next month to fully utilize their annual issuance quotas for …
Nigeria flirting again with unorthodox economics Comments from Nigeria’s president and potential cabinet members this week reinforced our fears that there has not been a clean break from Buharinomics. Justifying the removal of fuel subsidies, President …
Peak does not mean pivot Whether you took this week’s 25 basis point (bps) rise in interest rates, from 5.00% to 5.25%, and the Bank of England’s accompanying communications as hawkish or dovish largely depends on your prior expectations. We thought it …
This page has been updated with additional analysis since first publication. Labour market continues to loosen The small fall in employment and rise in the unemployment rate in July show that the labour market continues to loosen, suggesting that the …
Labour market conditions easing Non-farm payroll employment increased by 187,000 in July and, while that represented a trivial improvement on the downwardly revised 185,000 gain the month before, those are otherwise the two weakest monthly gains in …
Our new GDP forecasts There was something for both the bulls and bears in the euro-zone’s Q2 GDP data. For the bulls, the data were better than expected and show that the economy continued to dodge a recession. For the bears, some one-off factors meant …
Core inflation remains a concern Figures from the Philippines published earlier today show that headline inflation fell to 4.7% y/y in July. This compares with 5.4% in June and a peak of 8.7% in January. Falling food and energy price inflation have been …
Saudi Arabia’s announcement yesterday that it would extend its unilateral oil production cut of 1m bpd into September sent the Brent crude oil price climbing to $85 per barrel, where it remains today. We think the price will remain at around this level …
The Central Bank of Egypt unexpectedly hiked interest rates late yesterday, by 100bp to 19.25%, but it still needs to follow through with another devaluation as well as further rate hikes in order to get investors back on board. With growing signs that …
Renewed drop and more weakness ahead Euro-zone retail sales fell in June and we expect them to continue to trend down over the rest of this year as high interest rates take an increasing toll on consumers. The 0.3% m/m drop in retail sales in June was …
Government delivering on capex promise so far We noted at the time of the FY23/24 Union Budget announcement that the government appeared to be putting more emphasis on boosting longer-term prospects than had previously been the case. Capital expenditure …
On Tuesday, the Reserve Bank of Australia left its cash rate unchanged at 4.10%, upending the consensus forecast for a 25bp rate hike. The Bank’s detailed Monetary Policy Statement , published earlier today, showed that the Board did discuss the option of …
The headline CIPS construction PMI resumed its upward trend in July, with the rise to 51.7 more than reversing the drop into contractionary territory in June. All sectors saw an increase in their respective balances, with commercial rising to 54.4, its …
We suspect the boost to “risky” assets from the resilience of the economy may have mostly run its course. Risky assets in the US have stumbled over the past couple of days as Treasury yields have climbed. But that still leaves them having made quite big …
10-year yield continues to rise The Bank of Japan’s defence of Yield Curve Control (YCC) has devolved this week into a rearguard action. Since last Friday’s policy tweak to allow the 10-year Japanese government bond (JGB) yield to rise above 0.5%, the …
The French stock market’s strong showing since 2018 appears to have been built on solid ground. But French equities have stopped outperforming their German peers this year, and the bar is quite high for them to start doing so again. French and German …
3rd August 2023
Though investors appear to be increasingly moving towards our view of Bank Rate peaking at 5.50%, we think the levels priced into the market beyond this year – and, accordingly, expectations for gilt yields and sterling – are still too high. Today’s …
As major central banks near the end of their tightening cycles, the latest evidence of US economic resilience suggests to us that the dollar is poised to appreciate over the next couple of quarters. Over the past week or so, the Fed and other major DM …
We think the euro-zone economy will contract in the second half of 2023, and the subsequent recovery will be sluggish due to the lagged impact of monetary policy tightening as well as tight fiscal policy. Headline inflation in the euro-zone will continue …
The key points that stand out from the recent moves by central banks in Brazil, Chile and Hungary to cut interest rates are, first, how quickly policymakers have shifted from hawkish to dovish and, second, how they appear to be front-loading their …
Despite capital value falls of 7% and 9% to-date for industrial and apartments respectively, we are forecasting around 15% further value declines as cap rates rise. But the falls in appraisal-based indices appear to be lagging those in the market, where …
A surge in SAIBOR sets up SAMA to take stage The tightening of monetary conditions in Saudi Arabia since early 2022 has caused interest rates to rise rapidly. This week the Saudi Arabian Interbank Rate (SAIBOR) hit a record high. To prevent credit growth …
Economies in Central and Eastern Europe (CEE) have experienced large and persistent net migration outflows in recent decades, but the tide has shifted in the past five years or so as outflows have dropped sharply. This is likely to continue, with net …
7th August 2023
We think the Fed’s done with raising rates and won’t hike again at its September meeting – but much will depend on the next couple of inflation reports, including July’s. Chief US Economist Paul Ashworth and Deputy Chief US Economist Andrew Hunter held a …
We’ll be discussing Argentina’s upcoming PASO election and what it means for the economy in a 20-minute online Drop-In on Wednesday 9 th August at 10:00 EDT/15:00 BST. (Register here .) There are some unnerving similarities between Argentina’s current …
Surveys point to muted activity growth and lower core inflation The fall in the ISM services index in July illustrates that even though the risks of a recession may be easing, that doesn’t mean the economy is set to enjoy a strong performance over the …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm BST today. (Register here .) Today’s 25 basis point (bps) rise in interest rates from 5.00% …
This page has been updated with additional analysis since the post-meeting statement and press conference. CNB on the edge of a policy shift The Czech National Bank (CNB) left its main policy rate on hold at 7.00% today, but the post-meeting …
Javier Milei’s victory in Argentina’s presidential election will usher in a radical shift in economic policymaking towards ‘shock therapy’. But the implications for the economy and financial markets are highly uncertain. We'll help you navigate that …
The results of Argentina’s “open, simultaneous and obligatory primaries” (PASO) in 2019 – a dress rehearsal for the presidential election – triggered a 20% drop in the peso and a 40% plunge in the stock market. Should investors be bracing for another …
Closing in on the summit, but BoE suggests rates will stay at the top for a long time Today’s 25bps rise in interest rates, from 5.00% to 5.25% (CE 5.25%, 2/3 of consensus 5.25%, 1/3 of consensus 5.50%), may be followed by another hike in September to our …
We think El Ni ño poses downside risks to the prices of emerging market assets, in general. But even if the effect in aggregate wasn’t all that large, there are several vulnerable sectors where such an event could create some relative winners and …
We have collated a range of low-profile activity data for the UAE that point to strong activity in the non-oil economy. But this won’t be enough to offset the impact of oil production cuts. Prospects for next year are better, though, and we think the UAE …
The property downturn has left state-owned developers the dominant players in a previously privately-led sector. The state is likely to continue playing a larger role as consolidation continues around more financially-secure firms. Based on a sample of …
This webpage has been updated with additional analysis and a chart of the key data. Softer Gulf PMIs, but non-oil activity holding up well July’s batch of PMIs for the region were a mixed bag, with the surveys from the Gulf falling back as they did in …
Recession likely in H2 The final euro-zone PMIs confirmed that economic conditions deteriorated in July, with the Composite index consistent with GDP declining slightly. We continue to expect the euro-zone economy to fall into recession in the second half …
We recently held a Drop-in titled “Office Sector Armageddon – Who gets hit hardest?”, which you can view on-demand here . This Update addresses some of the specific European questions we received during the event. Which European cities will do better? At …
Lira depreciation feeding through more strongly The jump in Turkish inflation in July to 47.8% y/y is likely to be followed by further rises in the coming months as the recent sharp fall in the lira and hikes to VAT continue to feed through. The central …
This page has been updated with charts since first publication. Inflation declines further below 2% Easing core inflation drove headline inflation lower in July, but we don’t expect it to fall much further this year. Despite inflation now sitting within …
Net trade buoyed GDP growth in Q2 The rise in the trade surplus to $11.3bn in June, from $10.5bn in May, was broadly in line with what most had expected (Refinitiv Consensus: $11bn, CE: $11.5bn). Although exports of goods and services fell by 1.7% in …
BCB kicks off Brazil’s easing cycle The Brazilian central bank (BCB) started its easing cycle today with a larger-than-expected 50bp cut in the Selic rate, to 13.25%, and the relatively dovish tone of the accompanying statement suggests that policymakers’ …
2nd August 2023
Despite some recent high-profile labour strikes, it still seems likely that overall wage growth will slow sharply during the next 12 months, as labour demand cools and elevated immigration boosts supply. Some commentators have argued that the recent …
