The Bank of England’s Q4 Credit Conditions Survey suggests the worst of the drag on economic growth from higher interest rates is fading. That suggests an economic recovery will begin later this year. The net percentage balance of banks’ supply of …
18th January 2024
Policymakers to acknowledge weak economy and decline in inflation. But not ready to consider rate cuts. We expect first cut to come in Q2. The ECB is certain to keep interest rates unchanged next week, leaving the deposit rate at 4%, and we expect …
November’s activity data for South Africa show that while economic headwinds are easing, growth is still very soft. Still, less electricity outages and restrictive fiscal policy should allow for a modest pick-up in growth over this year. Data released …
Central banks in both Australia and New Zealand are likely to remain in “wait and watch” mode in the near term, given lingering risks to the inflation outlook. However, we think concerns about inflation persistence are overdone, especially with tradables …
This page has been updated with additional analysis since first publication Labour market will turn faster than the RBA anticipates With labour market data for December disappointing expectations, we’re more convinced than ever that the RBA will take its …
Market was picking up even before latest slide in mortgage rates The December RICS Housing Market survey showed sales volumes rising and buyer demand recovering even before the further sizeable drop in mortgage rates in January. That’s encouraging for our …
CPI-trim and CPI-median are overstating inflation pressures Economy going from bad to worse Bank to start cutting interest rates in April The acceleration in the CPI-trim and CPI-median measures of core inflation in December suggests the Bank of Canada …
17th January 2024
India’s economy has grown at a healthy clip over recent quarters and, with the help of government spending, we think it will continue to hold up well ahead of the upcoming general election. Given also that headline consumer price inflation is likely to …
This Global Markets Focus explains why we expect the S&P 500 to soar in 2024, in contrast to those who anticipate a much tougher year for the index after a banner 2023. Section 1 sets the scene with a brief overview of the change in the index since the …
We still forecast the renminbi to make ground against the US dollar by the end of this year, despite the seemingly stiff headwinds it faces. China’s equities and currency were back under pressure today, after the country’s Q4 activity data underwhelmed …
We anticipate that mortgage rates will continue to fall in 2024, but more gradually than they have recently from 6.8% now to 6.25% by the end of the year. That won’t be enough to bring a great deal of stock on the market. At the same time, we expect a …
Manufacturing sector stagnating The muted rise in manufacturing output in December shows that the sector continues to struggle, even as consumption growth remains strong. The 0.1% m/m increase in manufacturing output in December meant that the …
Consumers end the year on a high The 0.6% m/m rise in retail sales in December may have been supported by the unseasonably mild weather, but it still means there is no sign that households are buckling under the pressure of higher interest rates with …
Early prime office yield data for Q4 suggest that the property correction deepened at the end of 2023. The sharp rises in yields occurred despite a more favourable market interest rate environment. This suggests that property pricing still has further to …
The downward trend in the EU carbon price since early 2023 has been driven by lower demand for pollution permits on the back of industrial weakness and growth in cleaner energy sources. With energy-intensive activity in the bloc set to stay weak, and …
The latest euro-zone inflation data, published this morning, will dampen policymakers’ concerns about the strength of domestic price pressures. But with underlying inflation still too high for comfort, this won’t be enough for the Bank to change its …
Policy rate left unchanged, central bank hints at cuts later in the year Bank Indonesia left its policy rate on hold at 6.00% at its meeting today, but gave further hints that provided the rupiah continued to hold up well against the US dollar, there …
This page has been updated with additional analysis since first publication. Downward trend stalls, but drop to below 2% still coming in April The unexpected rise in CPI inflation from 3.9% in November to 4.0% in December (consensus and CE forecast 3.8%) …
This page has been updated with additional analysis and charts since first publication . Recovery still shaky China’s economy lost momentum in Q4 according to the official GDP figures. But we suspect that’s because they failed to acknowledge the full …
We expect GDP growth to slow to a crawl this year, weighed down by weak consumption growth and sluggish export growth. While the virtuous cycle between prices and wages has shown signs of a slowdown in recent months, it will soon receive a boost when …
In recent months, there have been growing concerns that the rapid rise in rental inflation will force the Reserve Bank of Australia to keep rates higher for longer. To be sure, leading indicators suggest that rental inflation will continue to accelerate …
Lower mortgage rates supporting demand The decline in mortgage rates appears to be supporting demand, with home sales rebounding last month. While prices continued to fall in December, the sales-to-new listing ratio is now pointing to positive house price …
16th January 2024
A hawkish mood has prevailed in markets this year, and comments from the Fed’s Waller today seemed to add fuel to that fire, at least initially. But given how aggressively rate cuts were priced in late last year, investors are still discounting a huge …
Perhaps surprisingly, the latest escalation in Middle East tensions has not prompted a surge in oil prices. We think this is because, so far, oil output is unaffected. Moreover, we suspect it also reflects concerns about weak demand, strong supply growth …
We are downbeat on industrial total returns over the next two years compared to the consensus because of our relatively pessimistic views on both rents and cap rates. And we think the risks to long-term returns are skewed towards the downside, which, if …
While sterling has outperformed other G10 currencies amid the dollar sell-off over the past couple of months, we expect it to reverse its gains against the greenback as short-term Gilt yields edge lower. So far this year, the pound has held up well …
Core inflation pressures still too strong Although the rise in headline inflation in December was mainly due to gasoline price base effects, the more worrying development is that the CPI-trim and CPI-median core measures both rose by a larger 0.4% m/m. …
The incidence of sovereign debt distress has fallen sharply across the emerging world in the last few months, but that doesn’t rule out the possibility of default in a handful of EMs. Tunisia looks most likely to do so, followed by Argentina and Ecuador, …
Tepid lending in December closes a sluggish year for activity Net lending on commercial real estate (CRE) by banks was positive again in December, rising by $4.2bn in the month. (See Table 1.) That said, the monthly change was broadly in line with the …
We have long highlighted the risk in Dubai’s corporate sector and the large debts that government-related entities (GREs) have accrued. This Update provides our latest estimates of these debts. The key point is that GREs appear to have weathered the large …
The resilience of euro-zone rental growth last year surprised us. But our analysis indicates that better-than-expected economic activity explained much of that strength and as recession looms in 2024, all-property rents are likely to slow more decisively. …
One of the big questions in Kenya in 2024 is whether the government can meet a $2bn Eurobond repayment due in the middle of the year. An improving balance of payments position, alongside an enhanced IMF deal and other external financing, mean that it …
This page has been updated with additional analysis since first publication. Wage growth fading fairly fast Another big drop in wage growth in November supports our view that domestic inflationary pressures are fading fairly fast. But the ongoing …
While overall inflation has moderated, services inflation has accelerated Bank will wait for upcoming spring wage negotiations before adjusting policy We expect a rate hike to 0.1% in March, with Yield Curve Control ending by mid-year The Bank of …
The Bank of Canada’s quarterly business and consumer surveys continue to flash warning signs about the outlook for the economy and labour market. The normalisation of inflation expectations remains painfully slow, however, presenting a risk to our view …
15th January 2024
Government bond yield curves in the US, Germany, and the UK seem to be once again on the path towards “normalisation”, or “disinversion”, as short-term yields are close to breaking below long-term ones. And while we think that 10-year yields will drop …
We don’t expect the Federal Reserve, European Central Bank or Bank of England to cut rates in their first meetings of 2024, but they may drop hints about when monetary easing could start. A team of our senior economists held this online briefing after the …
There’s a popular view that the RBA won’t start cutting interest rates until later in the second half of this year. We think Australia’s Q4 CPI release on 31 st January will help build the case for those cuts to start far sooner. Our ANZ and Markets …
Will US equities continue to lead the pack in 2024? How will monetary policymaking affect the level of yields? What will this mean for FX markets? To mark the launch of our new, interactive forecast dashboards, our Markets economists hosted a special …
Temporary rebound in sales volumes The rebound in manufacturing sales in November was broad-based but, with new orders dropping back and the manufacturing surveys weakening in December, that strength is unlikely to be sustained. The 1.2% m/m rise in …
US house prices saw strong gains in 2023, defying widespread expectations for them to fall as surging mortgage rates crimped supply. Will falling borrowing costs in 2024 swamp the market with a wave of new listings or could house prices surprise to the …
We doubt the recent resilience of business investment in the face of higher interest rates will last. Instead, we think a drop back in business investment will contribute to the economy continuing to stagnate in the first half of this year and a modest …
This page has been updated with additional analysis since first publication . Inflation now close to 30% y/y, CBN needs to act soon Nigeria’s headline inflation rate rose again to 28.9% y/y in December, as a weak naira continues to push up prices. …
The outsized attention paid to Taiwan’s presidential election this past weekend is in part a reflection of the breakdown in relations between the US and China and the 21 st century’s big geopolitical question of which of these countries will dominate the …
There was a wide disparity in house price growth across regions in 2023 and little reason to think that this year will be any different. Following the recent decline in mortgage rates, we suspect the largest rises in prices will be in the regions that …
German troubles not over yet Preliminary data published today show that German GDP contracted in Q4 and we expect it to continue to struggle this year. Today’s data release shows that Germany’s economy contracted by 0.3% in calendar year 2023, and a …
Inflation ends 2023 on a softer note Saudi Arabia’s headline inflation rate slowed from 1.7% y/y in November to 1.5% y/y in December, the weakest pace recorded since January 2022. And we expect that inflation will continue to ease at the start of this …
This page has been updated with additional analysis since first publication . The PBOC fails to deliver Despite a cut being widely expected, the MLF was again kept unchanged today – for a fifth straight month. The main factor holding the PBOC back was …
While most of the recent pick-up in services inflation has been driven by just a handful of components, there’s been an upward shift in the distribution of price changes across the CPI basket. However, even if wage growth settles at higher levels than …
