National inflation data for November released today suggest that euro-zone inflation has edged up this month, but we think this is just a blip. We still expect inflation to drop below target next year and the ECB to cut interest rates by more than …
28th November 2024
Economic spillovers of regional conflict may fade The Israel-Hezbollah ceasefire agreed this week may present a stepping stone towards broader de-escalation of the regional conflict. For Egypt and Jordan, among the countries most directly affected by …
This week we held a series of roundtable discussions with clients in our London office about the outlook for European commercial property. This Update outlines our thoughts on some of the most interesting questions raised, covering the likely winners in …
It now seems increasingly likely that, as we had been expecting, Germany will loosen its strict fiscal rule after the upcoming general election. However, hopes of a big fiscal stimulus are likely to be disappointed as any reform will be modest and …
Lower than expected German HICP inflation The inflation data for Germany and Spain do not significantly alter our forecast for euro-zone inflation which will be published tomorrow. We are forecasting a 50bp rate cut by the ECB in December but recent …
The Chancellor, Rachel Reeves, has confidently claimed that she will not be “coming back with more taxes”, but developments since the Budget have already whittled away her fiscal ‘headroom’. Further tax hikes are not inevitable, but they are more likely …
The fiscal tightening measures announced by Brazil’s finance minister late yesterday failed to live up to expectations and reinforce the idea that political commitment to stabilising the public finances is lacking. One consequence is that the central …
This page has been updated with additional analysis since first publication. EC Survey consistent with economy stagnating The EC survey was little changed in November and is still consistent with weak growth at best, while the price components suggest …
The Bank of Korea cut interest rates again today by a further 25bps (to 3.00%) and made clear in its statement that more easing is on the way. We are sticking with our view that the central bank will continue to cut interest rates steadily over the coming …
While the RBNZ started hiking rates earlier during the recent tightening cycle than the RBA, it also lifted rates to a higher peak. The RBA tempered the degree of tightening in order to preserve the large falls in unemployment seen during the pandemic and …
Interest rates cut, further easing ahead The Bank of Korea cut interest rates today by 25bps (to 3.00%) for a second meeting in a row. We were one of the few analysts to correctly predict a cut, with 34 out of 38 forecasters polled by Reuters expecting …
The reversal of weather- and strike-related disruptions leave us anticipating a 190,000 rise in nonfarm payrolls in November. We expect the unemployment rate to be unchanged at 4.1%, while wage growth should tick down to 3.9%. Hurricane and strike effects …
27th November 2024
We’re launching an updated version of our China Activity Proxy this month, alongside an interactive dashboard that gives clients access to the data. Our expanded model suggests that China’s growth so far this year has been weaker than we originally …
The China Activity Proxy (CAP) is our attempt to track the pace of economic growth in China without relying on the official GDP figures. It is based on a set of carefully selected low-profile indicators that capture activity across a broad spectrum of the …
Trump tosses first social media hand grenade Here we go again. This week President-elect Donald Trump lobbed his first social media hand grenade since the election – threatening to impose a 25% tariff on Canada and Mexico if both countries didn’t do more …
The fact that climate mitigation policies can manifest themselves in a range of macroeconomic outcomes will make it difficult for central bankers to know how to respond appropriately. Meanwhile, the increased push-back against low-cost Chinese green …
The failure of COP29 to deliver on ambitious climate finance targets means that developing economies still lack sufficient low-cost finance for climate adaption. That leaves them reliant on debt-based finance, adding to debt burdens and raising the risk …
Another above-target-consistent rise in core PCE prices The 0.27% m/m rise in the core PCE deflator in October was a little lower than we feared based on the earlier CPI and PPI data, but still confirms that prices rose at an above-target rate for the …
The latest IPF Consensus Survey was broadly unchanged from the previous forecast round. Total returns at the all-property level are forecast to be 7.7% p.a. over 2024-28, up from 7.6% p.a. previously. That contrasts to downward revisions in our forecasts, …
EM GDP growth ticked up in Q3 but is likely to fall short of expectations over the coming quarters as stimulus in China disappoints and still-tight monetary policy takes it toll. For most EMs, a universal 10% tariff on US imports – our working assumption …
What will a second Trump presidency mean for the green transition? Should investors and companies expect an across-the-board rollback on regulation? What does the presence of Elon Musk in the president-elect’s orbit mean for climate policy? Our Climate …
One of the many problems that the next German government will have to contend with is the struggling car sector. Unfortunately, the sector’s challenges are only likely to intensify given the prospect of sluggish European demand, rising competition from …
US tariffs on oil imports from Canada and Mexico would probably result in lower oil output in Canada and Mexico and higher US gasoline prices in the short term, and could also lead to a tightening in the global oil market over the medium term. Although US …
Headline GDP growth in the Gulf economies will strengthen in 2025 as oil output cuts are unwound. But lower oil prices are prompting a turn to fiscal consolidation, notably in Saudi Arabia, which will cause growth in non-oil sectors to slow. Outside of …
Economy remains resilient October’s income and spending data, due at 10am ET today, could also affect our estimate but, for now, the big drop back in goods imports in October means that we have forth-quarter GDP growth tracking at 2.7%, up from 2.2%, …
Inflation surge and hawkish comments suggest no rate cut next week We now think easing will begin in April as inflation drops back and economy cools We expect 100bps of cuts this easing cycle, a more dovish view than the consensus The …
Africa Chart Pack (Nov. 2024) …
The economic impact of the Israel-Hezbollah ceasefire hinges on whether the deal holds and whether it sets the stage for a broader de-escalation of the regional conflict. If it does, that would allow Lebanon’s shattered economy to recover and ease fiscal …
This special episode of The Weekly Briefing from Capital Economics is an exclusive extract from our online Drop-In briefing following Donald Trump’s threat to impose massive tariffs on Mexico, Canada and China. Was this a negotiating ploy from the …
Further rate cuts likely as deflation concerns increase Sri Lanka’s central bank (CBSL) today loosened policy further, and hinted at more rate cuts over the coming months amid continued deflationary pressures, weak growth and a further improvement in the …
We expect the New Zealand dollar to fall against the US and Australian dollars over the next year or so, and fare worse than most – if not all – other G10 currencies. Today’s as-expected 50bp rate cut by the Reserve Bank of New Zealand (RBNZ) didn’t move …
RBNZ will cut rates by another 50bp in February The RBNZ didn’t provide a clear signal about the speed of future rate cuts when it lowered the overnight cash rates by 50bp today, but we think it will deliver another 50bp cut at its February meeting. The …
Underlying inflation will reach top end of RBA’s target range next quarter The stagnation in headline inflation in October belies a renewed uptick in trimmed mean inflation and we’re sticking to our forecast that the RBA won’t cut interest rates before Q2 …
Fed slows pace of rate cuts The minutes of the Fed’s early-November FOMC meeting, when it slowed the pace of policy loosening with a smaller 25bp cut, tell us little about whether to expect another smaller quarter-point cut at the upcoming policy meeting …
26th November 2024
We aren’t convinced the outperformance of US small-cap (SC) equities since Donald Trump’s victory on 5 th November sets the tone for the first half of 2025. We doubt they will start to fare better than large-cap (LC) equities over a sustained period until …
Even if the government’s easing of planning rules were to mean that at least 300,000 new home approvals in England were granted a year, the number of construction workers would need to rise significantly. We estimate about 500,000 extra construction …
Hurricanes and elevated mortgage rates hit sales The large fall in new home sales in October was to be expected given the disruption from hurricanes Helene and Milton, as well as the rise in mortgage rates last month. While sales should rebound this …
House price growth picks up momentum in the summer The second consecutive moderate 0.3% rise in house prices in September reflects the market picking up momentum over the summer as mortgage rates fell. However, timelier indicators, like the sales-to-new …
Latin American (LatAm) markets have been generally resilient in the aftermath of the US election, possibly because investors were already pessimistic about the region’s prospects. But we think domestic and global headwinds will translate into LatAm assets …
25bp hike probably the last of this cycle The Central Bank of Nigeria opted for a smaller-than-expected hike in its policy rate of 25bp to 27.50%, at its meeting today and, with Governor Cardoso sounding optimistic that the effects of petrol price hikes …
Amid the Trump Trade, capital outflows from EM financial markets have persisted over recent weeks. Looking ahead, we expect the US dollar to strengthen further, suggesting that outflows will continue. This will not be a problem for most EMs, but those …
President-elect Donald Trump’s first threatened tariffs since the election are designed to extract concessions on drug trafficking and illegal border crossings, which means it may be possible for the countries targeted – Canada, Mexico and China – to head …
Inflation jumps, Selic heading higher The rise in Brazil’s headline inflation rate, to 4.8% y/y, in the first half of November was partly driven by a further increase in underlying core services inflation and means that Copom is likely to raise the Selic …
Economy bounces back at the start of Q4 The stronger-than-expected Polish activity data for October suggest that the contraction in the economy in Q3 wasn’t the start of a renewed trend. With fiscal policy set to remain loose over the coming year and …
India’s stock market has had such a good few years that it started to raise concerns about whether it was in a “bubble”. And as it’s come under pressure recently, some have speculated that the bubble is bursting. For our part, we think that there are …
The spread between 10- and 2-year Treasury yields has ‘inverted’ again, partly because the nomination of Bessent as US Treasury secretary has eased fiscal concerns. But we forecast the curve to steepen by more than most expect over 2025 as the Fed …
25th November 2024
We discussed the global impact of higher tariffs in a Drop-In on Tuesday, 26th November. Click here to watch the 20-minute online briefing. In this Focus, we construct a framework to explore the channels through which an import tariff works, which we use …
The latest activity data have brought further evidence that India’s economy is going through a soft patch. But given the strength of the recent inflation data, we now expect the RBI to keep rates on hold until April. For India, the direct impact of a 10% …
