Inflation still some way from its peak The further rise in Russian inflation to 5.2% y/y in August is a sign that the economy is bumping up against capacity constraints and we think it will continue to increase over the coming months. The central bank …
8th September 2023
Prices will remain buffeted by weak global economic growth and a strong dollar, at a time of mounting supply risks and some policy stimulus in China. These conflicting pressures suggest that prices will be fairly rangebound in the coming months. In …
Although upward pressure on the 10-year Treasury yield has abated a bit, the big picture is that it has risen by ~80bp on net in the past four months. While some of this rise has reflected a reassessment in the market of how quickly the Fed will cut rates …
The US dollar looks set to end the week higher against nearly all other major currencies. Remarkably, the DXY Index is set for an eight consecutive weekly rise, something that has rarely occurred since 1990. (See Chart 1.) And while that index is …
In his speech this week, Governor Tiff Macklem sounded much more confident that the Bank will be able to meet its 2% inflation target. The latest labour market and local housing data suggest that may still be possible without a recession. Policy rate has …
Policy mistakes risk being repeated in Nigeria Recent interventionist actions from Nigeria’s central bank and government have heightened our fears that growing political pressures are undermining policy reforms. This could see Nigeria’s inflation and …
It was a mixed week for commodity prices as they faced conflicting pressures in the form of the appreciation of the US dollar, mounting supply risks and signs of some resilience in China’s demand. Although the stronger dollar has probably acted as a lid …
Higher energy prices not a game changer for the Fed Crude oil prices up, wholesale gasoline down? The further rise this week in the WTI crude oil price to a 10-month high of $87 a barrel, from a recent low of less than $70 in late June, has raised …
Sheinbaum follows in Amlo’s footsteps Former Mexico City mayor Claudia Sheinbaum was unveiled as the ruling Morena party’s presidential candidate this week and with her facing off against the main opposition candidate Xóchitl Gálvez in next June’s …
It’s no surprise that the reverberations from the revisions to GDP announced by the Office for National Statistics (ONS) last week continued into this week because the upward revisions were so big. As we noted at the time, we estimate that the level of …
Market implied rates suggest that investors expect inflation to normalise in the US and Europe in the next couple of years. While we share that view, we think they are overestimating the level of policy rates required to achieve inflation targets. As a …
Christine Lagarde and her colleagues will have some new and gloomy data releases to contemplate when they gather in Frankfurt next week. First, revised data published on Wednesday show that the euro-zone eked out only a 0.1% increase in GDP in Q2 as …
This page has been updated with additional analysis since first publication. Rebound in hiring should ease recession concerns The rebound in employment and larger increase in hours worked in August suggest the economy bounced back following some of the …
The recent rise in oil prices to $90 per barrel means CPI inflation is likely to rise from 6.8% in July to 7.1% in August, but it won’t prevent inflation falling to the 2% target by the middle of next year. Even if oil prices climbed to $100 per barrel, …
The UK government’s failure to award any new offshore wind-power contracts in its latest procurement round ultimately stems from bean-counting stinginess and is nothing that a lot of extra government investment won’t fix. But with the days of ever-cheaper …
The decision by the National Bank of Poland (NBP) to kick off its easing cycle this week with a much larger-than-expected 75bp interest rate cut has been heavily criticised, and suggests to us that policymakers are underestimating the challenge of …
Having remained resilient over the past months, inflows into EM bonds and equity markets have turned negative in recent weeks. Inflows into Turkey have weakened despite August’s sharp interest rate hike and while India has continued to see notable …
Geopolitics loom large over New Delhi showcase Following the success of the Chandrayaan-3 mission to the south pole of the moon in August, this weekend’s G20 summit in New Delhi will undoubtedly be presented as another foreign policy triumph by the BJP as …
Headline inflation jumps in August The long and steady decline in inflation across Emerging Asia came to an end last month, with headline inflation picking up in all six countries that have so far reported August price data. (See Chart 1.) Chart 1: …
Huawei's chip breakthrough The launch of Huawei’s new phone, the Mate 60 Pro, has sparked a debate over the effectiveness of US export controls that were tightened last year, restricting the sale to China of machinery needed to produce sub-18nm chips. The …
Consumption set to slow further The 0.4% q/q rise in Q2 GDP was a touch stronger than the RBA’s August estimate of 0.2%, but the more important question is what the figures mean for the outlook for the economy over the coming quarters. On past form, the …
MoF signaling some concern over weaker yen As the yen weakened to nearly 148 against the dollar this week, the government has signalled its readiness to intervene in foreign exchange markets to stop its slide. Masato Kanda from the Ministry of Finance …
This page has been updated with additional analysis since first publication. Wage growth should moderate as inflation cools While the sharp slowdown in wage growth in July wasn’t as bad as it looks, it suggests that above-target inflation won’t prompt …
Note: We’ll be discussing the ECB September rate decision – along with those of the Fed and the Bank of England – in a ‘Drop-In’ on Thursday, 21 st September. Register here to join the online briefing. We think the ECB is slightly more likely to hike than …
7th September 2023
Although the Canadian dollar has held up relatively well among G10 currencies, we think it will weaken in the coming quarters as investors discount a more dovish policy path for the Bank of Canada (BoC). Despite the broad-based strength in the US dollar …
A “soft landing” for the economy in the US seems increasingly possible, so we look back at previous similar episodes to get an idea of what might be ahead for equities there. Despite the Fed’s aggressive tightening cycle over the past year and a half, it …
Emerging market (EM) easing cycles are underway in earnest even as the first Fed cut remains a while away. We think this easing will help to drive EM local-currency (LC) government bond yields lower, in general, over the rest of 2023. But we still expect …
Recent patterns in the US stock market are sending mixed signals about the extent to which investors are braced for an economic downturn. Our own view is that equities will struggle to make more headway this year – even if the economy avoids an outright …
Saudi oil output cut rollover a significant GDP hit Earlier this week Saudi Arabia confirmed that it will extend its additional voluntary 1mn bpd oil output cut until the end of this year which will result in a significant hit to economic growth this …
We think that the positive impact of lower inflation on households’ real incomes in the coming quarters will be offset by weaker employment and nominal wage growth. As a result, we don’t think that lower inflation will drive a recovery in real consumer …
With affordability stretched and the economy slowing, housing market activity is expected to remain weak over the coming quarters. While we expect house prices to lose some of their recent momentum, the worst of the correction appears to have passed and …
China’s commodity import volumes rose strongly in August compared to July. Crude oil imports were probably supported by the ongoing recovery in the aviation sector, which we expect to continue in coming months. But greater enforcement of steel output …
Will the FOMC’s September meeting confirm that the Fed is done with tightening? Will the ECB and Bank of England take rates higher? Will accompanying language give any hints about how long rates will stay elevated? Economists from our US, Europe and UK …
The UK government’s decision to block Marks and Spencer’s (M&S’) re-development of its flagship store highlights the challenges in the transition to net zero. In particular, while authorities are using regulation to force owners into greener choices, if …
Developments in the past few weeks have moved the dial somewhat on the global story. In major DMs, there have been more signs of activity softening either in terms of output or employment, evidence of disinflation continues to mount, and it has become …
Reports are swirling of yet more delay to the latest review of Egypt’s IMF deal, the central bank is preparing to meet in a pressurised market environment and speculation about a sovereign default isn’t going away. Deputy Chief Emerging Markets …
Inflation falls again, but Banxico to stay focussed on sticky services inflation Mexico’s headline inflation rate edged down again in August, to 4.6% y/y, on the back of softer core price pressures but, with services inflation still proving stubborn, …
According to Halifax, house prices are up by 20% compared to 2019 even after their recent falls. But adjusted for inflation they slipped to a seven-year low in August. High mortgage rates point to a further fall in prices in both real and nominal terms. …
The Budapest office market has underperformed in recent years, with rents lagging the rest of the region. While some weakness is likely for the rest of this year, the outlook is improving. With a more limited supply pipeline and improving demand, Budapest …
Stagnant in Q2, likely to contract in Q3 The downward revision to the euro-zone’s second-quarter GDP data means the economy is now thought to have essentially flat-lined since the fourth quarter of last year. With business surveys having turned down …
This page has been updated with additional analysis since first publication. The decision by Malaysia’s central bank (BNM) to leave the overnight policy rate unchanged at 3.0% came as no surprise. Despite the poor near term outlook for economic growth, …
Largest annual fall since 2009 The steep fall in the Halifax House Price Index in August confirmed that the further leg down in house prices we have been forecasting has materialised. If we are right to think that mortgage rates will remain around current …
Fall in German industrial production even worse than it looks Aggregate German industrial output fell sharply again in July and the fall was even larger if the construction and energy sectors are excluded. We expect production to drop further in the rest …
This page has been updated with additional analysis since first publication . Export volumes are likely to soften before long China’s export values continued to contract in August, but this mostly reflects lower prices. Export volumes continued to hold …
Net trade set to become a drag on Q3 GDP growth Following the sizeable 0.8%-pts boost to GDP growth in Q2, the July trade figures suggest that net exports will provide a drag in the third quarter. The trade surplus fell from a downward-revised $10.3bn in …
M1 narrow money continues to contract at a double-digit annual pace, as higher interest rates temper demand for low-return deposits. Broader money growth is not faring quite as badly, since higher rates are also boosting demand for savings deposits and …
6th September 2023
China’s announced support for the property sector and the extent of fiscal stimulus is modest, but it will help to support base metals demand in the coming months. Accordingly, we expect prices to tread water over the rest of 2023. Prices should rise in …
Higher interest rates lead to forecast downgrades The latest IPF Consensus Survey showed a reversal of last quarter’s forecast upgrades, bringing the consensus view more in line with our own. The surge in interest rates thanks to high inflation is behind …
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today supports our view that, once the large falls in inflation are behind us in early 2024 and the economy recovers, the easing cycle is likely to shift down a gear. We …
