With the share of non-performing CMBS loans on the rise, and plenty of loans set to refinance onto a higher rate this year, recent data provide further evidence that distress will rise both this year and next as we expected. However, while there is still …
18th July 2024
Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates were in line with expectations. The overall tone was arguably slightly dovish, making a September cut more likely. But the risks to our …
The Chinese Communist Party’s Third Plenum ended with a much-anticipated pledge to continue “comprehensively deepening reform”. But what reforms and how far will they go to tackle China’s deep-rooted economic problems? Our China team hosted this special …
SARB holds interest rates but cut now likely in September The South African Reserve Bank decision to leave its repo rate unchanged at 8.25% was of little surprise but there was increased optimism that inflation is moving towards the 4.5% mid-point of the …
Trump sets out his stall for warmer Saudi ties Donald Trump has outlined his intentions to improve relations with Saudi Arabia if he wins re-election. But potential tensions over the handling of the Israel-Gaza conflict mean that, for now, Saudi officials …
No cut, no guidance Today’s decisions to leave interest rates on hold and give no clear signals about the future path of interest rates was in line with expectations. A cut in September still seems more likely than not, but it will depend on whether …
The latest polls suggest that the opposition is on track to win Venezuela’s election later this month but President Maduro is likely to do all he can to cling on to power. If he manages to do so, Venezuela’s nascent economic recovery would be nipped in …
Newfound political stability in the UK contrasts with the now more uncertain political backdrop in France. A better relative outlook for economic growth and risk-free rates had already led to a narrowing in the premium on UK over French property in recent …
EM recoveries have been stronger than expected this year, but growth in aggregate will slow over the coming quarters. Within this there will be regional variation, with Emerging Asia the outperformer and Latin America the laggard. While we still expect …
China’s leadership has promised to continue comprehensively deepening reform in a wide range of areas. But there are few signs that the just concluded Third Plenum marks a major change in the direction of policymaking. And there still appears to be a …
The latest data out of Emerging Europe suggest that economic growth in Central Europe strengthened further in Q2, while Russia’s economy continued to overheat. In Turkey there are signs that demand may be beginning to moderate in response to policy …
While the global monetary policy loosening cycle is now well underway, there is more nuance than you might assume. Recent data have made us more confident that cuts (or further cuts) are to come in the US and Canada. But in Australia, the UK and large …
DM central banks may not be done raising rates – a too-hot Australian Q2 inflation report on 31 st July could push the RBA to hike at its meeting the following week. Our ANZ and Markets teams still think there’s a case for the Bank to hold, and they …
The policy shift underway in Nigeria has kept economic growth subdued – something that continued in Q2 according to the latest PMI and confidence data. Tight monetary policy will still remain a constraint on the economy. But with inflation soon set to …
This page has been updated with additional analysis since first publication. Encouraging, but interest rates may not be cut in August While the easing in wage growth in May was broadly in line with what the consensus and the Bank of England expected, it …
This page has been updated with additional analysis since first publication. A loosening labour market should forestall further rate hikes Although job growth remained healthy last month, it didn’t prevent the unemployment rate from rising anew. And we …
Totality of the data supports another cut Downside risks to activity rising, upside risks to inflation falling Bank to cut interest rates by 25bp at each meeting until 2.50% Despite stronger core price pressures in May and June, the totality of the data …
17th July 2024
A recent surge in the Russell 2000 after the US CPI report for June was published last week has prompted claims that we are entering the initial stage of a secular rotation into US small-cap stocks. We are not convinced, for four reasons. First, what has …
Gold jewellery demand has been highly sensitive to price changes in the past and so will come under pressure from the current backdrop of record high gold prices. Income growth in key markets will offset some of the demand destruction. But jewellery …
Yields look to have topped out in most sectors and alongside solid rental growth that means capital values are close to bottoming out. However, with no yield compression in sight the recovery will be weak by past standards, not helped by a struggling …
Japan’s intervention in support of the yen is not enough in itself to generate a sustained rebound in the yen. But with the FOMC (finally) nearing its first rate cut while the BoJ continues to tighten its policy stance gradually, we think the tide is now …
Drag from net trade will moderate Q2 GDP rebound While the widening of the trade deficit in June points to a sizeable drag from net exports on Q2 GDP growth, activity should still have rebounded last quarter. The 5.4% y/y rise in export values was weaker …
Manufacturing sector bucking negative tone of the surveys The rise in manufacturing output in June was better than we expected based on the small fall in hours worked, but it owed a lot to a rebound in motor vehicle production, which seems unlikely to be …
Multi-family driven increase in housing starts The rise in housing starts and building permits in June is not as good as it seems at first glance, as it was driven by gains in the volatile multi-family sector, which we think will prove temporary. …
South Africa is struggling to emerge from its recent trend of sluggish economic activity, with stronger outturns in the retail sector being offset by weakness in industry. Nonetheless, we think momentum will build over the coming quarters on the back of …
The ~10% fall in EU carbon prices since the end of May has mirrored a similar-sized fall in European natural gas prices, and we forecast both to fall by a further 25-30% by year-end. That said, the fundamentals still point to large gains in the EU carbon …
BI hints at rate cuts in Q4 Bank Indonesia today left its policy rate unchanged at 6.25%, but the central bank’s dovish commentary supports our view that rates will be cut in Q4. Today’s decision was correctly predicted by all 35 analysts polled by …
In the latest episode of The Weekly Briefing from Capital Economics, Chief North America Economist Paul Ashworth reflects on a couple of crucial inflation reports, explaining how they’ve shifted the disinflation narrative and could even lead to even more …
This page has been updated with additional analysis since first publication. We’re holding a 20-minute online briefing at 9.30am BST on Thursday 18 th July to discuss how today’s CPI and tomorrow’s labour market releases influence the chances of a rate …
This page has been updated with additional analysis since first publication. With inflation falling rapidly, the RBNZ’s August meeting is now “live” Today’s CPI release confirms that inflation is all but certain to return to the RBNZ’s 1-3% target by Q3. …
Housing market turning a corner Further interest rate cuts from the Bank of Canada should breathe some life into the housing market in the coming months, but the dimmer outlook for rent growth and apartment prices present downside risks to construction. …
16th July 2024
We expect short-term US Treasury yields to keep falling more rapidly than long-term ones, eventually putting an end to more than two years of an inverted yield curve. Despite a small rebound today after strong retail sales data were published, short-term …
Many households have left western metros in favor of those in the South over the past two years. With remote working looking like a permanent fixture of office-based jobs and affordability significantly stretched in the West, we do not expect to see a …
Overview – We expect mortgage rates to continue falling, but not by enough to fully offset the effects of mortgage rate ‘lock-in’. As a result, although we expect existing home sales to rebound, we forecast that they will still be a muted 4.8 million even …
The downward revisions to global population growth in the UN’s latest projections won’t have a major bearing on our long-term GDP growth forecasts. That’s because a lot of the revision was driven by lower population projections in China, where we had …
This Asset Allocation Focus takes a fresh look at emerging market (EM) equities. Section 1 sets the stage, by briefly reviewing their performance over the past decade. Sections 2, 3 & 4 explore their exposure to three key themes: section 2 examines the …
Odds still favour a July rate cut The Bank of Canada’s preferred CPI-trim and CPI-median measures of core prices rose at an above-target monthly pace for the second month running in June. Nonetheless, with the Bank’s Business Outlook Survey , released …
Strong control group sales ease fears of consumer slump Although retail sales were unchanged in June, the strong 0.9% m/m rise in control group sales should ease concerns about the plight of the consumer in the wake of the renewed slump in sentiment. …
The Bank Lending Survey suggests that there was a pick-up in demand for bank loans in the second quarter particularly for residential mortgages and consumer credit. This is consistent with the consensus and our own view that the economy is recovering and …
The upside surprise to headline consumer price inflation last month has all but ended hopes of a rate cut at the RBI’s August policy meeting. But we think that the conditions will be in place for policy loosening to begin in December. To recap, headline …
Newly-published data show that the Philippines has entered a demographic sweet spot that could provide a big boost to economic growth. But this will only happen if enough new jobs can be created for the wave of young people that will enter the workforce …
Inflation nudges down but a minor bump is on the cards in Q3 Saudi Arabia’s headline inflation rate edged slightly down to a six-month low of 1.5% y/y in June and, while we expect a small increase in the headline rate during Q3, the bigger picture remains …
The Bank of Canada’s business and consumer surveys point to weak GDP growth, show that firms’ wage expectations are now lower than their pre-pandemic peak, and suggest that consumers are increasingly concerned about the health of the labour market. All …
15th July 2024
Recent events have increased the perceived likelihood of another Trump presidency and, in the process, provided a clearer steer on how market participants expect such an outcome to affect key financial markets. Four key points stand out. First, between …
Stronger momentum in manufacturing The continued rise in manufacturing sales and new orders suggests that the sector gained some momentum in the second quarter. However, we expect that strength to fade this quarter. The 0.4% m/m rise in manufacturing …
Inflation at a peak Nigeria’s headline inflation rate edged up to 34.2% y/y in June on the back of the pass-through from previous naira falls. But we think this marks the peak and inflation should start to decline. If right, that’s likely to lend more …
Global Economics Chart Pack (July 2024) …
This page has been updated with additional analysis since first publication. Euro-zone manufacturing still struggling Industrial production in the euro-zone fell again in May and we think the outlook remains poor. The 0.6% m/m decrease in euro-zone …
