Why is productivity so weak outside the US? Productivity growth in most advanced economies has been much weaker than that in the US since the pandemic. This partly reflects the relative weakness of demand, coupled with a degree of labour hoarding which …
29th April 2024
While expectations for interest rate cuts in the UK have been pared back in recent months amid growing inflation concerns in the US, we think the markets have gone too far in concluding that UK interest rates will still be as high as 4.00% by the end of …
The dollar is once again sending shivers through global markets as its rise again generates fearful headlines about risks to economies large and small. Central bankers are clearly getting nervous – and some have good cause to be so – but the consequences …
This page has been updated with additional analysis since first publication. Survey points to stagnant economy and still-high price pressures The weaker-than-expected EC business and consumer survey for April is a reminder that the euro-zone economy is …
This page has been updated with additional analysis since first publication. Fairly strong start to Q2 The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) were a mixed bag in April, but our regional …
The different treatment of prices collected annually is a key reason why the quarterly CPI measure rose much faster last quarter than the Monthly CPI Indicator had indicated. While it’s possible to correct some of the shortfalls of the MCI, it can’t be …
The Ministry of Finance may have intervened earlier today by selling FX reserves to halt the sharp fall of the yen. However, the economic case for foreign exchange intervention is much weaker now than it was in 2022, when the MoF last sold dollars to …
In the latest episode of The Weekly Briefing, Group Chief Economist Neil Shearing previews the coming week’s Fed meeting, tackles market talk that the next move on the US policy rate could be up, addresses an intriguing report about Fed independence and …
26th April 2024
While the headline of the Q1 NCREIF NPI data (-0.9% q/q total return) suggests we could be near the end of the price falls, we think this simply stored up bigger falls for the rest of the year. The growing share of underwater loans, as well as the far …
The US dollar is ending the week a touch softer against most currencies despite another set of hotter-than-expected US inflation figures. But the main story in currency markets this week is the ongoing drop in the Japanese yen, which hit a new low for the …
The NASDAQ 100 has shrugged off this week’s surge in real US Treasury yields amid a mixed bag of earnings reports from some of the ‘Magnificent 7’. (See Chart 1.) This suggests to us that the earlier pull-back in the index wasn’t a harbinger of a far …
SARB hawkishness continues, no rate cuts in 2024 This week, the SARB published is biannual Monetary Policy Review , which showed a Bank less confident about South Africa’s disinflation trend and reiterated a desire to move to a lower inflation target. …
Have soft landing hopes been dashed? GDP growth slows, but stronger under the hood The slowdown in first-quarter GDP growth to 1.6% annualised, from 3.4%, was more marked than expected, but it was principally due to a bigger drag from the net exports …
US aid package a (large) sticking plaster for Ukraine The $61bn US aid package for Ukraine approved this week will provide a much needed boost to Ukraine’s efforts on the battlefield, but the delays that the funding has faced over recent months casts a …
Colombia: drought poses inflation & growth risk The recent rainfalls in many parts of Colombia have provided some relief to the country, which has been hit hard by an El Niño-linked drought. The drought had pushed reservoir levels to historical lows in …
The latest Summary of Deliberations showed division among the Governing Council about when it will be appropriate to cut interest rates. The data released since the April meeting favour the doves, however, so we are sticking to our view that the first cut …
In a mixed week for commodity prices, one interesting development is that, after the tin price reached multi-year highs at the end of last week, copper followed suit this week by topping $10,000 per tonne for the first time since April 2022. This is the …
Recovery in activity won’t stop ECB rate cuts This week brought some more evidence that the euro-zone economy is coming out of recession. The euro-zone Composite PMI rose more than expected in April, to a level consistent with GDP expanding slightly. …
Overview – Progress in getting back to central bank targets has slowed in several major economies. In advanced economies, a rebound in energy inflation has offset most of the drag on headline rates from lower non-energy goods inflation, and services …
Disinflationary trend to resume soon; real spending still strong The slightly bigger-than-expected 3.7% annualised first-quarter gain in the core PCE deflator was principally because January’s gain was revised up to 0.50% from 0.45%. Nevertheless, the …
Softer inflation figure (just about) keeps a 50bp cut in May in play The slightly lower-than-expected Brazilian inflation figure for the first half of this month, of 3.8% y/y, and signs of softening underlying core price pressures might just be enough to …
This week the FTSE 100 broke through the 8,000 mark for the first time since its brief three-day flutter in February last year and reached a record high of 8,100. This appears to be justified based on the recent improvement in economic activity. Indeed, …
Hawkish CBR worried about upside inflation risks The hawkish communications accompanying the decision by the Russian central bank (CBR) to leave its key policy rate on hold today suggests that monetary easing will probably arrive later than we previously …
We think the recent recovery in the share prices of some of the ‘Magnificent 7’ is a sign that the earlier pull-back in their collective performance wasn’t a harbinger of a far bigger correction in the NASDAQ 100. On the contrary, we suspect that index …
New monetary tool aimed at risk mitigation, not QE Speculation had emerged that the PBOC might start quantitative easing (QE) after it was revealed earlier this month that President Xi Jinping had called on the central bank to increase the buying and …
Ongoing heatwaves are a risk to inflation The past couple of weeks have brought more good news on India’s economy. The flash composite PMI for April released on Tuesday rose to a near 14-year high. (See Chart 1.) That suggests that the strength of …
While overall surveyor sentiment remains negative, the Q1 RICS survey appeared to show a divergence in views between respondents of where in the cycle the market currently is. We think the apparent differences in views stem from the growing discrepancy …
The continued decline in core inflation will make it difficult for Norges Bank to stick to its current guidance that it will leave interest rates unchanged until Q4. We suspect that the Bank will change its forward guidance next week to acknowledge the …
The Bank of Japan is getting more confident in meeting its inflation target on a sustained basis and signalled that inflation wouldn’t have to overshoot for policy to be tightened further. Nonetheless, policy rate hikes will become difficult to justify …
Wage increases becoming more widespread The Bank of Japan’s measures of underlying inflation suggest that the case for further policy tightening is diminishing as two out of three indicators fell below the Bank of Japan’s 2% target in March. (See Chart …
Surprise hike by Bank Indonesia Bank Indonesia surprised financial markets (and ourselves) when it raised interest rates at its scheduled meeting on Wednesday. The hike was a direct response to the increased uncertainty in global financial markets …
Bank of Japan will hike rates further in July The Bank of Japan signalled growing confidence in meeting its inflation target at today’s meeting and we’re sticking to our forecast that it will increase its policy rate further to 0.3% in July. As widely …
The plunge in inflation in Tokyo in April was mostly due to a sharp fall in high school tuition fees and the provision of free school meals. The impact of those policy changes on nationwide inflation will be much smaller and they won’t affect the Bank of …
The last mile will be the hardest The release of Australia’s quarterly CPI data this Wednesday made for grim reading. With price pressures proving more stubborn than most had anticipated, markets have now given up any hopes that the RBA will cut rates …
The US dollar would have to appreciate a lot further before having significant effects on the global economy and financial system. A key risk to watch for is the widening policy divergence between the US and Asia leading to a major depreciation in the …
25th April 2024
Hikes are back on the agenda at some central banks and core PCE data for Q1 added to the hawkish mood in US markets. But we don’t think the Fed will feel the need to start hiking again. Indeed, given the path of underlying inflation, we continue to think …
Africa Chart Pack (Apr. 2024) …
The fading of weather-related support and broader evidence of easing labour demand lead us to expect a smaller 200,000 rise in non-farm payrolls in April. We expect the unemployment rate to be unchanged at 3.8%, while average hourly earnings growth should …
The latest RICS survey suggested that there was a further improvement in occupier and investment demand at the beginning of 2024. However, the big picture was one of a very weak market, reaffirming our view that rent growth will slow further and the …
The Q1 RICS commercial survey provided further evidence that occupier demand has turned the corner, with demand ticking up in the industrial and office sectors. But with availability still elevated, office and retail rents are expected to decline over …
Foreign-born workers have been entirely responsible for the post-pandemic recovery in employment. But a gradual rise in labour market participation and a moderation in net migration may mean the share of UK-born employment starts to rise again. The risk …
A later start to Fed rate cuts than we anticipated will push the fall in mortgage rates and recovery in activity into the second half of the year. But as we think that the Fed Funds rate will eventually be cut by more than markets have currently priced …
GDP growth slows, but underlying momentum remains strong First-quarter GDP growth came in weaker-than-expected at 1.6% annualised, the weakest quarterly gain in almost two years, but the strong 3.1% gain in final sales to private domestic purchasers …
Stalling privatisation drive a blot on Egypt’s reforms Having previously pledged to reinvigorate its state privatisation drive, Egyptian officials have significantly pared back their targets. This could remain the one demerit on its IMF report card. …
Hawkish message as rates remain on hold Turkey’s central bank left its policy rate on hold at 50.00% at today’s meeting, but the statement continued to strike a hawkish tone amid persistent inflation risks in the economy. While we think the tightening …
Spanish house prices have risen 5% over the last two years despite rising interest rates. The relative affordability of houses in Spain is the main reason that the market remains strong, but the resilience of foreign demand for houses and a rising …
House price growth in London remains negative according to the ONS, but timelier measures of house prices and sentiment suggest that activity has picked up and prices are regaining momentum. The recent slight increase in mortgage rates may temper the …
The paring back of expectations for interest rate cuts in advanced economies this month has generally come alongside an upward revision to interest rate expectations across Emerging Europe. However, we think analysts may still be overestimating how far …
