We doubt that ECB policy will have much impact on German bond yields this year and next – if anything, risks are skewed to the upside. But the outlook may be a bit brighter for Italian bonds, and we expect the Italian-German spread to narrow. The yield of …
7th March 2024
This year is a particularly busy one for elections in the emerging world, and these votes raise the risk of fiscal giveaways that worsen public debt dynamics. We think the risks are greatest in Tunisia, followed by South Africa and Romania. Elsewhere, …
Today’s ECB decision was in line with expectations and President Lagarde’s comments in the press conference reinforce our view that June is the earliest date by which the Bank will start to cut rates. There were no major surprises in today’s ECB policy …
The preliminary China trade data released today suggest that China’s commodities demand was robust in the first two months of the year. Crude imports should stay elevated, but iron ore and coal imports may trend lower over the next few months. Growth in …
The raft of policy reforms announced by the Egyptian authorities yesterday, including a devaluation of the pound and new IMF deal, has put the economy on a path out of its current crisis. There have been false dawns before, but we think that momentum is …
We discussed the implications of Russia’s election in a Drop-In on Tuesday, 12 th March. Click here to watch the 20-minute online briefing. The outcome of Russia’s presidential election taking place over 15-17 th March is not in doubt: Putin is all but …
Imports set for stronger gain in first quarter The January trade data point to a potentially larger drag on first-quarter GDP growth than we had assumed, albeit mainly because imports look to have been stronger than previously believed. In nominal terms …
Improvement in trade balance may not be a good thing Although the economy appears to have received a large boost from net trade at the start of 2024, the plunge in imports does not bode well for domestic demand and raises the risk that an inventory …
Lagarde likely to dash remaining hopes of April rate cut The ECB decision to leave rates unchanged and the key messages in the press release were in line with expectations. In the forthcoming press conference we suspect that Christine Lagarde will kill …
Inflation drops, Banxico on course for rate cut this month The drop back in Mexico’s headline inflation rate to 4.4% y/y in February, alongside the weakness of the latest activity data, leaves Banxico on course to cut interest rates at its next Board …
Rates on hold throughout 2024 Bank Negara Malaysia (BNM) left its overnight policy rate on hold (at 3.0%) today, and hinted in its statement that it was in little rush to change interest rates any time soon. This supports our view that the policy rate …
End of mortgage rate fall slows prices The smallest month-on-month increase in house prices since September suggested that the boost to house prices from the decline in mortgage rates since last summer is over. With mortgage rates now edging up, house …
Export volumes hit record high China’s export values rose y/y at the fastest rate since May, with export volumes reaching a record high. We doubt the sustainability of this strength, however, since exporters now have more limited scope to reduce prices to …
The surge in the terms of trade explains some of the resilience of Australia’s economy as it has probably encouraged the government to spend more money than it would have done without soaring mining tax revenues. The key point though is that Australia’s …
This page has been updated with additional analysis since first publication. Regular wage growth will receive a boost in Q2 While the jump in overall wage growth in January was entirely driven by volatile bonus payments, regular wage growth will receive a …
6th March 2024
The net giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may help end the recession before an election later this year. But fiscal policy is still being tightened in 2024/25 and that tightening will continue after the election and will probably …
Today’s UK budget announcement contained no major surprises, leaving our forecast for the 10-year Gilt yield to fall further this year and sterling to struggle against other major currencies intact. Our UK Economics service is the place to look for the …
The January JOLTS release showed no evidence of a resurgence in labour demand. With forward looking indicators still pointing to a sharp easing in wage growth, there is little to suggest that the labour market will drive renewed inflationary pressures. …
The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that it is gaining a bit more confidence that inflation is moving in the right direction. We continue to expect the first rate …
The announcement of an agreement over a new IMF package for Egypt, coming on the back of the rate hike and devaluation earlier today, represents a shift towards more orthodox policymaking. While it is still early, Egypt now appears to be on the path out …
China’s government is planning further fiscal loosening and hinting at rate cuts this year, with the aim of boosting economic activity. We think the policy backdrop is sufficient to support commodities demand this year, although for metals used in …
Bank gives little away The Bank of Canada gave little away about the potential timing of interest rate cuts today, although its communications suggest that the Bank is gaining greater confidence that inflation is moving in the right direction. We …
NBP keeps rates on hold, limited window for rate cuts this year The National Bank of Poland (NBP) left interest rates on hold again today, at 5.75%, and the scope for monetary easing this year looks relatively limited. We still think there is a …
Powell content to wait for more data Fed Chair Jerome Powell looks set to stick to his previous script in his testimony to Congress today and, assuming we are right that the January strength in core inflation will prove to be a blip, his remarks do not …
Mortgage rates back above 7% stifle demand recovery February’s mortgage applications data show rising mortgage rates put an end to what had been the start of a fairly promising recovery, following the low for applications in October 2023. We think this is …
Boost to the economy now comes ahead of a bigger drag after the election The net fiscal giveaway of £13.9bn (0.5% of GDP) in 2024/25 in the Budget may at the margin help lift the economy out of its mild recession before an election later this year. But a …
This page has been updated with additional analysis since first publication. Euro-zone sales rose but still weak January’s retail sales data are consistent with our view that the near-term outlook for consumption is poor. While retail sales edged up by …
Construction PMIs edge closer to expansionary territory The headline CIPS construction PMI rose to 49.7 in February, just under the no change level. The rise was driven by the housing component, with commercial activity edging back a touch. As interest …
The Egyptian central bank has announced steps to tackle its economic crisis, including a large devaluation and a bumper interest rate hike. But will it be enough? Economists from our Emerging Markets team held this special 20-minute briefing on whether …
The drag from the unavoidable structural decline in China’s property sector has only just begun. Property sales and project starts have collapsed. But property construction activity has retreated only a little. It is likely to halve in the next few years, …
We hosted a Drop-in following the announcement that can be viewed on demand here . Central Bank of Egypt shifts back towards orthodoxy The announcement minutes ago from the Central Bank of Egypt that it has devalued the pound and hiked interest rates by a …
Overview – The economy isn’t in recession but GDP growth will slow towards trend this year. With a virtuous cycle between wages and prices now in full swing, we expect the Bank of Japan to end negative rates at its April meeting. However, price …
This page has been updated with additional analysis since first publication. Subdued activity will pave the way for rate cuts Although GDP growth last quarter was in line with what the RBA had expected, the Bank will take comfort from the fact that …
A fall in the participation rate has kept a lid on unemployment in recent months but, given rapid population growth, we continue to expect the unemployment rate to rise to 6.5% later this year. Despite the surge in the population, labour force growth has …
5th March 2024
We think there are three key points for investors to note from today’s announcements at the National People’s Congress annual “Two Sessions”, where the country’s authorities, among other things, have announced fresh growth and fiscal targets. First, …
The policy agenda laid out at the National People’s Congress today is a reasonably pro-growth one. The new fiscal plans are supportive, monetary policy continues to have an easing bias, and the Premier reiterated recent welcome messages about …
Commercial real estate investment saw its worst year in over a decade last year. Most brokers seem to expect a recovery in investment activity this year as the Fed cuts interest rates and distressed assets come to market. However, we think the effect of …
Survey shows little signs of growth or inflation acceleration The fall in the ISM services index to 52.6 in February, from 53.4, left our weighted composite index consistent with a stagnation in GDP in the first quarter. That said, with the survey …
Overview – Even if mortgage rates fall to 6% as we expect, mortgage rate ‘lock-in’ will continue to curb home moves. As a result, we only anticipate a trickle of new resale supply coming onto the market over the next few years. That will keep a lid on …
Note: Andrew Burrell will be answering questions and highlighting key issues around the size and scale of the recovery in commercial property in a Drop-In on Tuesday, 12th March . Register here for the 20-minute online briefing. Completions in Europe …
Very modest growth in Q4, but 2024 should be better South Africa’s economy posted a measly 0.1% q/q increase in GDP in the final quarter of last year and the latest evidence points to a soft start to 2024 too. But we still think that, with the drags from …
Gulf non-oil sectors strengthen in Q1; Egypt’s economy knocked by Israel-Hamas spillovers February’s batch of PMIs from the Middle East and North Africa continued to show that the Gulf’s private non-oil sectors have started 2024 on a strong footing. But …
This page has been updated with additional analysis since first publication. Above 2% inflation will allow BoJ to end negative rates in April Inflation jumped to well above 2% in Tokyo in February and will remain around that level for a few months. …
4th March 2024
Money growth remains weak but is rebounding steadily, with our broader M3 measure recovering to its strongest since mid-2022. But there is no reason to expect this to drive a rebound in inflation. Although M1 continues to decline, the pace of contraction …
We don’t think Fed rate cuts are a necessary condition for the stock market bubble to inflate further. After all, most measures of equity risk premia have scope to fall as hype around AI grows. A central theme of 2024 so far has been the paring back of …
The sharp narrowing in Colombia’s current account deficit last year to its lowest level since the aftermath of the Global Financial Crisis looks encouraging, but it was entirely a result of the weakness of domestic demand. As the economy recovers, the …
