Both “safe” and “risky” assets have struggled during Q3 so far, as “risk-free” yields have risen. We expect the fortunes of safe assets to improve over the rest of this year, largely informed by our view that investors are underestimating how quickly …
28th September 2023
The US dollar’s record run of 10 consecutive weekly gains has brought it to its strongest level since last December (see Chart 1), and prompted renewed talk of FX intervention in Asia. We think that market participants have now gone too far in discounting …
Global goods trade fell at its fastest pace since the pandemic in July and the timelier trade and survey data point to further declines in August and September. What’s more, given that we still expect several advanced economies to fall into mild …
We think the “tech”-heavy sectors of the stock market, which have largely shrugged off the rout in Treasuries, will generally continue to do well. The Treasury market sell-off has continued in earnest this week. The 10-year Treasury and TIPS yields have …
The drivers of Brazil’s recent period of rapid growth seem to be the subject of a heated debate at the central bank – and policymakers’ conclusions will play a big role in determining the pace and scale of the easing cycle. For our part, we think the key …
The direct hit to the economy from even an extended government shutdown beginning next week would be modest. But it could also result in delays to key data releases, including the September employment and CPI reports due over the next couple of weeks. At …
We suspect the pound will fall from $1.22 now to $1.20 by the end of this year. That’s not due to lower interest rate expectations in the UK compared to the US or the euro-zone, as we think the UK will be the last to cut rates. Instead, it’s due to the …
We forecast a 170,000 increase in non-farm payrolls in September as employment growth continues to trend lower, but a government shutdown may disrupt the release of the data on Friday 6 th October. Recent downward revisions took three-month average …
Will December’s election pave way for EGP move? Egypt’s National Election Authority confirmed this week that the presidential election will take place in December. As we highlighted , this adds to reasons to think the shift to orthodoxy will remain on …
The narrowing in India’s current account deficit in the four quarters to Q2 was mainly due to the shrinking of the goods trade deficit. Looking ahead, the recent jump in oil prices won’t prevent the deficit narrowing to around 1.5% of GDP this year, and …
We think the “higher-for-longer” narrative that has taken hold in the market won’t last through 2024. We suspect that central banks will generally cut faster than investors seem to expect and that, as a result, the bond market sell-off will turn into a …
As we anticipated , housing starts in England spiked to their highest level on record in Q2 as builders began work early to avoid having to conform with the Future Homes Standard. More timely monthly data show that starts slumped in July and August in …
Click here to read the full report. Overview – Russia and Turkey have outperformed the rest of the region this year amid support from loose policy, but both economies look set for a slowdown in 2024 while recoveries take shape across Central and Eastern …
GDP revisions change little; recent gap with GDI remains The comprehensive benchmark revisions to the GDP data changed almost nothing of substance – the real economy was still 6.1% bigger in the second quarter of this year than it was pre-pandemic in the …
Table of Key Forecasts Overview – Aggregate EM GDP held up better than we had expected over the first half of the year, but we think that a phase of softer growth lies in store over the coming quarters. Our near-term GDP growth forecasts lie below the …
Nigeria’s policy shift has stalled in recent weeks as officials have responded to a growing political backlash by reverting to the interventionist tendencies of the Buhari administration. The result is that the naira has plunged on the parallel market and …
Brazil and Mexico will outperform others in the region this year, but that’s likely to flip on its head in 2024 as they slow – and by more than most expect – while the Andean economies recover. Central banks across the region will continue to lower …
This page has been updated with additional analysis since first publication. Sentiment ticks down, but still consistent with recovery The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) were a mixed bag in …
This page has been updated with additional analysis since first publication . Euro-zone sentiment weakens further The weak outturn for the euro-zone’s EC Economic Sentiment Indicator (ESI) in September supports our view that the economy will contract in …
China’s economy is regaining some momentum after stalling during the summer. A step up in policy support looks set to deliver a modest cyclical recovery but trend growth remains under pressure. … China Chart Pack (Sep. …
German state figures point to big drop in euro-zone inflation The big drop in CPI inflation across German states in September all but confirms that German and euro-zone HICP inflation also fell sharply this month. While this mainly reflects base effects …
After a sharp slowdown this year, GDP growth across the Middle East and North Africa will improve in 2024 as OPEC+ starts to raise its output quotas and high oil prices allow the Gulf economies to keep fiscal policy supportive. Outside of the Gulf, …
This page has been updated with additional analysis since first publication. RBA will hike despite slower retail sales growth Retail sales lost some momentum in August. However, with sales volumes still running above their pre-pandemic trend, that …
Fairly solid growth, meaningful slowdown unlikely until 2024 Russia’s industrial production and retail sales data for August suggest that activity remained fairly solid and we think the economy is on track for GDP growth of 2.5% this year. Monetary policy …
27th September 2023
10Y Treasuries have underperformed 2Y Treasuries over recent months, bucking the usual pattern after the final Fed hike (if, as we think, the final hike was in July). But we think the stage is now set for 10Y Treasuries to outperform over the next year or …
Strong immigration and the resilience of the housing market raise the chance that the economy will avoid recession but, with the Bank of Canada keeping further rate hikes on the table, we still judge that GDP will contract later this year. Even if …
Overview – Economic growth across Sub-Saharan Africa is likely to pick up over the coming quarters, but a challenging external environment means that balance of payments positions will remain under strain and fiscal and monetary policy will need to stay …
New York and LA see a decline in office jobs Total employment growth slowed slightly in August to 0.4% 3m/3m across the 30 metros we cover, once seasonally-adjusted. But office jobs in western cities have continued to decline as layoffs in the technology …
This page has been updated with additional analysis since first publication. Easing cycle just around the corner The Czech National bank (CNB) left interest rates on hold again at 7.00% at today’s meeting, but we still think that an easing cycle will …
Equipment investment growth still set to slow The 0.2% m/m rise in durable goods orders in August was, at first glance, better than expected, but the outperformance was mainly due to a surge in defence aircraft orders. Admittedly, gains in core orders and …
From hope to reality to hype and hysteria. The rapid development and adoption of generative artificial intelligence may be keeping headline writers busy, but is there anything to their warnings about the technology’s roll-out leading to mass …
Emerging Asia Chart Pack (Sep. 2023) …
Overview – We expect the euro-zone economy to struggle over the next 18 months, and a mild recession in the coming quarters looks more likely than not. Lower energy prices and improved global supply chain conditions should keep headline inflation on a …
Overview – China’s economy is regaining some momentum after stalling for a brief period during the summer. A step up in policy support looks set to deliver a modest cyclical recovery but trend growth remains under pressure. Consumer Spending – …
Activity is holding up better than expected, while disinflation is stalling Another 25bp rate hike now seems more likely than not Policy easing pushed back to mid-2024 Stronger-than-expected GDP and inflation data should cement the case for the RBA to …
The latest euro-zone money and credit data show that tighter ECB policy is continuing to weigh on households’ and firms’ borrowing, as well as influencing what they do with their savings. The weakness in money and lending growth supports our view that the …
Final hike of the cycle The Bank of Thailand (BoT) today raised interest rates by a further 25bps (to 2.50%), but hinted this was likely to be the last hike of the cycle. With inflation below target and headwinds to the economic recovery mounting, we …
This page has been updated with additional analysis since first publication. Resurgent price pressures raise risk of tighter policy With Australia’s disinflationary process stalling, there’s a growing risk that the Reserve Bank of Australia will resume …
We think that investors’ enthusiasm for artificial intelligence (AI) will grow again next year and inflate a bubble in stock markets. This is just one of the many consequences that AI will have on the economy, in our view, as we discuss at length in our …
26th September 2023
Financial risks generally look quite low in most major EMs as current account deficits have narrowed this year and banking sectors remain in strong shape. But there are some areas of weakness, including large currency risks in parts of Eastern Europe …
This is an excerpt from our CE Spotlight series on AI. The whole series can be viewed here . A year ago, China was widely held to be a – perhaps the – global leader in AI. It has an online population larger than the US and Europe combined. Ubiquitous …
17th October 2023
Softening demand proves a tipping point for new home sales The 8.7% m/m drop in New Home Sales in August was the largest monthly decline since September 2022 and suggests that the renewed rise in mortgage rates has caused home purchase demand to decline …
The Hungarian central bank (MNB) delivered another 100bp interest rate cut (to 13.00%) and simplified its monetary policy toolkit at today’s meeting, paving the way for the second phase of the easing cycle in the coming months. The hawkish tone of the …
Another dip in house prices this year unlikely after sixth consecutive rise The sixth consecutive rise in house prices in July showed that very tight supply is causing home prices to continue to rise despite sales volumes remaining weak, and suggests a …
Chapter 5: AI and the global economic order …
