We think El Ni ño poses downside risks to the prices of emerging market assets, in general. But even if the effect in aggregate wasn’t all that large, there are several vulnerable sectors where such an event could create some relative winners and …
3rd August 2023
We have collated a range of low-profile activity data for the UAE that point to strong activity in the non-oil economy. But this won’t be enough to offset the impact of oil production cuts. Prospects for next year are better, though, and we think the UAE …
The property downturn has left state-owned developers the dominant players in a previously privately-led sector. The state is likely to continue playing a larger role as consolidation continues around more financially-secure firms. Based on a sample of …
This webpage has been updated with additional analysis and a chart of the key data. Softer Gulf PMIs, but non-oil activity holding up well July’s batch of PMIs for the region were a mixed bag, with the surveys from the Gulf falling back as they did in …
Recession likely in H2 The final euro-zone PMIs confirmed that economic conditions deteriorated in July, with the Composite index consistent with GDP declining slightly. We continue to expect the euro-zone economy to fall into recession in the second half …
We recently held a Drop-in titled “Office Sector Armageddon – Who gets hit hardest?”, which you can view on-demand here . This Update addresses some of the specific European questions we received during the event. Which European cities will do better? At …
Lira depreciation feeding through more strongly The jump in Turkish inflation in July to 47.8% y/y is likely to be followed by further rises in the coming months as the recent sharp fall in the lira and hikes to VAT continue to feed through. The central …
This page has been updated with charts since first publication. Inflation declines further below 2% Easing core inflation drove headline inflation lower in July, but we don’t expect it to fall much further this year. Despite inflation now sitting within …
Net trade buoyed GDP growth in Q2 The rise in the trade surplus to $11.3bn in June, from $10.5bn in May, was broadly in line with what most had expected (Refinitiv Consensus: $11bn, CE: $11.5bn). Although exports of goods and services fell by 1.7% in …
BCB kicks off Brazil’s easing cycle The Brazilian central bank (BCB) started its easing cycle today with a larger-than-expected 50bp cut in the Selic rate, to 13.25%, and the relatively dovish tone of the accompanying statement suggests that policymakers’ …
2nd August 2023
Despite some recent high-profile labour strikes, it still seems likely that overall wage growth will slow sharply during the next 12 months, as labour demand cools and elevated immigration boosts supply. Some commentators have argued that the recent …
The US government losing another one of its “AAA” ratings after Fitch Ratings’ downgrade decision last night is unlikely to matter much in the near term, but three points are worth highlighting. First, the market reaction so far is a far cry from that in …
Strong Q2, but signs of softening industrial activity Russia’s economy is likely to have had a very strong second quarter as industrial production and retail sales rose sharply in Q2 (both by more than 3.0% q/q). But the activity data for June suggest …
Office-based jobs suffering in western tech-led markets Seasonally-adjusted total employment growth rose by 0.6% 3m/3m on average across the 30 metros we track for the third consecutive month. But there has been clear weakness in the information sector in …
Applications dipped back down toward 30-year lows June’s rebound in mortgage applications for home purchase was short-lived as total applications fell by 1.7% in July. This pushed applications back down toward 30-year lows and was probably prompted by …
One key lesson from the bouts of inflation in the 1970s and 1980s is that core inflation faded only once a loosening in the labour market drove down the job vacancy rate to more normal levels. We estimate that a fall in the job vacancy rate from 3.0% in …
Last week, we held a Drop-In on the future of office property, which you can view here . This Update provides answers for a variety of questions from a UK perspective that emerged from the discussion. How does the office outlook compare across regions in …
We estimate that China’s trend rate of growth has slowed from 5.0% in 2019 to 3.0% now, based on our China Activity Proxy. This is a steeper deceleration than in the years leading up to the emergence of COVID-19. The official GDP data, while not fully …
Jump in food prices makes rate hold next week less of a certainty On balance, we still think the MPC will stand pat but strike a more hawkish tone If food price surge is sustained, loosening may be pushed back from early 2024 The recent surge in food …
The Bank of Thailand (BoT) today raised its policy rate by a further 25bps (to 2.25%), but we think this marks the end of the tightening cycle. With inflation now well below target and headwinds to the economic recovery mounting, we expect rates to remain …
Fitch downgrade to have little impact The news that Fitch Ratings is downgrading its US sovereign credit rating one notch from AAA to AA+ has predictably had little to no immediate impact on the Treasury market – yields are up on the day, but down since …
This page has been updated with additional analysis since first publication . Labour market will slacken in earnest before long Although New Zealand’s unemployment rate rose slightly last quarter, the labour market remains very tight by historical …
The fall in the EM manufacturing PMI to a six-month low in July was mainly driven by a renewed drop in China, but the surveys generally remained downbeat across most EMs last month. We think EM industry will continue to struggle over the rest of this year …
1st August 2023
Falling vacancies in sectors where wage growth has been particularly strong will provide some comfort to the Fed, however the JOLTS survey showed that the broader labour market remained resilient in June. The job openings rate remained unchanged at in …
The latest PMIs suggest that the decline in global manufacturing activity has further to run. At least weak activity is weighing on price pressures, which should lead to further falls in core goods inflation globally. The output component of the global …
Some measures of market risk premia have become quite low, suggesting to us that the bar for further big gains in risky assets has risen. If last week’s strong Q2 GDP print emphasised the surprising resilience of the US economy, the past couple of days …
We think the price of rice is set to climb after India’s additional rice export restrictions have exacerbated global shortage concerns. For now, though, we don’t expect other major producers to follow suit. India recently tightened rice export …
This page has been updated with additional analysis since first publication. Subdued manufacturing activity keeping inflationary pressures muted The modest improvement in the ISM manufacturing index to 46.4 in July, from 46.0, suggests the manufacturing …
The latest Pemex capital injection underscores that Mexico’s President López Obrador is more likely to lean towards providing a sovereign debt guarantee (either implicit or explicit) to deal with the company’s financial problems. But with a less …
China’s PMIs suggest that commodities demand has come completely off the boil. For the recent rally in industrial metals prices to be sustained, China’s policymakers will have to deliver on promises of stimulus. In continuing a recent theme, the official …
This page has b een updated with additional analysis since first publication . Economy showed signs of resilience in Q2 The slightly better-than-expected 0.1% m/m increase in Brazilian industrial production in June indicates that the sector grew a little …
Note: We’ll be discussing the implications of the Bank’s decision for the economy, the housing market and financial markets in a 20-minute online Drop-In at 3pm on Thursday 3 rd August . (Register here .) Despite the easing in CPI inflation from 8.7% in …
This page has been updated with additional analysis since first publication. Tight labour market will only loosen gradually The euro-zone labour market remains extremely tight, with the unemployment rate steady at a record low in June. We expect weakness …
PMI makes for grim reading South Africa’s manufacturing PMI fell even further in July as power cuts intensified again and the outlook remains bleak – we remain comfortable with our forecast for the economy as a whole to stagnate this year. Price pressures …
CEE industry continues to struggle, price pressures diverge The manufacturing PMIs for July suggest that industrial sectors generally struggled across the region at the start of Q3, and support our view that economic recoveries in CEE are not about to …
Warsaw industrial rents have seen an unprecedented surge in recent months on the back of strong demand and supply constraints due to the war in Ukraine. And while growth is set to slow significantly from here, we now expect the market to outperform the …
The Reserve Bank of Australia left rates unchanged at 4.10% for the second consecutive month. And while the Board continued to strike some hawkish notes, there is a good chance that its tightening cycle is already over. The RBA’s decision flew in the face …
Mortgage rate surge starts to take its toll The slight fall in house prices in July is the first sign of the surge in mortgage rates since mid-May taking its toll. As we expect mortgage rates to remain around their current level for the next 12 months, we …
This page has been updated with additional analysis since first publication. Manufacturing PMI shows further signs of cooling activity India’s manufacturing PMI edged down in July to a three-month low, and we expect higher rates and subdued global demand …
RBA stands pat The RBA’s decision to leave its cash rate unchanged at 4.10% means that its almost certain that our forecast for a terminal rate of 4.60% won’t come to fruition. Ahead of today’s meeting, 20 out of 36 analysts polled by Reuters, including …
Factory activity will continue to struggle Manufacturing PMIs remained in contractionary territory across most of Emerging Asia last month and the underlying data point to further weakness ahead. Falling new orders, bleak employment prospects and high …
Housing rebound continues unabated Australia’s house-price rebound went full steam ahead in July. At the margin, that should strengthen the case for the RBA to lift its cash rate by a further 25bp at its meeting later today. Nonetheless, with resurgent …
The Fed’s latest Senior Loan Officer Opinion Survey shows that, even though the banking crisis has faded, credit conditions remain unusually tight. Although the net percentage of banks tightening lending standards on commercial real estate loans fell back …
31st July 2023
While we suspect that sticky core inflation in the euro-zone will mean “higher for longer” interest rates there, we think that the ECB will eventually deliver more rate cuts than currently priced into the markets. Along with our dovish view of Fed policy, …
FX Markets Chart Pack (Jul. 2023) …
The message from electric vehicle sales data is now clear: the EV revolution is alive and kicking and poses important implications for oil demand. We are slightly more optimistic on the pace of EV adoption than other forecasters and suspect the drag on …
Hold does not mark the end of the tightening cycle Pakistan’s central bank (SBP) today left its main policy rate unchanged (at 22.0%), but we doubt this marks the end of the tightening cycle. With inflation likely to remain above target for some …
Strength seen in H2 unlikely to continue The 0.9% q/q rise in Mexican GDP last quarter followed a strong Q1 and showed that Mexico’s economy was more resilient in the first half of the year than we’d expected. That said, we think that weaker growth in the …
China's reopening recovery has fizzled out and the economy is now at risk of slipping into a recession. We think policymakers will provide enough stimulus to avoid this and deliver a modest reacceleration in growth over the coming quarters. But most of …
The 0.3% rise in euro-zone GDP in Q2 was largely due to a huge increase in Ireland’s GDP and the export of a cruise ship from France. Neither of these is a sustainable source of growth. With more of the hit from tighter monetary policy to come, we still …
