Chinese equities tumbled on Monday, and while we see scope for them to recover a bit in the coming months, we are quite pessimistic about their medium-to-long term prospects. Chinese stocks had a bad start to the month. US equities rose on Friday, which …
2nd September 2024
Explore our forecasts to end-2026 for GDP growth, inflation, policy rates and commodity prices. To explore our policy rate forecasts in more detail, please visit our Central Bank Hub dashboard. If you have subscriber access to the data underlying this …
PMI plunges but reasons to not be too downbeat The sharp fall in South Africa’s manufacturing PMI in August was disappointing but the survey has been extremely volatile recently and the big picture is that respondents remained optimistic about the …
Traffic-light coalition to stay on but state elections point to challenges ahead The big rise in populist parties in elections in two East German states at the weekend doesn’t threaten the survival of the governing coalition but it points to some …
PMIs increase, but still consistent with weak industrial activity The manufacturing PMIs increased across most of the region in August, although they generally remain at weak levels and suggest that industry has continued to struggle in Q3. In Poland and …
Rebalancing still a bumpy process The Turkish GDP figures for Q2, which showed a better-than-expected 0.1% q/q expansion in output, suggest that the rebalancing process still has some way to go. The data argue in favour of the central bank keeping …
Stretched affordability to sap momentum from house price rally With transaction volumes moderating and inventory rising, we expect the Australian housing market to cool in months ahead. In seasonally-adjusted terms, house prices across Australia’s eight …
This report was first published on 2nd September covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on 4th September. Growth has stabilised thanks to policy support The PMIs for …
August’s US employment report release on Friday will be the coming week’s must-watch market event. On the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing talks about what we’re expecting and how the …
31st August 2024
US and euro-zone inflation data released today did little to change our view that both the Fed and the ECB will cut interest rates by 25bp in September, as investors seem to expect. But we think both central banks will ultimately cut rates by a bit less …
30th August 2024
The dollar has rebounded a little this week ahead of next week’s crucial US non-farm payrolls report. The incoming data this week has generally supported our view that the US is on track for a soft landing, and if we are right in thinking that payrolls …
Harris supports dramatic increase in taxes After unveiling plans to boost spending and cut taxes for the middle-class in a big speech a couple of weeks ago, Vice President Kamala Harris has quietly acknowledged since then that she intends to pay for those …
Second-quarter GDP growth surprised to the upside of the Bank of Canada’s forecast, but the evidence that growth slowed sharply over the quarter suggests that third-quarter growth will be much weaker than the Bank is anticipating. That raises the chance …
Canada joins tariff hiking club On Monday, Canada announced a 100% tariff on imports of Chinese electric vehicles and 25% tariffs on aluminium and steel. The tariffs themselves won’t have much of a macro impact – the affected goods make up less than 0.1% …
Asia Chart Pack (August 2024) …
The Prime Minister’s statement this week that “there is a budget coming in October, and it’s going to be painful…those with the broader shoulders should bear the heavier burden” has prompted yet more speculation about how much tax revenues will rise and …
Canada’s tariffs on China’s electric vehicles Canada recently took a leaf out of the US trade policy playbook (see here ) by announcing a 100% tariff on Chinese-made electric vehicles (EVs). We think that the macroeconomic impact of the tariffs on China …
Chinese lending to Africa increases Data out this week showed that Chinese lending to Africa increased for the first time since 2016. With fiscal policy tight, African economies will welcome more financing. But the region would also benefit from efforts …
Lula taps Galípolo In a move that had been long signalled, Brazil’s President Lula announced this week that Gabriel Galípolo is his nominee to take over at the helm of the central bank when the term of current governor Roberto Campos Neto finishes at the …
Falling house prices and a soft labour market will continue to hold back consumer spending over the coming months. And with the PBOC concerned about a bond bubble, large-scale monetary easing appears unlikely. But a ramp up in fiscal spending and …
Belgium's political crisis and high budget deficit have largely gone unnoticed in past couple of months while all eyes have been on France. This Update answers some key questions about its political situation and prospects for fiscal policy heading into …
GDP figures for Q2 show a sharper-than-expected slowdown in India’s economy. Looking ahead, we expect economic activity to moderate a bit further over the coming quarters. But the big picture is that the economy remains on track to grow by a world-beating …
With no significant hard activity data out yet, it is too early to be confident about how the economy will perform in Q3, but the initial signs are not promising. To recap the survey data so far, the euro-zone Composite PMI fell from an average of 51.6 in …
Despite Q2 upside surprise, data raise chance of a 50bp cut next week Although second-quarter GDP growth surprised to the upside, the downgrade to GDP in June and preliminary estimate that GDP was unchanged again in July imply that third-quarter growth …
Price pressures well behaved despite strength of real economy The July income and spending report shows price pressures remaining muted despite the strength of real consumption. The latter suggests that third-quarter consumption growth will be 3.7%. Even …
Weaker-than-expected US data and a dovish shift from the FOMC have led to a sharp fall in interest rate expectations in the US, driving the dollar down as the market turmoil at the start of August has largely unwound. The yen has continued to rally, as …
Traditional gold drivers pick up the reins Much of the chatter in the gold market this year has been about the role of non-traditional drivers – particularly demand from China – in propelling the gold price higher. (Our latest Commodities Focus , …
Further signs of fiscal complacency in Poland The Polish government’s draft budget for 2025 announced this week suggests that fiscal policy will be more expansionary than we had previously expected next year. While that poses an upside risk to our …
Falling fertility bodes poorly for long-run outlook Data released this week showed that Korea's fertility rate (the average number of children a woman is expected to have over her lifetime) dropped further to 0.72 last year (see Chart 1), the lowest of …
This page has been updated with additional analysis since first publication. Services inflation remains sticky We doubt that August’s unexpected increase in services inflation will stop the ECB from cutting interest rates at its next meeting in September …
Net lending continues to recover gradually Net lending to commercial property was positive for the fourth consecutive month in July, albeit by a smaller £520mn. With development lending still negative, this was driven entirely by a rise in lending …
This page has been updated with additional analysis since first publication. Steady improvement in credit is supporting the economy July’s money and lending data provide further evidence that a steady improvement in the flow and demand of credit is …
MPC dissenters Varma and Goyal to step down As was widely expected, it was confirmed this week that the MPC’s three “external” members (who have careers outside the RBI and are selected by the government) will step down when their current terms expire on …
This page has been updated with additional analysis since first publication. Lower mortgage rates may soon help house prices regain momentum Despite the recent declines in mortgage rates, the small fall in the Nationwide house price index in August …
A solution in search of a problem The Australian government’s migration policy is in the spotlight once again as the Senate deliberates over legislation aimed at capping international student commencements in the country. The proposal put forward by …
Activity rebounding, inflation levelling off at 2% The activity and inflation data released today increase our conviction that the Bank of Japan will press ahead with another rate hike. The rebound in industrial production and the rise in retail sales in …
We think the rally in developed market government bonds has gone a bit too far and that yields will rise a little despite (further) rate cuts by the major central banks. One exception is the UK where we still think investors are expecting an excessively …
This page has been updated with additional analysis since first publication. Consumption rebound likely to be gradual The softness in retail sales last month suggests that household consumption growth will remain muted this quarter. Insofar as spending …
Economic recovery lost some steam in Q3 The July activity data suggest that the economic recovery continued in Q3 but shifted down at least one gear. The 2.8% m/m rise in industrial production in July was a touch weaker than the analyst consensus of 3.3% …
This page has been updated with additional analysis since first publication. Underlying inflation seems to settle around 2% The jump in the unemployment rate in July should reverse before long as economic activity rebounds. Meanwhile, the renewed pick-up …
Our China Activity Proxy suggests that activity growth edged up in July thanks to a ramp-up in fiscal spending. Policy support will continue to drive a cyclical recovery over the coming months. But once support starts to fade and export growth weakens, …
29th August 2024
We think enthusiasm around AI will return before long and inflate the stock market bubble further over the next year or so, supported by a backdrop of resilient economic growth and monetary easing cycles. In turn, we expect the “big-tech” sectors to …
We forecast a healthier 170,000 gain in non-farm payrolls in August, alongside a small fall in the unemployment rate to 4.2%. Wage growth should remain at 3.6%. Together, that would be consistent with a 25bp rate cut by the Fed next month. Beryl impact on …
Against the backdrop of central bank buying, strong physical gold demand, and a surge in ETF holdings, China appears to have been a key driver of the rally in gold prices earlier this year. Looking ahead, we think that China’s appetite for gold will grow …
Road cleared for ECB cut in September Inflation figures for Germany and Spain suggest that euro-zone headline inflation may have fallen to the ECB’s 2% target in August and that the core rate edged down. That paves the way for a September rate cut, but …
Libya’s oil shutdown could influence OPEC+ The oil market was rocked by two political shocks in the past week: an exchange of missiles between Israel and Hezbollah and a crisis in Libya, which led to cuts to its oil output. At the margin, the loss of …
The PBOC appears poised to step up its efforts to prevent bond yields from falling, even though lower borrowing costs would help the economy right now. The inconsistencies in its policy approach are linked to the shifting whims of the Party leadership, …
The PBOC has just revealed that it purchased RMB400bn of government bonds from primary dealers today. This might seem like an odd move given that the central bank has spent recent months trying to prevent yields from falling. But most signs suggest that …
EM recoveries are beginning to slow and should continue to do so over the coming quarters. Within this there will be regional variation, with Asia the outperformer and Latin America the laggard. Headline inflation rates will end the year above target in …
