SA: rising risk premia threaten high for longer rates One new threat to the inflation outlook that the South African Reserve Bank highlighted at its policy meeting on Thursday was a higher country risk premium which is fuelling downward pressure on the …
26th May 2023
As in the euro-zone, the rise in prime property yields in Scandinavia slowed sharply in Q1 after the surge in H2 2022. Along with decent gains in rents, where Oslo offices and industrial saw the fastest growth, this meant that the decline in capital …
Weak Q1, disappointing early data for Q2 Most countries in the region have now published Q1 GDP figures, and in the majority of places the data were weak as high interest rates and subdued demand from abroad weighed on growth. (See Chart 1.) The …
Limited impact from INR2,000 note withdrawal The RBI’s announcement that it is withdrawing the INR2,000 note is likely to have evoked memories of the shock demonetisation exercise in 2016. As it happens, the INR2,000 note’s existence has been short-lived; …
Chief Europe Economist Andrew Kenningham and colleagues from the Europe team were online shortly after the May HICP release to talk through the latest inflation numbers and their implications for policy. During this 20-minute online session, Andrew and …
Improved outlook for retailers, but higher interest rates to restrain spending The 0.5% m/m rise in retail sales volumes in April suggests that higher interest rates are not yet taking a toll on spending. While the worst of the declines in retail sales …
Improving outlook for retailers, but higher interest rates to weigh on spending before long The 0.5% m/m rise in retail sales volumes in April was better than we expected (consensus +0.2%, CE -0.5%) and reversed some of the 1.2% m/m fall in March (revised …
Underlying price pressures moderating The final default market offer prices announced by the Australian Energy Regulator this week were a touch higher in New South Wales than the draft unveiled in March. However, the Victorian energy regulator announced a …
Inflationary pressures broadening even further We’ve been highlighting the increasingly broad-based nature of price pressures in Japan and there’s been no let-up. All three underlying measures of inflation published by the Bank of Japan increased in …
Sluggish consumption adds to case for RBA pause Coupled with rising unemployment and lukewarm wage growth , the weakness in retail sales in April supports our view that the Reserve Bank of Australia is done hiking interest rates . Retail sales values were …
Weak consumption adds to case for RBA pause The weakness in retail sales in April supports our view that the Reserve Bank of Australia is done hiking interest rates. Retail sales values were unchanged last month, a weaker result than the analyst consensus …
Inflation to fall below 3.0% by year-end Tokyo headline inflation fell to 3.2% in May largely due to a sharp fall in energy inflation, but inflation excluding fresh food and energy ticked up due to faster gains in “core” goods prices. We still expect a …
We think UK retail sales contracted again last month (07.00 BST) US real consumption and durable goods orders probably picked up in April (13.30 BST) Meanwhile, we think US core PCE inflation rose by another 0.3% m/m (13.30 BST) Key Market Themes Higher …
25th May 2023
Despite the recent slowdown in China’s reopening recovery, we don’t expect the renminbi to weaken much further against the US dollar. Yield differentials should begin to tilt back in favour of the renminbi as the Fed turns towards interest rate cuts later …
Central banks in the region’s two largest economies, Nigeria and South Africa, both hiked interest rates this month and, whereas attention elsewhere is turning to rate cuts, the risks seem to be tilted towards further increases in both countries. …
President Erdogan looks set to secure victory in the second round of Turkey’s presidential election on 28 th May. This Update sets out how we think this would play out in Turkey’s financial markets this year: in short, we think that measures of Turkey’s …
While it is a hot political potato, well targeted migration could be one part of the solution to the UK’s labour shortages problem. That could help inflation and interest rates be lower than otherwise. Net migration of 606,000 in the year to December 2022 …
The aviation sector is pinning its hopes on sustainable aviation fuel to help cut its carbon footprint over the coming decades. But any ramp-up in biofuel usage would pit aviation against the needs of other sectors and industry officials are becoming more …
China’s refineries pumped out more oil products than at any point in their history in the first four months of this year. This is perhaps not too surprising given that the removal of COVID-19 restrictions was always going to give a boost in demand. But a …
The debt ceiling stand-off will probably now drag on into early June, setting up the prospect of a near-default before a bipartisan bill is finally passed by Congress, possibly only after a more serious bout of market turmoil. The risk of a formal debt …
The South African Reserve Bank (SARB) hiked interest rates by 50bp, to 8.25%, today on the back of policymakers’ growing concerns about the inflationary impact of persistent power cuts. For now, we think that today’s move marks the end of the tightening …
We estimate that employment growth continued to trend gradually lower in May with a 200,000 rise in non-farm payrolls. Although the unemployment rate remains exceptionally low, the report should also bring further evidence that wage growth is easing. Jobs …
The results of elections in major EMs over the past month have increased macroeconomic policy risks. Most notably in Turkey , President Erdogan now has the edge ahead of a second-round presidential election run-off next week. Hopes of an opposition …
Tunisia’s central bank independence under fire A new wave of reforms supposedly laid out by Tunisia’s President Saied’s have taken aim at the central bank’s (BCT’s) mandate which could result in it being used for unorthodox measures. That would …
The increase in mortgage rates has been the main determinant of the size of house price falls in developed market economies. Very tight supply in the US, and to a lesser extent the UK, has also supported prices in those markets. Employment, incomes, …
This webpage has been updated with a table and chart of key data Inflation shows broader signs of easing The surprise fall in Brazilian inflation to 4.1% y/y in the first half of May, coming alongside this week’s approval of the new fiscal framework in …
Hopes for CBRT rate hikes are evaporating Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% again today and, with Recep Tayyip Erdoğan in pole position to be re-elected as Turkey’s President this Sunday, the probability of much-needed …
Note: We’re discussing potential EM equity outperformance, monetary easing and “friend-shoring” in our next EM monthly online briefing on Thursday, 1 st June. Register here to join. Colombia’s very strong post-pandemic recovery has come at the expense of …
Speculation is building that, after its surprise April cut failed to lift oil prices for very long, OPEC+ could use its 3rd-4th June meeting to announce further production cuts. What’s the likelihood of another move, and how would that affect the price …
Inflation has just a bit more to climb Headline inflation in Tokyo fell from 3.5% to 3.2% in May, largely due to a sharp 8.2% fall in energy inflation, which took away almost 0.5%-pts from headline inflation. The drop shows that lower energy import prices …
Falling inflation to open the door for early rate cut Bank Indonesia (BI) kept its main policy rate unchanged today (at 5.75%) as was widely expected. With inflation falling and growth easing, we think there is a good chance the central bank could cut …
Germany in recession and outlook poor The downward revision to Germany’s Q1 GDP means that the country has fallen into a technical recession and that euro-zone GDP probably stagnated in Q1 rather than expanding by 0.1% q/q. We expect further economic …
The Bank of Korea today left interest rates unchanged (3.5%) for a third consecutive meeting, and pushed back against the possibility of early interest rate cuts. However, with inflation falling back, the economy struggling and the housing market …
Singapore’s economy is being hit hard by multi-decade high interest rates and elevated inflation. And with external demand set to weaken, we expect growth to be much weaker than consensus projections. The revised estimate for Q1 GDP published today …
On hold again, first cut likely in August The Bank of Korea today left interest rates unchanged (3.5%) for a third consecutive meeting, but we don’t think it will be long before the central bank starts cutting interest rates. With inflation falling …
Some officials looking to resume rate hikes The minutes of the early May FOMC meeting reveal that although Fed officials agreed “the extent to which additional increases in the target range may be appropriate after this meeting had become less certain”, …
24th May 2023
The flash Q1 GDP figures for Saudi Arabia showed the economy grew at its weakest pace in two years at the start of 2023, reflecting the cut in oil production in line with the OPEC+ decision in October. And the even more recent voluntary output reductions …
The long-awaited inclusion of WTI Midland into Dated Brent is now taking place in a gradual month-long process that started on 2 nd May. The inclusion of Midland could be a factor weighing on the Brent-WTI price spread in the coming months, but we …
Metro level data for Q1 2023 showed the slowdown in occupier demand was widespread, with no market consistently outperforming across the sectors in terms of absorption. While office and industrial asking rents continued to grow, they did so at a slower …
History suggests that in the absence of a major financial shock, central banks usually leave interest rates at their peak for a year or more. That’s consistent with our view that the ECB is unlikely to start cutting interest rates until around the middle …
The strength in US product demand is unlikely to be sustained Commercial stocks slumped as imports fell sharply. Meanwhile, implied product demand rose, but we think the usual summer boost to demand may be more subdued this year as economic growth slows. …
We think Turkey’s central bank will keep its policy rate at 8.5%... (12.00 BST) … while policymakers in South Africa will deliver a 50bp rate hike, to 8.25% (14.00 BST) Clients can sign up here for tomorrow’s Drop-In on China’s economic outlook Key …
During our latest monthly dive into the big themes in emerging markets, the team discussed the macro and market forces that could see EM equities breaking their recent run of underperformance against their developed market peers. In addition, economists …
The Central Bank of Nigeria’s decision to raise its policy rate by 50bp, to 18.50%, reaffirmed that officials continue to focus on tackling high and rising inflation at the expense of supporting the struggling economy. The increasing likelihood of fuel …
The turnaround in the housing market, with sales and prices rebounding in April, has raised hopes that construction will hold up despite elevated borrowing costs. Media reports suggest that buyer enquiries for pre-construction projects have rebounded, …
The most troubling aspect of April’s inflation data, released earlier today, was evidence that price pressures are becoming increasingly domestically generated. Accordingly, we now expect the Bank of England to raise interest rates further than we …
EM labour markets have shown relatively little sign of adjustment in response to the recent weakening of growth. That’s likely to keep wage growth uncomfortably strong in Central Europe and Latin America. In turn, we think this will limit the scale of …
A strong rebound in tourism provided a big boost to growth in Thailand and Hong Kong last quarter, which along with China, were the three best-performing countries in Emerging Asia in Q1. But for the rest of the region, the GDP figures painted a …
