A higher corporate tax would reduce corporate sector surpluses and could stimulate demand if the additional revenue were used to finance higher public spending or transfers to households. But the tax would have to be raised to implausibly high levels to …
17th April 2023
Shift towards cheaper homes challenges statisticians The divergence between the Nationwide and Halifax House Price Indices (HPIs) of late has cast some doubt on the direction of house prices. A struggle to adjust the statistics for a shift towards cheaper …
Central banks in Australia and New Zealand have taken starkly different approaches to managing the inflation-unemployment trade-off in their countries. Despite being behind the curve on interest-rate hikes relative to other advanced economy central …
Neil Shearing Group Chief Economist The acute phase of last month’s banking crisis — which some, channelling the US College Basketball tournament, have dubbed “March Madness” — has passed. The sense of panic has abated and markets have calmed. Measures …
Bank of Canada Governor Tiff Macklem used his press conference this week to push back against expectations for interest rate cuts later this year. That partly reflects the Bank’s less downbeat assessment of the economic outlook, but the nascent rebound in …
14th April 2023
Despite a bounce today, the US dollar is set to end the week lower against most currencies and around its weakest level, in aggregate, in a year. This partly reflects that, even though Treasury yields are set to end the week higher following today’s …
UK headline CPI probably fell in March, though core pressures remain strong (Wed.) We expect the PBOC to keep its 1-Year Loan Prime Rate on hold next week (Thu.) Flash PMIs for the euro-zone may point to a continued expansion in April (Fri.) Key Market …
Overview – We have made substantial downgrades to our metro-level forecasts this quarter. The outlook for office-based employment growth has been hit by tech sector struggles, weighing on demand in many western markets. We have also pushed through bigger …
The strength of the March CPI data may be enough to persuade the Fed to squeeze in a final 25bp rate hike at the early-May FOMC meeting. But with mounting evidence that economic growth is weakening again, we doubt that strength will last much longer. Core …
Commodity prices received a boost from expectations that the Fed is nearing the end of its tightening cycle and the weaker US dollar this week, but we think that it is only a matter of time before the economic slowdown we forecast in developed economies …
The outlook for economic activity remains poor due to the impact of high inflation, tight monetary policy and weak external demand. Sweden is already in a recession, not least thanks to the slump in its property sector. And while Norway and Switzerland …
Lula’s 3.0: an inauspicious start Brazil’s president Lula marked his first 100 days in office this week and, while there’s been a bit more enthusiasm from investors for Brazilian assets in the past few days, there hasn’t really been much for investors to …
Glimmers of hope have emerged this week about unlocking the stalemate over the global debt restructuring framework, with encouraging signs for negotiations in Zambia and Ghana. But we fear that the measures considered are more of a workaround that don’t …
Further evidence of fading economic momentum The 0.5% m/m fall in manufacturing output in March provides more evidence of a loss of economic momentum going into the second quarter. While the return of temperatures to seasonal norms last month appears to …
How will the ructions in the banking sector be reflected in the data? Tracking the credit impact of March’s events isn’t as straightforward as it appears, says Group Chief Economist Neil Shearing . He talks to David Wilder about how to cut through the …
Manufacturing outlook remains challenging After a bright start to the year, manufacturing activity weakened in February. While that was partly due to temporary factors that are likely to be quickly reversed, the surveys point to a challenging outlook. The …
Global sugar prices have surged by over 20% since the start of the year as production estimates in several key producers have been downgraded. We think the supply picture is unlikely to change by much over the next months and will keep prices elevated. …
Sales saved by online strength Retail sales fell by 1.0% m/m in March, adding to the evidence that the strong start to the year was partly due to the unseasonably mild winter weather. With control group sales only falling by 0.3% m/m last month, …
Note: Join our Tuesday 18 th April online briefing discussing what China’s Q1 “data dump” tells us about the strength of the country’s reopening recovery. Register Now . The rebound has exceeded most expectations Mixed data have contributed to differences …
Further evidence of fading economic momentum The 0.5% m/m fall in manufacturing output in March provides yet more evidence of a significant loss of economic momentum going into the second quarter. While the return of temperatures to seasonal norms last …
Surge in household incomes unlikely to be sustained The UK economy has continued to be more resilient to the twin drags of higher inflation and higher interest rates than we thought. Real GDP was flat in February despite an extra drag from the strikes. …
Financial market strains have eased over recent weeks, though some pockets of uncertainty remain and our sense is that the risk of further problems emerging in the coming months remains high. Since the forced takeover of Credit Suisse by rival UBS three …
Sales boosted by online strength Retail sales fell by 1.0% m/m in March, adding to the evidence that the strong start to the year was partly due to the unseasonably mild winter weather. With control group sales only falling by 0.3% m/m last month, …
Headline inflation falling, but little else to cheer for The raft of March inflation data released across Emerging Europe this week showed that the regional disinflation process is now well underway, but that core price pressures remain incredibly strong. …
Data point to positive growth in Q1 The latest official activity data suggest that the euro-zone economy posted a small expansion in Q1. Admittedly, retail sales fell in February, continuing the downward trend they have been on for over a year. But lower …
This week, Swiss legislators voiced their concerns about the collapse of Credit Suisse and its takeover by UBS. While the vote to reject the Credit Suisse rescue package will not affect the takeover itself, or the government guarantees provided, it has …
Small rebound in confidence suggests no big hit from bank turmoil The small rebound in the University of Michigan consumer sentiment index in early April suggests that the easing of the crisis in the banking sector has reassured consumers. Nevertheless, …
After a strong 2022, we expect Warsaw offices to face a more difficult time ahead. Falling employment and hybrid working practices will limit any revival in demand after 2023 and leave rents underperforming both the CEE and wider European averages. The …
Difficult balancing act for the Philippines The US and the Philippines this week began their largest-ever joint military exercises, with 17,000 troops taking part. The exercises follow an agreement in February that provided the US with four more …
India becomes home to world’s largest population According to UN projections, India will today become home to the world’s largest population, displacing China from the number one spot. In truth, the exact timing of the transition is unknown: it may even …
Core inflation dips below 9% The fall in Sweden’s measure of core inflation to 8.9% in March suggests that it may now be passed its peak. But it is still much higher than the Riksbank had anticipated at its February meeting and does not change our view …
On April 13 th a three-member panel delivered its review of Australia’s migration system to the Home Affairs minister, Claire O’Neil. Although the review is unlikely to be published before next month, it is already stoking debate over whether the ongoing …
The Monetary Authority of Singapore (MAS) kept policy on hold today and with the economy set to struggle and inflation likely to fall sharply over the coming quarters we expect today’s decision to have marked an end to the tightening cycle. The MAS …
Ueda has his eye on wage growth Bank of Japan Governor Kazuo Ueda noted in his inaugural press conference this week that more time is needed to see if wage growth can be sustained at a level where it will support inflation at or above the 2% target. So …
MAS keeps policy unchanged while GDP contracts The Monetary Authority of Singapore (MAS) kept monetary policy on hold today and with the economy set to struggle and inflation likely to fall sharply over the coming quarters we expect today’s decision to …
Recent data appear to confirm that economic activity held up better than feared at the start of 2023. Retail sales rose in most major economies over the first two months of the year, world industrial production was broadly stable and China’s zero-COVID …
13th April 2023
Forecasts unchanged, lower production will support prices Despite justifying its recent production cuts on an uncertain demand outlook, OPEC did not make any changes to its 2023 global GDP or oil demand forecasts in its monthly report for March. We think …
We think Peru’s central bank will keep its policy rate on hold at 7.75% (Thu.) US activity data for March may cast doubt on the case for a 25bp hike (Fri.) We expect Singapore’s central bank to leave policy unchanged (Fri.) Key Market Themes The recent …
Although the Turkish lira is at its weakest ever level against the US dollar, it would have fallen far further by now were it not for intervention by policymakers. We anticipate that the currency will depreciate sharply before long against a backdrop of …
The raft of EM CPI figures out this week show that headline inflation is, in aggregate, finally starting to fall significantly, and we expect it to decline further in the coming months. But core inflation is easing relatively slowly, and remains …
Although equity and oil prices are usually positively correlated, we think equities will struggle in the next few months and that oil prices will end this year somewhat higher than they are now. We also expect a rebound in equities across the board in …
This report has been updated with an additional table and chart of the key data. Price pressures continue to ease Saudi Arabia’s headline inflation rate slowed from 3.0% y/y in February to 2.7% y/y in March as both food and non-food inflation decreased …
Inflation nearing a peak but devaluation fears linger Egyptian inflation rose to its fastest pace since mid-2017 in March and, while there are signs it could be nearing its peak, mounting pressure on the pound presents a clear upside risk. Data released …
Despite the cost-of-living crisis, the leisure sector did better than expected last year as households used the savings they had built up during the pandemic to boost spending on recreation and restaurants. But with those savings now exhausted and real …
China’s commodity imports generally rose strongly in March which we think reflects higher demand as a result of the re-opening of the economy. While April data may also be strong, we expect import volumes to soften later in the year as export demand …
Mortgage demand still the limiting factor The headline mortgage availability balance of the credit conditions survey turned positive for the first time in over a year in Q1. The collapse of SVB while the survey was in the field probably helps explain why …
The shipping industry is notable as being both a vital artery of world trade and one of the trickiest sectors to de-carbonise. This Update looks at five key questions on the near-term plans to reduce emissions from the sector and the potential …
The fading effects of the mini-budget meant that bank lending conditions to households and businesses didn’t deteriorate any further in Q1. But the latest credit conditions survey doesn’t capture the full extent of the tightening triggered by recent …
Bank of England may yet need to generate a recession The stagnation in real GDP in February means the economy probably avoided recession in Q1. But it also increases the chances that the Bank of England will need to raise interest rates further to …
