The flash PMIs for March suggest that not only did advanced economies avoid recession in Q1, but the outlook for activity has improved as well. However, we still think the hit from higher interest rates will intensify . And with services price pressures …
24th March 2023
SARB to follow CBN in delivering dovish hike Nigeria’s central bank shrugged off the recent banking sector turmoil and kept its eye firmly focussed on tackling inflation as it hiked interest rates this week and, on balance, we think the South African …
As we discussed in our “Drop In” webinar after this week’s Bank of England policy decision (see here ), the 25 basis points (bps) hike in interest rates, from 4.00% to 4.25%, could prove to be the end of the tightening cycle. But it is the data on the …
Russia strengthens China relations after Xi’s visit Russia-China relations were on full show this week as China’s President Xi visited Moscow and the two countries announced a raft of measures to increase ties over the coming years. China has helped …
The Fed will need to wait at least another few weeks for clearer evidence of the impact from the recent banking sector turmoil, but we expect economic weakness will convince officials to move to the side-lines before long. Although the Fed pressed ahead …
Click here to read the full report Overview – With valuations still highly stretched and rent growth likely to slow as the region falls into recession, we think capital values will fall further in 2023. While the 4.5% decline forecast at the all-property …
There has been a rise in risk premia in the bond market since the start of the banking sector turmoil. But we think impending recessions will push corporate credit spreads up further from here. Global financial markets have seen a repricing of risk across …
Needless to say, economic downturns are usually bad news for US banks’ share prices. But banks haven’t always underperformed the overall stock market in a recession – even when there has been a banking crisis! That could conceivably be the case again this …
The ongoing struggles of the banking sector in the US and elsewhere has muddled the outlook for the dollar. But while we think the balance of probability has shifted against the greenback, we continue to expect a near-term rebound in the dollar, in …
Investment weakening even before banking woes The 1.0% m/m fall in durable goods orders in February indicates that business equipment investment was weak even before the banking turmoil arose. With business confidence likely to have taken a hit in recent …
Consumer spending made a strong start to the year The large rise in retail sales volumes in January and the even bigger increase in sales at food service & drinking places imply that household consumption rose strongly at the start of the year. Spending …
A few key points on Europe’s banks We discussed the recent turmoil in the banking sector in a Drop-in this week. (See here , or you can listen to a shorter version on our podcast here .) The big picture is that there are reasons to be cautiously …
Norges Bank and SNB raise rates Undeterred by global banking turmoil, the Norges Bank and SNB focused on inflation this week and – in line with decisions by the ECB, Bank of England and the Fed – raised interest rates. The Norges Bank lifted its policy …
Indonesia reforms – boost to long-run prospects Long-term prospects for Indonesia’s economy received a boost this week when parliament passed a long-delayed series of reforms that should lift competitiveness. The Omnibus Law on Job Creation includes …
Official efforts to curb China’s reliance on imported semiconductors have been going on for years. In 2015, the government set a goal of China being 70% self-sufficient by 2025. But progress toward that target has been much slower than hoped. Only a third …
Investment weakening even before banking woes The 1.0% m/m fall in durable goods orders in February indicates that business equipment investment was continuing to weaken even before the banking turmoil arose. With business confidence likely to have taken …
The EU’s Net-Zero Industry Act announced last week aims to keep the manufacture of clean technologies within the EU and shows that global fracturing will take place within blocs as well as between blocs over the coming years. But the bigger picture is …
Food inflation pushes headline rate down, but core pressures still strong The further decline in inflation in Brazil, to 5.4% y/y in the middle of this month, was driven by lower food inflation, but core price pressures remain very strong. As a result, …
Bank failures have had only a modest impact on UK banks’ wholesale funding costs to date, reflecting an assessment that lenders are in good health which we think seems fair. Greater investor scrutiny could still lead to more caution in mortgage lending, …
Fading domestic price pressures could mean yesterday’s rate hike is the last The flash PMIs suggest the economy’s strong start to the year was sustained in March. But with the full drag from high interest rates yet to be felt, our hunch is still that …
Overview – High interest rates and weak export demand will weigh on the region’s economies this year, and we expect below-trend and below-consensus growth in most countries in 2023. The exceptions are China, which has rebounded strongly on the back of a …
Strong PMIs point to further ECB hikes The strong batch of euro-zone flash PMIs for March suggests that the economy expanded in Q1 and that both employment conditions and price pressures remained very strong. That adds to the reasons to think that, as …
With the clocks set to go forward in the UK and EU this weekend, it’s worth noting that the practice of “preserving” daylight has its roots in saving energy: the policy was first implemented by Germany in WW1 to free up coal stocks and was re-adopted in …
Strong PMIs point to further ECB hikes The strong batch of euro-zone flash PMIs for March means it is now all but certain that the economy expanded in Q1 while both employment conditions and price pressures remained very strong. With the banking turmoil …
Activity remains resilient, despite global banking issues The flash PMIs suggest the economy’s strong start to the year was sustained in March. But with the full drag from high interest rates yet to be felt, our hunch is still that the economy will enter …
Labour reforms could encourage more MNCs The overarching message from our latest India Economic Outlook published this week is that while prospects for the economy look a little uninspiring over the near term, there are reasons to be optimistic further …
Too soon to conclude February’s rebound will be sustained The further rebound in retail sales volumes in February suggests the recent resilience in activity hasn’t yet faded. But we doubt this will last as the drag on activity from higher interest rates …
Too soon to conclude February’s rebound will be sustained The 1.2% m/m rise in retail sales volumes in February was much better than the consensus forecast of a +0.2% m/m rise (CE +0.5% m/m). That suggests the recent resilience in activity hasn’t yet …
No visible uptick in financial risks There have been no signs of stress in Japan’s financial markets as a result of the banking crises in the US and the demise of Credit Suisse. For starters, there hasn’t yet been a spike in the Bank of Japan’s foreign …
The dovish tone of the RBA's March minutes has heightened the risks to our forecast for two more 25bp rate hikes in April and May. However, the Board did reiterate that its decision regarding a pause would hinge on the economic data released before its …
Slight improvement doesn’t change recessionary outlook March’s flash PMIs corroborate our view that the economy will see a mild recession this year. The manufacturing PMI improved but was still contractionary, as demand remained weak. Meanwhile a further …
Inflation to still fall below 2% target despite higher peak for food inflation Government energy subsidies took 1%-pt off headline inflation last month, but the rise in underlying inflation to a four-decade high underscores the strength in price …
We think UK retail sales edged up again in February (07.00 GMT) Flash PMIs for the euro-zone probably declined a little in March (09.00 GMT) We expect US durable goods orders fell in February (12.30 GMT) Key Market Themes With major central banks …
23rd March 2023
Financial markets across Sub-Saharan Africa have struggled – and have underperformed their EM peers – since the global banking sector turmoil erupted. Amid broad risk-off sentiment, African sovereign dollar bonds have sold off nearly across the board and …
US regional banks’ higher exposure to CRE debt means we expect their struggles to weigh heavily on credit availability for commercial real estate investors. Even without building in second round effects on lending from other debt providers we expect this …
Supply picture improving, but plenty of challenges remain There were a few positive signs in February’s steel production figures; output in China grew healthily and production in advanced economies (DMs) appears to have troughed. However, any rebound in …
Homebuilder incentives support new home sales The modest recovery in new home sales continued in February reflecting support from price reductions and incentives offered by homebuilders, as well as a tight existing home market pushing buyers to the new …
The turmoil in the global banking sector has not spread to Emerging Europe, but the focus is back on the health of the region’s banks given the not-so-distant memory of the 2008/09 banking crises that swept across the region. The good news is that banks …
The Bank of England followed the Fed’s example by forging ahead today with a 25 basis point (bps) interest rate hike, taking rates from 4.00% to 4.25%. This could prove to be the last hike of the tightening cycle. But if wage growth and CPI services …
Crisis of confidence at crunch CBE meeting The Central Bank of Egypt’s decision in February to leave interest rates on hold looks to have been a policy misstep and, with inflation surging and growing concerns over the commitment to orthodox policymaking, …
A degree of calm has returned to markets, but investors remain nervous about where the next blow-up could occur – and attention is increasingly focused on commercial real estate. But are the concerns about real estate justified and – if so – where in the …
This webpage has been updated with a Table and Chart of the key figures. Stronger services inflation to keep Banxico tightening Mexico’s headline inflation rate dropped back by more than expected, to 7.1% y/y, in the first half of March but the further …
Bank of England may not yet be finished in its battle with inflation The Bank of England followed the US Fed’s example by forging ahead today with a 25bps interest rate hike and signalling that it may not yet be finished in its battle with inflation. As a …
CBRT keeps rates on hold after one-off cut in February Turkey’s central bank (CBRT) left its key policy rate on hold at 8.50% today as policymakers kept monetary conditions loose to support activity after the earthquakes in February. Interest rates are …
This morning’s 50bp interest rate hike by the Swiss National Bank (SNB), to 1.50%, was in line with expectations and shows that, like the ECB and Fed, Swiss policymakers have not been distracted from their inflation-fighting task by problems in the …
The Norges Bank’s 25bp rate hike today was accompanied by new verbal guidance that it is likely to raise rates further in May. Together with the new, higher interest rate forecast, this supports our view that the policy rate will peak at 3.5% and stay …
In a surprise move, Taiwan’s central bank (CBC) today raised its main policy rate by 12.5bps (to 1.875%), but with the economy struggling badly and inflationary pressures set to ease further, we think this was the last hike of the tightening cycle. The …
The central bank of the Philippines (BSP) today slowed the pace of tightening as it raised its main policy rate by 25bps (to 6.25%), and hinted that the tightening cycle was now approaching an end. Although inflation has now started to fall, it remains …
The statement accompanying the Brazilian central bank’s decision to keep the Selic rate unchanged at 13.75% yesterday will have disappointed some (not least in the government) that thought global market turmoil and economic weakness might prompt a quicker …
