Wage growth eases despite labour market remaining tight The labour market remained tight in January. Even so, the Bank of England will breathe a sigh of relief as wage growth is easing. But the fallout from Silicon Valley Bank’s collapse suggests that the …
13th March 2023
This dashboard shows our latest national sector-level commercial real estate forecasts for the next five years, as well as summary forecasts for a handful of core macroeconomic variables. If you have subscriber access to the data underlying this …
Overview – The economy is on the brink of a mild recession but with underlying inflation still accelerating, we expect new Bank of Japan Governor Ueda to end Yield Curve Control at the upcoming meeting in April. Key Forecasts Table Domestic Demand – We …
US authorities intervened on Sunday following the extraordinarily rapid collapse of Silicon Valley Bank last week. Have they done enough to calm markets, what does this mean for the need for further monetary policy tightening and what are the contagion …
Neil Shearing Group Chief Economist I had intended to write this week’s note on lags in monetary policy – then SVB blew up, Signature Bank followed in quick succession, and US policymakers were forced to introduce a package of emergency measures over the …
Economy continues to boom in early 2023 The large increases in industrial production and retail sales in Turkey in January suggest that the economy got off to a strong start in early 2023. Activity will have been disrupted from the earthquakes last month, …
Fed, Treasury and FDIC lay out fire break for banking system In the wake of the collapse of Silicon Valley Bank ($215bn in assets) – which has been followed today by the demise of Signature Bank ($110bn) – the Fed, Treasury and FDIC have acted …
12th March 2023
Was Silicon Valley Bank's failure an isolated case of bad balance sheet management, or does it point to the start of another financial crisis? As policymakers scrambled to shore up market confidence ahead of the open, Group Chief Economist Neil Shearing …
The circumstances of the Silicon Valley Bank (SVB) collapse are unique enough that it probably won’t trigger a widespread financial contagion. Nevertheless, it is a timely reminder that when the Fed is singularly focused on squeezing inflation by jacking …
10th March 2023
The dollar’s sharp rally after Fed Chair Powell’s hawkish testimony to Congress on Tuesday sent US interest rate expectations soaring now looks like ancient history. Instead, after unexpected turmoil in the US banking sector and today’s …
We think US consumer price inflation fell slightly to around 6% in February (Tue.) Retail sales in China probably rebounded in January and February (Wed.) We expect the ECB to hike by a further 50bp (Thu.) Key Market Themes US government bond yields …
Failed dockworker union negotiations on the West Coast have led to further diversion of US imports toward the East and Gulf Coasts, supporting warehousing demand in those markets for longer than expected. We expect a degree of this demand to persist into …
Even though US non-farm payrolls increased by 311,000 in February, the report contained signals that were consistent with slowing inflation, prompting a fall in US interest rate expectations today. Despite this, commodity prices are still broadly down on …
Despite the renewed hawkishness of central bankers elsewhere, the speech that followed the Bank of Canada’s policy announcement this week suggests that the bar to resume rate hikes remains high. Bank still comfortable with its “conditional pause” The …
Powell in hawkish mood Fed Chair Jerome Powell confirmed this week that interest rates are set to rise higher than we previously anticipated. Powell noted that the strength of the January activity, employment and inflation data indicated that …
Broad-based falls in inflation last month Russian inflation came in slightly softer than expected in February, at 11.0% y/y, and it will fall to the central bank’s 4% target in March as base effects pass through. We don’t think there’s been enough …
There were some surprises in the Q4 commercial real estate data from the euro-zone, in particular in how swiftly yields have risen. Taken together with changes to our economic view these imply further downgrades to our forecasts. Notably we now think that …
Brazil: is a Q2 rate cut plausible? The prevailing monetary policy story in Brazil so far this year has been one of ‘higher for longer’. We set out such a view recently , the BCB’s communications point this way and analyst expectations have shifted up. A …
The view that interest rates in developed markets may rise further and stay higher for longer than previously anticipated gained further traction this week following US Fed Chair Jerome Powell’s hawkish comments on Tuesday. Our US Economics team revised …
Hours worked rise strongly despite employment slowdown Employment growth slowed sharply in February but the rise in hours worked suggests that the economy performed well last month. With the low unemployment rate putting upward pressure on wage growth, …
Payrolls strong but rest of report suggests 25/50bp Fed hike debate unresolved The above-consensus 311,000 increase in payroll employment last month confirms that the super-sized 504,000 gain in January wasn’t just a seasonal distortion, but the rest of …
SA cabinet reshuffling no magic bullet The new configuration of South Africa’s cabinet, following this week’s reshuffling, is facing high expectations to turn around the power crisis and with it, the economy. But hurdles abound and we doubt that the …
Industry to remain soft over the coming months Growth in industrial production picked up in January, supporting our view that Q4 will have marked the trough for q/q growth. Nevertheless, the outlook for the industrial sector over the coming months is …
Employment strong, but rest of report suggests 25/50bp Fed hike debate still unresolved While the above-consensus 311,000 increase in payroll employment last month confirms that the super-sized 504,000 gain in January wasn’t just a seasonal distortion, …
GDP shrank in Q4 (to two decimal places) The third estimate of euro-zone GDP in Q4, released earlier this week, strengthened our conviction that the economy will underperform most forecasters’ expectations. The 0.1% q/q expansion in GDP in the fourth …
A closer look at Swiss inflation We learnt this week that Swiss headline inflation rose from 3.3% in January to 3.4% in February, driven by core inflation which increased by 0.2%-pts. (See here .) But the growth in underlying prices pressures appears to …
We have revised up our forecasts for real GDP and no longer think the economy will be quite as weak. This has very little to do with the 0.3% m/m rise in real GDP in January released this morning. Most of that was a rebound after the widespread strikes …
Inflation continues to ease but fiscal risks to keep Copom in hawkish mood The further fall in Brazilian inflation, to 5.6% y/y in February, was driven mainly by a drop in food inflation. Core inflation pressures remain uncomfortably strong for the …
The National People’s Congress (NPC) is still in session. But the key outcomes are already known. Here are four takeaways. First, the economic targets and policy settings for this year were cautious and restrained . We discussed them in detail here . The …
Thailand forecast change The recent inflation data from Emerging Asia have made for encouraging reading, with headline inflation falling in seven out of the nine countries to have published February data. (See Chart 1.) Chart 1: Consumer Prices (%, …
Credit growth benefiting from reopening boost Bank loan growth jumped to a 14-month high in February. And broad credit growth accelerated for the first time since September. This rebound should continue in the near-term thanks to a reopening revival in …
Despite improvement, coal stocks remain low Fears over a shortage of coal in India have resurfaced in recent weeks amid expectations over another extremely hot summer, which would push up electricity demand. India remains heavily reliant on coal for …
January’s strength won’t prevent contraction in GDP in Q1 The 0.3% m/m rise in real GDP in January (consensus +0.1% m/m, CE +0.4% m/m) will raise hopes that the economy will escape a recession in 2023 and will increase calls for the Chancellor to splash …
Governor Phil Lowe’s proclamation at Wednesday’s AFR business summit that the RBA was closer to a pause in interest-rate increases has fed speculation of a dovish pivot on the part of the Board. Indeed, financial markets have tamped down their …
Lower inflation means Norges Bank can stick to 25bp hikes February’s decline in headline and core inflation takes some of the pressure off the Norges Bank and means that it is likely to hike by 25bp at the meeting in two weeks’ time. After surprising on …
The Bank of Japan didn’t make any policy changes at Governor Kuroda’s last meeting today but we expect incoming Governor Ueda to abandon Yield Curve Control in April . While that decision was widely anticipated, we were among the few who predicted the …
Resurgence in activity unlikely to last The 0.3% m/m rise in real GDP in January (consensus +0.1% m/m, CE +0.4% m/m) leaves the economy in better shape than we had expected just a few months ago. But looking beneath the surface, the figures suggest the …
Case for end of YCC a touch weaker but still strong Contrary to our expectations, the Bank of Japan did not make any changes to Yield Curve Control (YCC) at today’s meeting. And the case for abandoning the policy now looks a little less compelling than a …
BoJ still likely to end Yield Curve Control The Bank of Japan didn’t make any policy changes at Governor Kuroda’s last meeting today but we expect incoming Governor Ueda to abandon Yield Curve Control in April. We were among the few who expected the Bank …
The South African rand has weakened sharply against the US dollar so far this year, markedly underperforming other emerging market (EM) currencies. We expect domestic and global headwinds to drive a bit more depreciation, to 19.0/$, later this year. But …
9th March 2023
The future of OPEC+ on the table once more Reports have re-emerged in the past week that the UAE may be seeking an exit from OPEC+ and, if the group persists with its current quotas, tensions could boil over. This would support our view that oil …
The Fed is clearly trying to avoid a premature easing in financial conditions and a repeat of 1970s-style “stop-go” monetary policy. This Update discusses some lessons from that period for equity markets today. Equities have struggled over this week, …
The Bank of Japan could abandon Yield Curve Control tomorrow We think UK GDP growth picked up in January, but recession looms (07.00 GMT) We expect US payrolls data to confirm that January strength was a blip (13.30 GMT) Key Market Themes We think …
The US may not have a monarchy, but cash has arguably become its proverbial king of investments. If history is a guide, it is a reign that is likely to feature equities underperforming bonds amid a recession. Last November, the yield of a 3-month Treasury …
The Italian industrial market saw its sharpest fall in capital values on record last year, owing to a surge in yields in Q4. But with valuations still stretched and investor demand weakening, we think yields will climb higher. And with rent growth …
We expect industrial completions to exceed 3.5% of inventory this year, despite the first quarterly drop in space under construction in Q4 for over two years. But new starts are already slowing and with higher interest rates, elevated construction costs …
50bp hike looks a done deal. New guidance likely to explicitly point to higher for longer policy rates. No more news on QT next week, but we expect it to accelerate in July. We expect the ECB to raise interest rates by 50bp next week and accompany that …
Inflation edges down, but still a bit more tightening in the pipeline Mexico’s headline inflation rated edged down to 7.6% y/y in February but the further pick-up in services inflation will continue to worry policymakers at Banxico. We think that the …
