Net exports will support GDP growth in Q1 Notwithstanding a fall in the trade surplus in January, we think net trade is likely to provide a boost to GDP growth in Q1. The decline in the trade surplus, from $13bn to $11.7bn in January came in below the …
7th March 2023
This inaugural Climate Economics Outlook establishes our bottom-up long-term forecasts for greenhouse gas emissions for the world’s largest polluters. These forecasts will serve as a baseline for future analysis of the impacts of alternative climate …
6th March 2023
We expect Australia’s central bank to hike by 25bp (04.30 GMT) Fed Chair Powell may reveal whether his outlook for interest rates has changed (15.00 GMT) We think China’s exports weakened, but imports strengthened, in January and February Key Market …
In this Update we examine the implications of affordability for house prices at the market level. Despite sunbelt markets seeing the strongest house price growth over the past couple of years, affordability looks most stretched in the West. This has been …
Click here to view an online briefing with our team about China's economic plans. It was recorded on 6th March, 2023. The economic plans that have been detailed at the National People’s Congress are more cautious and restrained than had seemed likely …
Non-performing loan (NPL) ratios have risen by as much as 4-5%-pts during non-banking crisis downturns in EMs in the past. This time around, there are reasons to think that the increase will be smaller and EM banks generally look well placed to cope. But …
Construction activity rebounds The headline CIPS construction index rebounded back into expansionary territory in February and the forward-looking indicators also showed further improvement. Commercial developers may be taking advantage of lower input …
Germany is more vulnerable than most advanced economies to a reduction in trade with China both because of the scale of trade and the use of Chinese-made inputs to its large manufacturing sector. We have highlighted in our Spotlight series that the …
Sales up in January but trend is still down January’s rise in euro-zone retail sales was not enough to offset December’s fall. And the low levels of household confidence suggest that consumption will decline in the coming months. The national-level data …
Inflation likely to stay above 3% over the coming months. The CPI data for February suggest there is a long way to go before inflation returns to target especially as underlying prices pressures show no signs of abating, with the core inflation rate …
Payrolls week invariably means another feeding frenzy in markets over the latest numbers from the Bureau of Labor Statistics. But this is a volatile series, and one that frequently gets revised. Any sensible central banker will remain above the fray to …
Wage growth should rebound in February We think the surprise sharp fall in wage growth in January was at least in part the result of Lunar New Year disruptions and there should be a rebound in February. The much slower wage growth in January, falling …
With labour productivity falling the most on record over the past year, unit labour cost growth has surged even as hourly earnings growth has remained sluggish. While we expect productivity growth to rebound, we also expect hourly earnings growth to …
It’s US payrolls week and all eyes will be on whether January’s blowout jobs growth number was just a one-off or confirmation that – despite the Fed’s actions – the labour market remains tight. Labour market conditions matter hugely for how much further …
5th March 2023
It was another fairly quiet week in commodity markets, with prices caught between diverging narratives. Rather perversely, robust economic data in advanced economies weighed on commodity prices. This is due to expectations that economic resilience will …
3rd March 2023
Our new forecasts for metro employment growth have prompted limited change in the rankings for total jobs over the next three years. But, there are two shifts, both owing much to recent and likely further cuts in the tech sector. First, we think 2023 …
Although recent economic data have surprised to the upside, we still think that economic growth in the US will falter later this year. In our view, indicators of the equity risk premium in the US point to some complacency regarding the economic outlook, …
Currency markets have mostly gone sideways this week, with the US dollar set to end it a touch weaker against most other major currencies. (See Chart 1.) With both activity and price data continuing to surprise to the upside in the US , Europe and China, …
Very weak Q4 figures The fourth quarter GDP figures published over the past few weeks made for grim reading. GDP contracted in around half of the countries covered by our Emerging Asia services. Only India, Indonesia and the Philippines recorded decent …
We expect Australia’s RBA to hike by another 25bp (Tue.) Japan’s central bank will probably abandon Yield Curve Control (Thu./Fri.) We think US non-farm payrolls rose by 200,000 in February (Fri.) Key Market Themes Notwithstanding the partial …
Koruna strength will add to disinflation in Czechia The recent strength of the Czech koruna, which hit a 14-year high of 23.3/€ this week, adds to a number of disinflationary forces that are currently taking hold in the country. And we think that …
Nigeria to take baby steps in pro-market direction The results of Nigeria’s presidential election were quickly challenged by the opposition this week, which is likely to keep investors on tenterhooks. And even once the dust settles, we suspect that …
The latest data give the Bank of Canada plenty to think about ahead of its policy announcement next week. The data appear to lend support to the Bank’s view that a soft landing is still achievable, with the stagnation in fourth-quarter GDP followed by a …
Mixed labour market signals Labour market data released this week from Brazil, Chile and Colombia flew under the radar, but they provide a useful guide to inflation risks. The common theme is that labour markets are losing steam amid an economic slowdown. …
Surveys not consistent with economic reacceleration The marginal fall in the ISM services index to 55.1 in February, from 55.2, suggests activity continues to expand at a reasonably healthy pace, but provides further reason to doubt the idea that there …
The February employment report and Fed Chair Jerome Powell’s testimony to Congress next week should give a clearer indication of whether recent talk of interest rates going “higher for longer” is justified. Longer, but not necessarily higher? Market rate …
Brexit looking a bit brighter The economic developments this week were generally positive, starting with news that the Prime Minister, Rishi Sunak, struck a deal with the EU on trading arrangements for Northern Ireland, officially known as the Windsor …
With much of the global economy holding up surprisingly well and inflation not coming down as quickly as expected, investors are weighing up the risk that policy rates remain elevated for much longer than previously thought. This Update discusses what …
Another inflation surprise… The focus this week was on yet another higher-than-expected inflation print. The headline inflation rate edged down in February, but only to 8.5%, whereas a much bigger fall had been anticipated. And the core measure rose …
Sweden in recession This week brought yet more bad news about Sweden’s economy. Before the first release of Q4 GDP on 30 th January, the available monthly data pointed to an increase of around 0.5% q/q in the quarter as a whole. But those data were then …
PMIs point to resilience, especially in services February’s final Composite PMIs suggests that economic activity in the euro-zone has been fairly resilient in February, with the indices for Spain and Italy, and for the services sector, particularly …
Following the release of GDP data for Q4 (Q3 of FY22/23) this week, we now know that the economy grew by 6.7% in 2022 as a whole, one of the fastest growth rates anywhere in the world. Output was 10% above pre-pandemic levels at the end of last year. (See …
Inflation declines, but disinflation process slows Inflation in Turkey fell to 55.2% y/y in February, but underlying price pressures remain strong and the disinflation process appears to be happening more slowly than had been expected. Inflation will stay …
While Q4 GDP was broadly in line with our expectations , a look under the hood shows that the Australian consumer is on much weaker ground than we had anticipated. The starting point for our pessimism is the ongoing weakness in household incomes. Indeed, …
The government will lay out its economic agenda for this year at the annual session of the National People’s Congress (NPC), which kicks off on Sunday. Most of the key documents, including the government Work Report and annual Budget are published on the …
Large fall in January industrial output The 4.6% m/m plunge in industrial production in January partly reflected disruptions caused by the early start to the Lunar New Year this year. Oddly, unlike export volumes, which typically show an equally strong …
Bank under political pressure to abandon Yield Curve Control as inflation surges Incoming Governor Ueda seems to have been given a mandate to end the policy However, existing Governor Kuroda may well spring one last surprise Yield Curve Control is on …
Broader inflation outlook still intact The unemployment fell slightly in January but we’re still expecting it to rise through mid-year due to an economic downturn. Meanwhile, energy inflation fell by less than we expected in Tokyo as government subsidies …
Overview – We think prices will drop a little further in the coming months as economic slowdowns in advanced economies weigh on commodities demand, even as China’s economic recovery takes hold. However, the prospect of a higher for longer Federal Funds …
2nd March 2023
Egypt’s government feeling the hit Recent falls in the pound and rising borrowing costs forced Egypt’s Ministry of Finance to revise up its targets for debt and the budget deficit earlier this week, but we remain of the view that the government will be …
We think inflation in Turkey eased slightly to 54% in February (07.00 GMT) Final PMIs in Europe may confirm that activity is holding up better than expected (09.00 GMT) We expect the US ISM services index to have fallen back in February (15.00 GMT) …
Labour markets look very tight in Central Europe and a handful of other EMs (particularly in Latin America), and we think that wage growth is unlikely to fall far enough in these countries to bring inflation back to target in the near future. One …
The current economic downturn will mean that short-to-medium term property performance is under-par. But over a longer horizon, we expect real estate returns to reassert their traditional position somewhere between bonds and equities. Last year was an …
After the blowout 517,000 gain in January, we expect a more modest 200,000 increase in non-farm payrolls in February. But given the potential impact of weather and seasonality effects in January there is the possibility of another shock last month, albeit …
The account of the ECB’s last meeting is consistent with our view that the ECB will raise its deposit rate to 3.0% a fortnight today and continue hiking beyond that. In light of the data released since the last meeting, there are growing upside risks to …
As political risks appear to be largely discounted by investors, we expect the Colombian peso to outperform other major EM currencies over the next couple of years. Although the Colombian peso is broadly unchanged against the greenback so far this year, …
Struggling amid high interest rates The 0.2% q/q fall in Brazil’s GDP in Q4, which was driven by weakness in domestic demand, provides clear evidence that high interest rates are taking a heavier toll on the economy. Taken together with the softness in …
Pakistan’s central bank (SBP) raised its policy rate by 300bps (to 20.0%) today, and signalled monetary policy would remain tight as policymakers look to secure a loan deal with the IMF and tackle multi-decade high inflation. We expect a further 200bps …
A sharp increase in property yields in Q4 helped European property valuations improve for the first time in two years. That said, spreads over alternative assets remained very narrow by past standards and all markets besides Istanbul were still …
Strength of core inflation means ECB has a long way to go February’s increase in core inflation will reinforce ECB policymakers’ conviction that significant rate increases are needed. For some time we have been forecasting a 50bp hike at the meeting in …
