Economy likely to contract in first half of 2023 The small increase in France’s GDP in Q4 last year was worse than it first appears as household consumption fell sharply and investment growth slowed. It looks as if a (mild) recession in the first half of …
31st January 2023
Reopening kick starts a rapid recovery The official PMIs add to evidence of a rapid rebound in economic activity this month as disruption from the reopening wave faded. More shoppers returned to the street boosting services activity while easing labour …
Further rise in services spending will prevent fall in Q4 consumption Retail sales volumes declined last quarter on the back of a weaker-than-expected end to 2022. A solid increase in services spending means overall consumption should still have risen at …
Recession may have already begun The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. Similarly, the strong rebound in retail sales is likely to give way to slower growth as the …
Weakening industrial production outlook heralds recession Retail sales rebounded in December and industrial production was mostly flat in December. However, firms’ forecasts are consistent with sharp contractions in industrial output over the coming …
Unemployment rate to rise before long The unemployment rate stayed unchanged in December, but labour market conditions are beginning to betray signs of loosening. We are expecting unemployment to rise to 2.8% by mid-year due to a recession. The labour …
30th January 2023
It’s well known that, with the yield curve inverting the Fed is now racking up losses, but what is less appreciated is that the higher interest payments it is making are going mostly to foreign banks and money market funds. The Fed earns interest on …
We think China’s PMIs picked up in January as its COVID wave ebbed (01.30 GMT) Euro-zone GDP probably flatlined in the fourth quarter… (10.00 GMT) …and economic growth may have weakened in Mexico and the Czech Republic Key Market Themes The Fed , ECB …
The outlook for Latin America has turned more positive at the start of the year as China has shifted away from its zero-Covid policy and commodity prices have rallied. But this comes against a backdrop in which regional growth is showing clearer signs …
Although there has been some good news for risky assets over the past couple of months, we still think they will struggle before long as economic growth disappoints in major advanced economies. The global equity market rally that began at the back end of …
The Lunar New Year holiday wasn’t quite back to normal this year as fears of spreading COVID to elderly relatives prevented many households from returning to their hometowns – long-distance journeys, while the highest since the start of the pandemic, …
Asian currencies have continued to rebound against the US dollar over the past month, and most are now up by around 5-15% against the greenback since early November. Optimism around China’s reopening and expectations for a Fed policy pivot have been the …
The shift away from floating-rate to fixed-rate mortgages presents risks as well as benefits. It will protect homeowners who are lucky enough to have a long time remaining on their fixed rate contract from higher mortgage payments. But that reduces the …
While an improvement in appetite for risk has fuelled a strong start to 2023 by UK equities and sterling, we doubt this will remain a source of support as recessions in the US, the UK and the euro-zone economies take hold. We anticipate the FTSE 100 …
Sentiment up, price pressures coming off the boil but still strong The improvement in economic sentiment in January is consistent with the picture painted by other surveys. But the high level of firms’ selling price expectations shows that the ECB’s …
Sharp slowdown in Q4, but sentiment improves further in January Economic sentiment in Central and Eastern Europe picked up again in most countries in January and our regional-weighted measure hit a four-month high. We still think that GDP in most …
Recession not off the table yet The fall in German GDP in Q4 shows that the energy crisis started to dent activity at the end of last year. This pours cold water on the recent optimism about the prospects for the euro-zone and suggests that a technical …
A Q4 fall in GDP The 4.9% increase in Polish GDP over 2022 as a whole is consistent with a slowdown in growth to around 1.6% y/y in Q4 and a small quarterly decline in output of around 0.5% q/q, confirming that the economy slumped towards the end of the …
Recession not off the table yet The fall in German GDP in Q4 suggests that the energy crisis started to dent activity at the end of last year. This pours cold water on the recent optimism about the prospects for the euro-zone and suggests that a technical …
All attention this week will be on a swathe of major central bank decisions, with the Federal Reserve’s first rate announcement of the year due on Wednesday, followed by the Bank of England and the European Central Bank on Thursday. As the week’s policy …
Recession began in Q4 after all Data published today show that the economy contracted by 0.6% q/q in Q4 as the resilience previously reported towards the end of last year has been revised away. With the more timely data for December and January still …
The conventional wisdom is that the annual spring wage negotiations (Shunto) are a bellwether for wage growth. In reality, the small number of employees covered by the talks and their bias towards workers in large manufacturing firms means that the Shunto …
In this week's episode: It's a big week for markets, with US December payrolls due and the Fed, the ECB and the Bank of England all set to deliver their first policy decisions of the year. Group Chief Economist Neil Shearing discusses what to expect, …
29th January 2023
A streak of stronger-than-expected economic data in the euro-zone has given markets there a boost this year. But with much of the good news seemingly already discounted, and, in our view, a still hawkish ECB, we expect rallies in equities and government …
27th January 2023
After rising sharply for much of this year, the Lunar New Year holiday in China meant that commodity prices generally took a bit of a pause this week. The only exceptions were natural gas prices, which continued to plunge, owing to lower-than-normal …
We expect the Fed to slow the pace of interest rate hikes to 25bp… (Wednesday) …but the ECB and Bank of England are likely to raise rates by 50bp (Thursday) We’ve pencilled in a below-consensus gain of 150,000 in US non-farm payrolls (Friday) Key Market …
The US dollar looks set to end another week broadly unchanged against most major currencies. Activity data released this week seemed consistent with resilience in European economies and near-recessionary conditions in the US , and we have revised our …
Our forecasts for house prices, mortgage rates and incomes over the next few years mean affordability will remain relatively stretched compared with the past 15 years. But there is good reason to think that mortgage payments as a share of income were …
Common currency talk highlights dollar concerns The week kicked off with the surprise news that Argentina and Brazil are looking at establishing a common currency to facilitate trade between the two countries. Further reports have clarified that, rather …
While a “risk-off” period in markets may prompt it to pause in the near term, we expect the recent pattern of the US dollar retreating as non-US equities outperform to set the tone for the next couple of years. One major recent theme in global markets has …
Recession denial in full effect The commentary this week dismissing the validity of the Conference Board’s leading indicator (see here ), which is currently giving an unambiguous recession warning, reminds us of the old quote from JK Galbraith that “faced …
This week’s Australian CPI data delivered an unwelcome surprise for the RBA. The headline rate rose from 7.3% to 7.8% in Q4, compared with an analyst consensus of 7.5%. While that was lower than the RBA had been expecting back in November (8.0%), the …
Governor Tiff Macklem stressed on Wednesday that the pause in the Bank of Canada’s tightening cycle is conditional on looser conditions in the labour market and a fall in inflation expectations. The CFIB Business Barometer showed evidence of both a day …
Turkish policymakers deepen de-dollarisation Turkish policymakers deepened their “lira-isation” drive this week by increasing the incentive for firms to convert their FX into lira, but we’re not convinced that the policy changes will be successful and …
More encouraging than it looks This week’s headlines suggest that Pakistan is in the midst of a full-blown crisis. On Monday the central bank hiked its main policy rate by a further 100bps. Two days later the cap limiting daily moves in the rupee was …
Slump in spending suggests recession could have already started The monthly income and spending figures reveal that, despite the apparent resilience of fourth-quarter GDP growth, the economy was on the precipice of a recession, and may already have fallen …
Yields have continued to surprise on the upside, with the all-property equivalent yield rising by 106bps in the three months to December. That matches the worst months of the GFC, and even though rental growth has held up capital values ended the year …
China under fire for delays to Zambia’s debt deal Delays to Zambia’s debt restructuring threaten to hold up the country’s IMF deal and add to the signs that the Common Framework isn’t fit for purpose. Officials in Zambia had hoped that a sovereign debt …
Outlook better, but still bad There has been a marked improvement in sentiment towards the euro-zone recently as activity indicators have come in stronger than expected. Euro-zone GDP now looks likely to have flat-lined in the fourth quarter and January’s …
Whither the Norwegian krone? Norway’s position as a major oil and gas exporter means that movements in its currency are typically correlated with moves in energy prices. But since the start of 2021, the krone has failed to keep pace with the rise in oil …
The recent persistence of inflation leads us to think that the Bank of England will proceed with another 50 basis point (bps) rise in Bank Rate, from 3.50% now to 4.00% next Thursday. (See here .) We will be discussing the policy outlooks for the BoE, the …
Demand growth for industrial metals slowed sharply late last year. But attention is now geared towards the rebound in China’s metal demand. We think there is a good chance that the rebound disappoints. The CE Demand Proxies are our attempt to gauge the …
PM Kishida, demographic doomsayer In his speech on Monday kicking off the first Diet session of the year, PM Kishida proclaimed that it is “now or never” when it comes to addressing Japan’s demographic decline. To that end, he pledged to double spending …
The reversal of temporary subsidies and changes to weightings will probably push headline German HICP inflation back up in January. But the bigger picture remains that the headline rate will fall sharply this year and that the ECB will continue to focus …
Euro-zone investment contracted sharply in Q4 2022 and we think further interest rate rises will prolong this weakness throughout much of this year. But we expect a recovery in transactions towards the end of the year, when economic activity should be …
Consumer spending in emerging markets initially recovered quickly from the pandemic, but it looks like high interest rates and inflation caused spending growth to slow sharply over the second half of last year. And we think consumer spending is likely to …
December’s euro-zone money and credit data show that the effects of rising interest rates were starting to be felt. Households and firms shifted their money into longer-term deposits which are less likely to be spent, and lending growth slowed. Overall, …
China has made an abrupt shift away from zero-COVID, prompting a wave of market euphoria – and some anxiety – about a surge in demand. But what does the economy’s reopening really mean for emerging markets? Our latest dive into the big stories in EM macro …
For watchers of India’s economy, next week is one of the most significant of the year as Finance Minister Nirmala Sitharaman delivers the Union Budget for FY23/24 on Wednesday. Ahead of the announcement, the fiscal position looks pretty healthy. The …
