A partial recovery in Lunar New Year travel The world’s largest annual migration of people is well underway, with millions of Chinese returning to their hometowns to spend the upcoming Lunar New Year holiday with their families. This migration, which …
20th January 2023
More signs of a growing electronics ecosystem We argued at the end of 2022 that one of the key developments for investors to look out for this year was signs of a growing electronics ecosystem in India. We are only three weeks into the new year but there …
Disappointing end to a difficult year The 1.0% m/m fall in retail sales volumes in December was much worse than both we and the consensus (+0.5% m/m) had expected. That meant sales volumes fell 1.3% q/q in Q4 and were a disappointing 5.4% below their …
10-year JGB yield retreats from ceiling Following the Bank of Japan’s decision on Wednesday to keep its short-term policy rate and Yield Curve Control (YCC) settings unchanged, 10-year Japanese Government Bond (JGB) yields fell to as low as 0.37% that …
Real incomes rising despite soaring inflation The biggest news coming out of New Zealand this week was the resignation of Labour Party PM Jacinda Ardern. The conservative National Party is leading the polls ahead of the next election in October and has …
Inflation will fall below 2% by mid-2023 Inflation hit 4% in December but due to the government’s energy subsidies we expect it to fall below the Bank of Japan’s 2.0% target by mid-year. The increase in inflation from 3.8% to 4.0% in December was in line …
Government measures to lower inflation from January Inflation hit 4% in December but due to the government’s energy subsidies we expect it to fall to around 3.0% in January, and further below the Bank of Japan’s 2.0% target by mid-year. The increase in …
19th January 2023
Commercial crude stocks will continue marching upward Commercial crude stocks unexpectedly increased this week. Weak refining activity and stable production helped stocks build. We expect that slower US economic activity over the next six months will …
We expect the China’s Loan Prime Rate to remain unchanged (01.30 GMT) Retail sales in the UK probably increased by 2.5% m/m in December… (07.00 GMT) …but in Canada we think that preliminary data will show retail sales declined (13.30 GMT) Key Market …
China’s shift from zero-COVID is the big Asia story of the moment and our economists gave an update on what this means for the region’s growth outlook, including how quickly outbound tourism is recovering and which economies stand to benefit. But there’s …
While the Bank of Japan pushed back against expectations that it would end its Yield Curve Control (YCC) policy yesterday, we think it is only a matter of time before YCC bites the dust. That suggests further upward pressure on the yield of JGBs and the …
The Fed’s hawkish transformation has been so marked that, if its forecasts are to be believed, over the next couple of years it would effectively be adopting the same reaction function last followed during the Greenspan and Bernanke eras between 1987 and …
Starts hold up better than expected Single-family housing starts surprised on the upside in December. But it is too soon to call the bottom of the market. Indeed, another substantial fall in permits means we think starts are set to resume their downward …
The theme of global economic fracturing, which was the focus of our Spotlight Series of research last September, is at the centre of economic discussion in 2023, including at Davos. We held an online drop-in session yesterday to update clients on our …
First came the inversion of the yield curve. Next the index of leading indicators began to fall. Then the survey-based activity indicators plunged well below the 50 mark. Finally, this week we learned that the weakness had spread to the hard data on …
The account of the December meeting, along with data released since then and recent comments from policymakers, suggest the ECB will raise its deposit rate from 2% to 3% by March rather than May as we had previously expected, and that QT will accelerate …
Disappointing end to a difficult year The surprise 1.0 % m/m fall in retail sales volumes (consensus +0.5%) meant that sales volumes fell by 1.3% q/q over Q4 as a whole and ended the year a disappointing 5.4% below their level at the start of the year. …
CBRT continues with policy pause Turkey’s central bank (CBRT) left its main policy rate unchanged at 9.00% as expected today and our central view is that rates will remain on hold in the coming months. But with inflation now falling sharply and the …
Demand for mortgages collapses due to spike in mortgage rates The Q4 2022 Credit Conditions Survey shows that while lenders tightened lending criteria in the aftermath of the “mini” budget, the main constraint on lending volumes was a collapse in demand …
Moderating core price pressures, the continued fall in inflation expectations and the sharp decline in wholesale natural gas prices mean we think inflation in Central and Eastern Europe (CEE) will fall a bit more quickly in 2023 than we had anticipated a …
Petroyuan” talk further sign of frayed Saudi-US ties Comments by Saudi Arabia’s finance minister that the Kingdom could conduct trade in currencies other than the dollar will add fuel to the debate about the rise of a “petroyuan”. There are hurdles to the …
Bank Indonesia (BI) today raised interest rates by a further 25bps (to 5.75%) but also appeared to signal there would be no further rate increases this year. We are changing our forecast in response, and now think the tightening cycle has come to an …
Our China Activity Proxy (CAP) suggests that output was still depressed at the end of 2022, though it held up surprisingly well in the face of a huge reopening wave of infections. With the virus situation now improving, activity appears on course for a …
Norges Bank tightening nearly over The Norges Bank eased off the brakes today by leaving policy on hold, but signalled that it will raise its policy rate at the next meeting in March. We suspect that will be the final hike in this tightening cycle, and …
Malaysia’s central bank (BNM) unexpectedly left its main policy rate unchanged today (at 2.75%), but appeared to leave open the possibility of further rate hikes later in the year. However, with growth set to slow and inflationary pressures easing, we …
The Norges Bank eased off the brakes today by leaving policy on hold, but signalled that it will raise its policy rate at the next meeting in March. We suspect that will be the final hike in this tightening cycle, but the risks are skewed towards …
Bank Indonesia tightening cycle at an end Bank Indonesia (BI) today raised interest rates by a further 25bps (to 5.75%) but also appeared to signal there would be no further rate increases this year. We are changing our forecast in response, and now …
Rates on hold, end of the tightening cycle Malaysia’s central bank (BNM) unexpectedly left its main policy rate unchanged today (at 2.75%), but appeared to leave open the possibility of further rate hikes later in the year. However, with growth set to …
Prices and activity continue to plummet There was little to cheer in the December RICS survey, with prices continuing to drop and sales volumes falling further from November’s already-subdued levels. The past prices balance of the RICS Residential Survey …
Unemployment rate will soon start to rise in earnest The labour market struggled in December and the unemployment rate has started to rise. With economy activity set to slow sharply, t won’t be long before unemployment increases in earnest . The 14,600 …
Exports heading into 2023 on the backfoot While the trade deficit narrowed further in December, most of that reflects falling import prices. Export volumes likely fell slightly and with the global downturn weighing on external demand, export growth will …
Unemployment rate to rise in earnest before long The labour market struggled in December and it won’t be long before unemployment starts to rise in earnest. The 14,600 drop in employment in December was well below the analyst consensus of +22,500. And …
18th January 2023
The powerful re-opening rally in China’s stock market has eroded a large part of the valuation gap that led us to judge that equities there were relatively appealing a couple of months ago. That said, we think there’s still some scope for it to continue …
Economic growth slowing and inflation falling But labour market still tight and inflation expectations too high Bank to drop down to 25 bp hike, but likely to add hawkish guidance The Bank of Canada is set to raise interest rates by a smaller 25 bp …
Japan’s trade deficit probably widened in December (23.50 GMT) We think the Norges Bank will hike its policy rate by 25bp, to 3.00% (09.00 GMT) US housing starts may have fallen sharply in December (13.30 GMT) Key Market Themes The latest signs that …
The election of left-wing candidate Lula for a third term as Brazil’s president is unlikely to accelerate Petrobras’ sluggish shift towards large scale biofuel production. We expect proposed oil sector reforms to weigh on biofuel demand, while ongoing …
Manufacturing output slumps to 14-month low The manufacturing sector appears to be in recession and, even if China’s emergence from its Covid restrictions provide some boost later this year, the deterioration in the survey evidence suggests the …
Consumers buckle under higher rates The 1.1% m/m fall in retail sales in December, which followed a downwardly-revised 1.0% fall in November, adds to the evidence from the surveys that the economy was losing momentum towards the end of last year. …
Manufacturing falls into recession, with output at a 15-month low Echoing the recent slump in the survey-based indicators, industrial production declined by a worse-than-expected 0.7% in December, with November’s decline revised up to 0.6% m/m, from 0.2%. …
The recent falls in the Egyptian pound pose a threat to Egypt’s fragile public debt dynamics but we think that the government will be able to muddle through. The key risk is that the government shifts fiscal policy in a looser direction, which could …
Consumers starting to buckle under higher rates The 1.1% m/m fall in retail sales in December, which follows a downwardly-revised 1.0% fall in November, adds to the evidence from the surveys that the economy was rapidly losing momentum towards the end of …
Industrial weakness offsetting retail strength November’s hard activity figures out of South Africa were a mixed bag, but we think that weakness in industrial sectors will increasingly dwarf any strength elsewhere especially as power cuts and softening …
India has historically remained unaligned geopolitically but we made the case last year that, in a fracturing global economy , it was more likely to lean towards a US-led bloc and away from a China-led bloc. Events over the past month have strengthened …
Underlying price pressures still strong The euro-zone has probably passed peak inflation as sharp declines in food and energy inflation are set to drag down the headline rate. But December’s final HICP data showed that underlying inflation remained …
Movements in REIT pricing provide a good indication of where property capital values are heading. And the latest data are consistent with our expectation that all-property values will see a peak-to-trough fall of around 20% by the end of this year. But …
Taiwan’s economy unexpectedly contracted in Q4, driven by a sharp fall in exports. We expect the economy to remain weak over the coming quarters as exports struggle amid a global recession and higher interest rates weigh on domestic demand. According to …
End of monetary tightening not far away as inflation falls Inflation in South Africa came in softer than expected, at 7.2% y/y, in December, and with core inflation ticking down as well, we think that a slowdown in the tightening cycle is nailed on. We …
Inflation may be falling, but services inflation is still too strong for comfort The small drop in CPI inflation from 10.7% in November to 10.5% in December (consensus forecast 10.5%) and the unchanged core rate of 6.3% (consensus 6.2%) suggest the …
