Economy set to remain weak 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 …
18th January 2023
The BoJ kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes over in April . Following the unexpected widening of the tolerance …
Inflation is falling, but services inflation still too strong for comfort The small fall in CPI inflation from 10.7% in November to 10.5% in December (consensus forecast 10.5%) and unchanged core rate 6.3% (consensus 6.2%) suggests it is too early for the …
The shortage of new housing caused by the government’s HomeBuilder grant is showing signs of easing. That means that the housing downturn should soon start to weigh on homebuilding in earnest and that new dwellings inflation will continue to slow. The Q3 …
New Governor will ditch Yield Curve Control in April The Bank of Japan kept policy settings unchanged today, but the increase in its medium-term inflation forecasts supports our view that Yield Curve Control will be abandoned once a new Governor takes …
Business investment likely ended 2022 with a whimper “Core” machinery orders fell to their lowest level since February 2022 in November, pointing to a contraction in spending on machinery and transport equipment in Q4 from Q3. The upshot is we now have …
Further signs of investment slowdown Weakness in the manufacturing sector led to “core” machinery orders falling to their lowest level since February 2022, and points to a slowdown in investment last quarter. “Core” orders crashed by 8.3% m/m in November …
17th January 2023
OPEC keeps 2023 forecasts unchanged OPEC left its annual supply and demand forecasts broadly unchanged but tweaked the quarterly profile. Like us, the group expects demand to rise faster than supply, which is a key reason why we expect prices to rise over …
We think that the prevailing yields of high-grade 10-year government bonds in other major developed markets (DMs) support the idea that the 10-year Japanese government bond (JGB) yield would rise a bit further, were the Bank of Japan (BoJ) to end its …
House prices fall further despite lower new listings The large fall in new listings in December failed to prevent another sizeable drop in house prices, but the improvement in the sales-to-new listing ratio offers some hope that the downward pressure on …
We think the Bank of Japan will probably keep policy settings unchanged on Wednesday We expect UK CPI inflation to have fallen from 10.7% to 10.2% in December (07.00 GMT) US retail sales and industrial production data are both likely to be weak (13.30 & …
The surge in FDI inflows to a 15-year high in Central and Eastern Europe (CEE) last year will partly unwind this year given the weaker global macro backdrop. But we think that a large part of the increase reflected structural forces, which will keep FDI …
We think the yield of 10-year Japanese Government Bonds (JGBs) would rise to at least 1% if the Bank of Japan (BoJ) decided to abandon Yield Curve Control (YCC), which could conceivably happen as soon as tomorrow. But we wouldn’t be surprised if it ended …
This special episode is all about property markets, with Chief Property Economist Andrew Burrell leading wide-ranging discussions about what to expect in 2023 and some key sector trends. In this episode: Andrew outlines our forecasts for US, UK and …
Raising the federal debt ceiling later this year will require bipartisan compromise, most likely involving measures to reduce the budget deficit modestly. But a deal probably won’t be reached until the last minute, raising the risk that the deadline to …
Encouraging signs despite elevated core inflation Although the annual rates of core inflation remain elevated, the three-month annualised rates of CPI-trim and CPI-median dropped back to 2.5% in December. Elevated inflation expectations mean that the …
It looks highly likely that Tunisia’s government will this year follow in the footsteps of Sri Lanka and Ghana by defaulting on its external debts. Fortunately, public debt risks elsewhere don’t look as acute. But while the focus is on sovereign …
Some encouraging signs despite elevated core inflation Unfavourable base effects mean that the small falls in CPI-trim and CPI-median inflation in December are better than they look. And with prices falling on the month for the first time since July 2020, …
Output from Franc e’s beleaguered nuclear industry jumped last month, raising hopes that a recovery is underway. However, we think any increase in France’s nuclear output this year is likely to be modest and will probably be offset by reactor closures in …
The process of “global fracturing” that we outlined in our annual Spotlight series last year will remain the dominant macro theme for the next decade. But speculation that it will result in the rise of a “petroyuan” on a scale sufficient to challenge …
Office markets started to lose momentum at the end of last year and the expected weakness in employment this year suggests the slowdown will continue. That said, we think prime rents will avoid falls in most euro-zone markets, though the risks to this …
Outlook improving, but high interest rates will keep economy weak Economic sentiment in Germany improved further at the start of 2023 adding to the signs that the economy will hold up better than we feared. But with underlying price pressures still …
Recent data suggest that Nigeria’s economy was struggling even before demonetisation efforts hit activity late last year. And we don’t expect economic news to take a turn for the better any time soon as further disruptions are likely no matter who wins …
Strong wage growth adds pressure on the Bank of England to raise rates Consistent with the economy proving to be more resilient than expected, November’s labour market data showed that conditions remained tight and wage growth stayed strong. This will …
A smaller-than-expected hit from reopening China’s statistics bureau claims that GDP was unchanged q/q in Q4. That is implausible, even accounting for December data showing surprising economic resilience in the face of the reopening wave of infections. …
Widespread unrest across several regions in Peru could make the central bank’s job of reducing above-target inflation even more difficult while also threating to hamper activity in some of the country’s key industries, such as mining and tourism. Peru’s …
16th January 2023
Wage and price inflation expectations still too strong for comfort The Bank of Canada’s latest quarterly surveys leave no doubt that higher interest rates are weighing on demand, but still don’t show a convincing moderation in wage and inflation …
Activity data is likely to show that China’s economy lost momentum last month (02.00 GMT) We think tightness in the UK labour market eased in November (07.00 GMT) Germany’s ZEW survey will offer first clues about economic sentiment this year (10.00 GMT) …
Lending activity still strong in December On the surface, net lending to real estate in December looks to have reached its highest since October 2008. However, this apparent spike in lending was almost entirely due to the addition of a recently-converted …
The fall in Spanish gas and electricity prices that has already happened is likely to cause energy inflation to slump to minus 20% in the coming months and this in turn will pull headline inflation below 2%. Core HICP inflation will probably also remain …
Strong wage growth adds pressure on the Bank of England to raise rates Consistent with the economy proving to be more resilient than expected, November’s labour market data show that conditions remain tight and wage growth stayed strong. This will only …
Dip in inflation to turn CBN’s hawks into minority December inflation data out of Nigeria, at 21.3% y/y, came in below expectations, and provided a first sign that inflation passed its peak. Policymakers are likely to latch onto the fall in inflation and …
Surge in motor vehicle sales fails to offset weakness elsewhere The easing of supply shortages provided a big boost to motor vehicle shipments in November, but this failed to offset falls elsewhere. While there is scope for transportation equipment …
2023 has begun with the Ukraine war still raging, tensions mounting over global trade practices, but also signs that China is dialling down its aggressive diplomatic posturing. By the end of this year, candidates will be dialling up the rhetoric as they …
The recent resilience of the economy to the dual drags of high inflation and higher interest rates doesn’t mean the pain has been avoided. Instead, our analysis suggests that higher interest rates will become a bigger drag on activity in the most …
China’s rapid reopening and the likelihood of policy stimulus there has improved the macro-economic backdrop for commodities in 2023. But with developed economies in recession, and a somewhat stronger dollar and weaker US equities in Q1, we think a …
Housing downturns are well underway in many countries and house prices and activity generally have further to fall. Construction activity is already suffering as a result. While it is hard to detect any major adverse effect on household spending, this …
There’s some dispute as to whether UK Prime Minister Harold Macmillan ever actually said “events, dear boy, events” when asked what can blow governments off course. Whatever its provenance, the quote does capture how economic forecasts can be blown off …
Wholesale inflation drops for the sixth month in a row The drop in Indian wholesale price inflation for the sixth month in a row in December further reinforces our view that the MPC will draw the tightening cycle to a close after one more rate hike in its …
China’s economy was tied down by the government’s tough zero-COVID regime. And then it wasn’t. The virus appears to have ripped through much of China’s urban population in the wake of the dramatic policy U-turn by Beijing, setting the stage for a dramatic …
15th January 2023
The dismantling of China’s zero-COVID policy has come quicker than we and many had expected. Whereas we previously thought the first quarter would bring the worst of the economic disruption from surging COVID cases, it now appears the worst is behind us …
13th January 2023
The US dollar has remained under pressure as hopes of a “soft landing” continue to build and risk sentiment improves. While yesterday’s key US CPI data came out roughly in line with consensus expectations, and the market reaction was more limited than …
This Update makes four key points about corporate earnings in the US as the Q4 results season gets into swing. They all feed into our view that the S&P 500 will remain under pressure until the spring and underperform Treasuries as a recession there begins …
BoJ may abandon Yield Curve Control as soon as next week (Wed) We think the PBOC will leave rates on hold next week, buts cuts are coming We anticipate interest rate hikes in Norway, Indonesia and Malaysia Key Market Themes An end to Japan’s Yield Curve …
The December CPI data and the Bank of Canada’s quarterly business and consumer surveys, released next week, could have a big bearing on the policy outlook. For the Bank to pause after one final 25 bp hike this month, as we assume, it will need to see …
Tuesday’s retail sales data are likely to show that spending plunged as COVID crashed through China last month. But December was an age ago. It can’t tell us much about what will happen now. We’d caution against some of the bullish takes doing the rounds. …
Further fall in inflation despite utility price hike The softer-than-expected inflation reading in Russia in December, of 11.9% y/y, is likely to be followed by further sharp falls in the coming months towards 4% as last year’s surge in prices passes …
We have revised up our forecasts for equities in China, given a brighter outlook for the economy there. We have also increased our China 10-year sovereign bond yield forecast for end-2023, as we think that a faster economic recovery will lead to tighter …
Brazil riots: reflecting on the fallout The riots in Brasília last Sunday thankfully ended quickly. And the country’s financial markets, after losing ground on Monday, have rebounded over the course of this week. Investors have been buoyed by the fact …
