At a key policy conference, South Africa’s ruling party officials offered little by way of new ideas to address the country’s mounting economic challenges. And some fresh proposals risk making matters worse. The ruling African National Congress (ANC) …
13th January 2023
Implications of a stronger recovery in China COVID-19 has spread through China much faster than we had expected, with one province reporting that 89% of the population has been infected with the virus. This is paving the way to a much earlier economic …
Sentiment rebounding from historically weak level The further rise in the University of Michigan consumer sentiment index to 64.6 in January, from 59.7, illustrates that consumers have taken some encouragement from the fall in energy prices. Nevertheless, …
Early signs that the inflation tide is turning This week brought the clearest evidence yet that the disinflation process in Central Europe is underway as most economies experienced a marked and broad-based easing of price pressures in December. This is …
While the medium-term outlook for the renminbi and other Asian currencies has improved, and we have revised some of our forecasts accordingly, we continue to anticipate that a deterioration in risk sentiment as other major economies slide into recession …
Core CPI continues to moderate The 0.1% m/m decline in headline CPI in December was principally due to a 9.4% m/m drop in gasoline prices, but core consumer prices also increased by a more modest 0.3% m/m, extending the run of weaker monthly gains to …
While euro-zone equities face some meaningful short-term headwinds which threaten their recent run of outperformance, we still expect them to fare better than US equities over the next couple of years. Euro-zone equities broke a long run of …
It’s remarkable that the economy appears to have avoided a recession (defined as two consecutive quarters of falling real GDP) in 2022. Most economists thought that the recession began in Q2 2022 as back in August the ONS estimated that real GDP fell by …
Commodity imports generally rose in December, but fell in 2022 as a whole. In a possible sign of optimism around reopening, soybean imports skyrocketed. China’s unexpectedly swift switch to living with COVID should see commodity imports, particularly …
After months of gloom, there seems to be some newfound optimism about the euro-zone’s economic prospects. Commentary about the euro-zone economy has turned more positive. And this year’s rally in euro-zone financial markets probably at least partly …
The past month has brought a string of positive developments on the activity and inflation side. The biggest news has been China’s decision to throw in the towel on its zero-COVID policy, which brightened the prospects for the world’s largest economy …
Higher Swedish GDP forecast We learnt this week that Sweden’s monthly GDP Indicator declined by 0.5% m/m in November as a result of a fall in manufacturing output and “several service producing industries”, suggesting that policy tightening was …
The euro-zone economy held up a bit better than we expected at the end of last year. On balance, the data point to GDP flat-lining or contracting only slightly in Q4. Germany’s statistics office this morning published its first estimate of GDP in 2022, …
The recent commencement of stricter office EPC legislation in the Netherlands has raised concerns that Dutch office valuations may be on the edge of a regulatory precipice, given the large proportion of non-compliant stock. However, we think the …
Q4 contraction probably avoided Annual GDP data for Germany suggest that the economy avoided a contraction in Q4 and that the euro-zone as a whole will probably prove more resilient to the energy crisis than we initially feared. But activity clearly …
Rupee settlement mechanism to see limited use It has been a relatively quiet start to the year on the economic front in India but a speech over the weekend from RBI Governor Shaktikanta Das has garnered attention. Among the highlights, Governor Das struck …
Recession averted in 2022, but unavoidable in 2023 The small 0.1% m/m gain in real GDP in November (consensus -0.2% m/m, CE -0.3% m/m) suggests the economy did not contract in Q4 and is not in recession. Even so, it is too soon to conclude the economy …
Another rise in core inflation means 50bp hike in February nailed on Yet another larger-than-expected increase in the Riksbank’s target measure of inflation and in the core rate suggest that policymakers are highly likely to raise rates by 50bp in …
The Bank of Korea today raised interest rates by a further 25bps (to 3.50%) and relatively dovish comments by Governor Rhee support our view that the tightening cycle is now over. With growth set to struggle and inflation likely to fall back further, we …
GDP resilient, but still set for contraction in Q1 The small 0.1% m/m gain in real GDP in November (consensus -0.2% m/m, CE -0.3% m/m) suggests the economy was not as weak in Q4 as we had previously thought. But even if the economy does a bit better than …
Reopening to boost imports but exports will still struggle China’s exports contracted year-on-year in December by the most since the Wuhan lockdown in early 2020. Imports held up slightly better but are still depressed. Inbound shipments should start to …
Services inflation on the rise The timely Tokyo CPI showed that inflation jumped from 3.7% to 4.0% in December, twice the BoJ’s 2% target. Our measure of “core” goods inflation accelerated further, but below the surface there are clear signs of a …
Inflation strong, consumption resilient On balance, the economic data released this week are consistent with our view that the RBA has more work to do. For a start, inflation rose back up from 6.9% to 7.3% in November, with trimmed mean inflation reaching …
Final rate hike of the cycle The Bank of Korea today raised interest rates by a further 25bps (to 3.50%), but with price pressures easing and economic growth slowing sharply, we think this will be the last hike of the cycle. Today’s decision came as …
There are growing signs that housing market activity may be close to a trough. The decline in mortgage rates over the past couple of months has led to a small improvement in affordability and a rise in homebuyer sentiment, albeit from a record low. …
12th January 2023
Further big falls in inflation seem now to be discounted in major developed markets, especially the US. That helps to underpin our view that high-grade government bond markets will only rally a little further over the remainder of this year even if, as we …
Disruption from China’s reopening is fading faster than we had expected and we have revised up our forecast for growth there from 2.0% to 5.5%. This means that global GDP growth will be stronger than we had expected this year and energy inflation will …
The Bank of Korea is likely to implement one final 25bp hike (01.00 GMT) Chinese trade data will probably show falls in both imports and exports in December We think UK GDP fell by 0.3% m/m in November (07.00 GMT) Key Market Themes The latest evidence …
Europe’s energy crisis, sky-high rates of inflation and Ukraine’s reconstruction were among the biggest topics of conversation at Euromoney’s Central and Eastern European (CEE) forum in Vienna this week. There seems to be a widespread view now that …
The Norges Bank is one step from ending its tightening cycle. We expect it to raise its policy rate by 25bp next week, to a peak of 3%. After that it is likely to pause while it waits to assess the full effects of the cumulative 300bp of tightening that …
Another more muted gain in core CPI Core CPI inflation was still an elevated 5.7% in December but, with another more muted 0.3% m/m gain, the three-month annualised rate fell to a 20-month low of 3.1%. Admittedly, the latter is still slightly above the …
Slump in gasoline prices drives decline in headline CPI Consumer prices declined by 0.1% m/m in December, helped by a 9.4% m/m drop back in gasoline prices and a more modest 0.3% m/m increase in food prices. The pace of monthly gains in food away from …
Has the EGP gone too far once again? The Egyptian pound has pared back its losses after sharp falls against the dollar on Wednesday in a sign that, just like 2016, the currency may have overshot. The authorities may keep the pound weak in a bid to rebuild …
Drop in headline inflation suggests end of tightening is imminent The further easing in headline CPI inflation in December to a 12-month low of 5.7% y/y supports our view that the tightening cycle is in its final throes. We expect just one more hike in …
Construction activity contracts as profits decline The latest RICS Construction Survey showed the first contraction in workloads since the height of the COVID-19 pandemic in mid-2020. Weakening demand and rising financing costs are cutting profits and …
In the first instalment of our Election Watch series ahead of the late-February polls in Nigeria, we assess the economic policies proposed by key candidates. The elections offer a chance to depart from unorthodox policymaking under the outgoing …
We had expected disruption from China’s reopening wave of COVID infections to weigh heavily on activity well into Q1. But there is mounting evidence that much of China’s population has already been infected and that disruption is already fading rapidly. …
Some very modest reopening effects Consumer price inflation ticked up in December, while producer price deflation eased. There are some early signs that the transition toward living with COVID is starting to put upward pressure on prices. But the uptick …
Net trade to provide sizeable boost to Q4 GDP growth The trade balance widened to a five-month high in November even though import prices outpaced export prices last quarter, which suggests that net trade provided a sizeable boost to Q4 GDP growth. The …
Net trade to boost GDP growth in Q4 The trade balance widened to a five month high in November even though import prices probably outpaced export prices last quarter, which suggests that net trade provided a sizeable boost to Q4 GDP growth. The trade …
Our updated remote worker metro ranking shows some important changes since the end of the pandemic, though the winners remain in the South. Nashville tops the table, having climbed seven places. Tucson and Memphis also climb into the top 10, with …
11th January 2023
Commercial crude stocks surge and could have further to rise Commercial crude stocks surged last week at the fastest pace since February 2021, as net imports rose and disruption to refineries lingered from the recent cold weather disruption. Going …
December CPI inflation probably edged down in China despite reopening… (01.30 GMT) … and fell back in the US driven by softer core inflation and lower energy prices (13.30 GMT) Sign up here for our Drop-In on the implications of the US CPI print for …
November’s money and credit data showed that the effects of tighter ECB policy were only just starting to be felt. So while some of the recent economic data have been a bit stronger than expected, the drag from tighter monetary policy is set to …
Foreign capital inflows into EMs have picked up a little since the beginning of the year. This should provide some relief to those countries with sizeable current account deficits, including Chile, Colombia, Philippines, and several countries in Central …
Speculation is mounting that the Bank of Japan is finally moving to end its yield curve control (YCC) regime following December’s surprise policy tweak. How likely is the Bank to take this step, what would it mean for its monetary policy, and what impact …
The sharp fall in the Egyptian pound today means that, in real trade-weighted terms, it is at its lowest level since the 2016 devaluation. The experience from that period is that the boost to Egypt’s external competitiveness will lead to a sharp narrowing …
Industry stagnated towards end of last year, 2023 to be tough Mexico’s industrial sector stagnated in November as higher construction and utilities output offset a slump in manufacturing and mining. More timely survey indicators have continued to hold up …
