Swiss manufacturing cruising, services snoozing The latest batch of surveys suggest that, in common with the euro-zone, prospects for the Swiss economy improved marginally at the end of last year. For a start, the KOF economic barometer for December …
6th January 2023
Surge in employment locks in another interest rate hike The surge in employment in December and renewed fall in the unemployment rate suggest that the Bank of Canada will raise interest rates again later this month, although the fall in wage growth …
The property repricing in response to higher interest rates has not yet run its course. Coupled with a recession-driven slowdown in rent growth, this means 2023 is shaping up to be another bleak year for European real estate. Given the rapid rise in …
Surge in employment locks in another interest rate hike The surge in employment in December and renewed fall in the unemployment rate suggests that the Bank of Canada will raise interest rates again later this month, although the fall in wage growth means …
Wage growth slowing despite employment resilience The solid 223,000 gain in non-farm payrolls and drop-back in unemployment to a 50-year low in December will, at face value, do little to ease the Fed’s concerns about resilient core services inflation. …
Inflation is on its way down Headline inflation in the euro-zone has probably passed its peak. (See here .) Admittedly, core inflation rose to a new record high in December, with both services and core goods inflation increasing in y/y terms. Core goods …
The recent plunge in wholesale gas prices means that utility prices for households may fall below the government’s price freeze in July. As a result, CPI inflation will be around 0.3 percentage points (ppts) lower than we previously thought in the second …
European natural gas prices have halved over the past month as usage stayed low and LNG imports hit record highs. Barring dramatically colder weather, EU gas storage looks set to be in a more comfortable position than we had expected. As a result, we have …
Forecast change on China border reopening Tourism across Asia has rebounded strongly in recent months, with arrivals in most places now at around 45% of pre-crisis levels. (See Chart 1.) Chart 1: Tourist Arrivals (% of 2019 level) Sources: Refinitiv, …
PMIs increasingly at odds with hard data The PMI surveys for December released this week suggest that India’s economy was firing on all cylinders at the end of 2022. Both the manufacturing and services measures hit multi-month highs (see Chart 1), while …
After November’s positive surprise, will December’s CPI report provide more evidence that US inflationary pressures are easing – and what would that mean for the Fed’s policy calculus? Chief US Economist Paul Ashworth and Senior US Economist Andrew …
Deep downturn in Q4, but signs of improvement in December The latest EC Economic Sentiment Indicators for Central and Eastern Europe point to a regional decline in GDP in the order of 0.5% q/q in Q4, but it was encouraging that sentiment increased for the …
COVID-19 has torn through China’s population with remarkable speed. Medical experts estimate that over 70% of the population in major cities such as Shanghai have been infected since mid-November. Anecdotal evidence suggests that the human cost among the …
Headline index falls below 50 as recession hits property demand The headline CIPS construction index fell below 50 in December, indicating a contraction in activity, as the recession hit demand and developers’ concerns about capital values increased. With …
New year cheer but ECB will stick to hawkish script The fall in inflation and improvement in economic sentiment in December suggest that the euro-zone’s case of stagflation is not quite as acute as feared a few months ago. Nonetheless, a technical …
New year cheer but ECB will stick to hawkish script The fall in inflation and improvement in economic sentiment in December suggest that the euro-zone’s case of stagflation is not as acute as feared a few months ago. Nonetheless, a technical recession is …
PMI picks up, but manufacturing sector set for tough 2023 South Africa’s manufacturing PMI picked up for a fourth consecutive month, to 53.1, in December but the backdrop of persistent power cuts, tight policy and a global recession means that we think …
Downward pressure on the Hong Kong dollar has abated in recent weeks and we think it is very unlikely that the existing currency framework will be abandoned any time soon. For much of 2022, the USD/HKD rate traded at the upper end of the band defined by …
Q4 industry slump won’t prevent GDP rebound We warned in December that the surge in manufacturing inventories in the Tankan signals a sharp downturn in industrial activity. As it happens, industrial production only fell marginally in November. But that …
House price falls already well advanced The further large fall in house prices recorded by Halifax in December suggests that the house price correction is further advanced than we previously thought. Indeed, while the Nationwide figures point to a …
End of China’s zero-Covid to boost travel exports Media reports suggest that China will start to import Australian coal from April. We explained here why the impact on the economy should be modest. A more important development is the end of zero-Covid in …
Wage growth should settle around 1% this year The sharp slowdown in wage growth in November was mostly due to a plunge in volatile bonus payments and wage growth will rebound over the coming months . The slowdown in wage growth in November, from 1.4% to …
Wage growth will settle around 1% The sharp slowdown in wage growth in November was mostly due to a plunge in volatile bonus payments and it will rebound over the coming months. The slowdown in wage growth in November, from 1.4% y/y to 0.5%, was more …
5th January 2023
Hit to implied product demand from cold weather likely to be short-lived Commercial crude stocks rose last week due to refinery closures in the wake of the extremely cold weather. But this should be short-lived, with most refinery plants back online soon. …
After post-pandemic property rallies hit the skids last year, what will 2023 bring? Economists from across our US Commercial and Housing teams held a special briefings on what to expect in the coming 12 months. During this 30-minute session, the team …
After post-pandemic property rallies hit the skids last year, what will 2023 bring for UK and euro-zone markets? Economists from across our UK Commercial and Housing and Europe Commercial Property teams held a special briefing on what to expect in key …
The 0.3% q/q contraction in Q3 left real GDP 0.8% below its Q4 2019 pre-virus level and the UK economy lagging even further behind its major counterparts. In contrast, GDP has risen above its pre-pandemic level in all G7 economies, including the US …
Euro-zone inflation may have fallen to 9.2% in December (10.00 GMT) We think US non-farm payrolls growth slowed to 160,000 in December (13.30 GMT) The US ISM Services survey will probably point to slowing momentum (15.00 GMT) Key Market Themes Despite …
The latest fall in the Egyptian pound sends a strong signal that the authorities are committed to the shift to a more flexible exchange rate. And while the weaker currency poses a threat to the country’s fragile public debt dynamics, investors seem to …
Strong rental growth and higher mortgage costs will keep shelter inflation elevated for the next few months, but we expect it to fall sharply over the rest of 2023 as lower house prices feed through. Shelter inflation surprised to the upside of our …
We have revised our European wholesale gas price forecast down and, as a result, now expect euro-zone inflation to fall more rapidly than we had previously anticipated. In turn, this means that real incomes and economic activity might be slightly …
Models point to recession soon Our composite models continue to suggest that a recession this year is a near-certainty, with the implied odds of the economy being in recession in six months’ time and in one year’s time both above 90% as of December. …
Trade hit by domestic and external weakness The sharp narrowing of the trade deficit to $61.5bn in November, from $77.8bn, came as a big fall in exports was offset by an even sharper drop in imports. Net trade still looks to have been a small drag on …
Lower commodity prices push goods trade into deficit Lower commodity prices have now wiped out the goods trade surplus, while the falls in export and import volumes present downside risks to the preliminary estimate that GDP edged up in November. The …
The latest MSCI data show that prime property values underperformed the wider market last year. But with the rest of the market more vulnerable to the economic recession and as MSCI values catch up, relative performance is likely to shift in 2023. The …
Goods trade balance moves back into deficit Lower commodity prices have now wiped out the goods trade surplus, while the falls in export and import volumes present downside risks to the preliminary estimate that GDP edged up in November. The merchandise …
Industry stuck in the doldrums The 0.1% m/m fall in Brazilian industrial production in November and the weak surveys for December provide further evidence that the economy is in the midst of a slowdown. But the central bank will wait for further signs of …
Fed doubling down on hawkish views The minutes of the Fed’s December policy meeting reveal officials in hawkish mood, with participants arguing that “a restrictive policy stance would need to be maintained until the incoming data provided confidence that …
4th January 2023
While our forecast that the economy would slow in 2022 on the back of high inflation and Fed policy tightening was right, like every other forecaster we were surprised by its extent. This threw off our call for further property yield falls in 2022. But we …
The latest JOLTS data suggest that labour market conditions remain quite tight and a lot more adjustment is needed to ensure that the drop back in price inflation to 2% will be sustained. While the job openings rate was unchanged at 6.4% in November, …
Index drops into recessionary territory The decline in the ISM manufacturing index to a two-and-a-half year low of 48.4 in December, from 49.0, is another sign that the economy lost more momentum at the tail-end of last year. Nearly all the survey-based …
December FOMC minutes may reveal impact of softer CPI prints on Fed thinking (19.00 GMT) We think the US trade balance narrowed dramatically in November (13.30 GMT) Sign up for our Drop In on the outlook for global inflation here Key Market Themes …
China’s abandonment of its zero-COVID policy could lead to supply chain disruption in other EMs, particularly other parts of Asia and Mexico, though we’re not too concerned yet. And outbound Chinese tourism is likely to soar, to the benefit of Hong Kong …
Weaker ISM shows activity stalling, but labour market conditions remain tight The decline in the ISM manufacturing index to a two-and-a-half year low of 48.4, from 49.0, is another sign that the economy was losing momentum at the tail-end of last year. …
Rates on hold, but cuts still some way off Poland’s central bank (NBP) left interest rates unchanged at 6.75% again today. We expect the next move by the NBP will be an interest rate cut , although that is only likely to arrive towards the end of 2023. …
The sharp fall in the Egyptian pound today, coming in the wake of last week’s move to ease FX restrictions, suggests that the authorities are starting to make good on their pledge to shift to a more flexible exchange rate regime. There are already signs …
Lending weak, but no longer falling A second consecutive increase in home purchase applications in December suggests that declining mortgage rates have allowed buyer demand to bottom out. Indeed, as we expect mortgage rates to continue to fall, the …
The nomination of a less dovish candidate to succeed BoJ Governor Kuroda would probably signal that Yield Curve Control will soon be abandoned, though we would still expect the Bank to keep its short-term policy rate at -0.1%. This would result in a …
Net lending rises further despite worsening outlook Net lending to property accelerated in November to an 11-month high. But given the worsening economic and property outlook we expect it will soon go into reverse. Indeed, investment activity is now …
