Most commodity prices rallied on Friday as rumours circulated that China was considering a relaxation of its zero-COVID policy. However, in the absence of any official statements to that effect and the relatively low levels of vaccination, we are …
4th November 2022
Despite energy price caps and direct support for households, we think euro-zone private consumption will fall further than most anticipate in the coming months, and we expect investment and exports to fall too. All told, the forthcoming recession is …
NBP divided on the length of its tightening cycle The divergent views among policymakers at the National Bank of Poland (NBP) make it increasingly difficult to tell whether the central bank’s tightening cycle is coming to an end. We expect the NBP to …
The modest fiscal loosening unveiled in the Fall Economic Statement this week is unlikely to move the needle much for monetary policy, but the surge in employment in October and the acceleration in wage growth nevertheless leave the Bank of Canada’s …
Risks have been building for a while Commercial interest rates in Korea have continued to rise over the past week despite aggressive intervention by the authorities as they struggle to calm the markets. (See Chart 1.) While the recent jump in borrowing …
While front-month European natural gas prices have fallen sharply as concerns have eased around shortages this winter, longer-dated futures haven’t fallen by as much. That reflects how difficult it will be to fill storage without Russian gas flows next …
This week’s FOMC meeting may have dashed hopes that the Fed will follow the recent dovish tilts of some other central banks. But we still think Fed officials are underestimating the degree to which their aggressive rate hikes will put downward pressure on …
ECB Governing Council members had a busy week, with just under half of them giving speeches or interviews on the outlook for monetary policy. There are four key takeaways from their comments. First, rates will rise further. All policymakers who spoke …
Mixed employment report won’t alter the Fed’s hawkish bent The October employment report had something for everyone, with continued strong gains on the payroll survey while the household measure showed a sharp fall in employment and a rise in …
Jump in employment and wage growth pressures the Bank to do more The 108,300 surge in employment in October makes a mockery of claims that the economy is on the cusp of recession and, with wage growth accelerating sharply despite favourable base effects, …
Falling inflation may keep SNB in check The reductions in headline and core inflation in Switzerland in October confirm that inflation has now passed its peak, and both measures look set to continue on a downward path next year. (See here . ) We don’t …
This week the Bank of England displayed the most extreme example of a “dovish hike” that we can recall. The hike bit; the 75 basis point rise in interest rates was the largest rise since 1992; it meant that rates have risen in each of the past eight …
Mixed employment report won’t alter the Fed’s hawkish bent The October employment report had something for everyone, with payrolls pointing to continued strong employment gains while the household survey showed a sharp fall in employment and a rise in …
Improvement in headline index will not last long As was the case last month, an improvement in delivery times and subcontractor availability drove a surprise rise on the headline construction PMI in October. But a slowing economy and higher financing …
South Africa: strikes loom as wage talks collapse South Africa is on the cusp of large public sector strikes which will deal another blow to the recovery and raise the risk of fiscal slippage a week after the Medium Term Budget Policy Statement (MTBPS). …
Recent data tell a conflicting story about the health of India’s export sector. The new export orders component of the manufacturing PMI released this week rose to 56.6. It has only been higher on one occasion since the start of 2015 . By contrast, the …
Our US Economics team held a briefing shortly after the October data release, in which they answered client questions and addressed key issues around what was happening at the Fed and Congress, including: How far the Fed will raise interest rates; Whether …
Chief Markets Economist John Higgins held a discussion with economists from across our Markets team shortly after the release of our Q4 Outlooks. During this briefing, John and the team answered client questions and highlighted key takeaways from their …
Chinese equities turned a corner earlier in the week on the back of rumours of plans to shift away from the zero-COVID policy by next March. Remarks reportedly made at a conference by Zeng Guang, the former chief scientist at China’s CDC, added fuel to …
Recession looms while inflation stays exceptionally high The final euro-zone PMIs for October paint a clear picture of falling activity and sky-high inflation. We expect the ECB to prioritise the fight against inflation and press on with raising the …
Business investment strong in Q3 Data released on Monday showed that capital goods shipments fell by 4.1% m/m in September. But across Q3, capital goods shipments rose 11.4% q/q to the strongest they have been since Q4 2018. Meanwhile, the Bank of Japan’s …
RBA increasingly worried about wage-price spiral The Reserve Bank of Australia lifted the cash rate by 25bp on Tuesday as we and most other analysts had anticipated and the marked upward revision to its inflation forecasts support our view that the Bank …
The $6bn in new federal spending measures for this year, as outlined in the Fall Economic Update , amount to just 0.2% of GDP and will have little impact on the economic outlook or monetary policy. By utilising only a small part of the windfall from …
3rd November 2022
Gold and silver prices fell following Chair Powell’s hawkish comments yesterday. But if we are right in thinking US rates won’t rise by as much as markets expect, gold and silver prices should increase next year. We forecast prices to rise from $1,630 and …
The differing tones of the Fed, ECB and BoE at their recent meetings have seen yields rise in the US more than elsewhere and reignited the rally in the US dollar. That pattern could last a few more months. But we expect falling inflation in the US to mean …
Composite PMIs for Italy and Spain probably fell further in October (09.00 GMT) We think US non-farm payrolls rose by 225,000 in October (12.30 GMT) Sign-up to our Global Economics Drop-In on the upcoming recession Key Market Themes We’re inclined to …
Saudi liquidity fears solidifying Saudi interbank rates (SAIBOR) have surged recently as liquidity conditions in the banking sector have tightened again. With no sign yet that the central bank (SAMA) is about set to step in, credit growth could slow and …
Currencies in some of the largest frontier markets, including Nigeria and Vietnam, have come under pressure recently as the external backdrop has deteriorated and domestic policy concerns have mounted. With FX reserves generally limited, this will put …
The recent easing of global supply chain problems could put some downward pressure on euro-zone goods inflation soon. But equipment shortages are still a major problem for manufacturers, while their price expectations are high. And with the labour …
Although the Monetary Policy Committee (MPC) raised interest rates today by 75 basis points (bps), from 2.25% to a 14-year high of 3.00%, it sent the strongest signal yet that it thinks rates won’t need to rise much above 4.00%. But with price/wage …
Services activity at a two-and-a-half-year low The decline in the ISM services index to a two-and-a-half-year low of 54.4 in October, from 56.7, leaves it at a level that has historically been consistent with only muted GDP growth of around 1% annualised. …
Export strength overshadowed by record fall in building permits The improvement in crop yields boosted export volumes in September, but the strength of exports was overshadowed by the also-reported record slump in building permits, which suggests that …
Exports fading; better news on unit labour costs A drop back in exports and small rebound in imports means the trade deficit bounced back to $73.3bn in September, from a downwardly revised $65.7bn. With that weakness in exports likely to last for some …
Dovish CNB unlikely to tighten further The Czech National Bank (CNB) left its policy rate on hold, at 7.00%, for a third consecutive meeting today. With inflation nearing a peak and the economy now contracting, we think rates will be left unchanged over …
Export outperformance overshadowed by record fall in building permits The improvement in crop yields boosted export volumes in September, but the outperformance of exports was overshadowed by the also-reported record slump in building permits, which …
Strength of net exports fading; better news on unit labour costs won’t stop the Fed hiking yet A drop back in exports and small rebound in imports means the trade deficit bounced back to $73.3bn in September, from a downwardly revised $65.7bn. With the …
The RBI’s out-of-cycle meeting today concluded with no decision on interest rates. That’s no surprise – it was called for administrative reasons, rather than as a response to changing economic conditions. We believe that further tightening will still be …
Dovish tilt, but rates may still rise to 5.00% Although the Monetary Policy Committee (MPC) raised interest rates today by 75bps, from 2.25% to a 14-year high of 3.00% (consensus 3.00%), it sent a strong signal that it is unlikely to raise rates to the …
Construction activity set to slow as financing constraints bite The latest RICS Construction Survey showed a rise in workloads in Q3, although the gain was small. Looking ahead, a slowing economy and higher financing costs will soon lead to a cut in …
Labour market still strong but likely to soften from here The fall in the euro-zone unemployment rate to 6.6% in September shows that the labour market remained very tight even as the economy headed towards recession. We expect unemployment to rise in …
The surge in energy prices this year has led to a sharp widening in Hungary’s current account deficit and increased its dependence on foreign capital inflows. While the central bank (MNB) seems to have put a floor under the currency recently, it remains …
Today’s decision by the Norges Bank to slow the pace of rate hikes is the beginning of the end for its tightening cycle. But we don’t expect a pivot towards interest rate cuts next year. The Bank signalled at its last meeting that after raising its policy …
PMIs picked up last month, regional divergence continues This page has been updated with additional content. October’s batch of PMIs picked up in most of the region but there remains a stark divergence in growth prospects between the Gulf and non-Gulf …
Falling inflation will allow SNB to raise rates less than others The decline in both core and headline inflation in October supports our view that Switzerland has passed peak inflation. We expect further falls in the coming months which will allow the …
The Nigerian central bank’s plans to replace high-value bank notes by the end of January will, if India’s experience in 2016 is anything to go by, disrupt activity and fail to address some of the problems (e.g. illicit activity) that policymakers are …
Malaysia’s central bank (BNM) raised its main policy rate by 25bp (to 2.75%) today, but with inflation falling and growth set to slow, we think the tightening cycle is nearing an end. Today’s move came as little surprise and was accurately predicted by …
Inflation pressures show little sign of easing Inflation in Turkey rose to 85.5% y/y in October due to a broad-based strengthening of price pressures. Even so, the central bank will remain under pressure from President Erdogan for looser policy and …
BNM closing in on the finish line Malaysia’s central bank (BNM) raised its main policy rate by 25bp (to 2.75%) today, but with inflation falling and growth set to slow, we think the tightening cycle is nearing an end. Today’s move came as little surprise …
Rebound in trade surplus won’t prevent drag from net trade in Q3 While the trade surplus bounced back in September, we’ve pencilled in a drag from net trade to Q3 GDP growth as export volumes probably didn’t rise fast enough to offset a surge in imports. …
