The US dollar has fallen back across the board in May as expected interest rate differentials have shifted against the US vis-à-vis many other economies, and risk sentiment has recovered. Overall, the greenback remains caught in something of a crosswind. …
31st May 2024
Government spending set to reaccelerate The official PMIs for May published today were disappointing. Taken at face value, they imply that the improvement in economic momentum earlier this year has stalled. One reason appears to be that government …
The key event next week will of course be Thursday’s ECB meeting which we have previewed separately in our ECB Watch . In brief, we think the Bank will go ahead and cut its deposit rate from 4.00% to 3.75% but now expect it to leave rates on hold in July …
Our View: We expect equities to outperform most other assets as a bubble fuelled by AI-enthusiasm continues to inflate, supported by a backdrop of resilient economic growth and monetary easing cycles In particular, we expect US equities to continue to …
With both Labour and the Conservatives this week ruling out increases in income tax, national insurance and VAT, it remains difficult to see how cuts to public services can be avoided after the election. (For all our election analyses, see here .) But …
Growth softer than expected, but strength under the surface The 1.7% annualised gain in GDP in the first quarter was weaker than the Bank of Canada’s forecast for an above-potential 2.8% increase. With consumption growth looking much stronger than …
Having pre-committed to doing so, we think the ECB will cut rates next week. But given the jump in services inflation in May, we now expect a pause in July. We forecast the ECB to cut its deposit rate to 3% by year-end. Having agreed to do so at their …
What to watch after Mexico’s election Mexicans head to the polls on Sunday to elect thousands of local officials, a new congress and the country’s next president. We have covered the macroeconomic implications of the election in several pieces – all of …
The decision by OPEC+ to move its crunch meeting from in-person on Saturday in Vienna to online on Sunday, historically a sign of an uneventful meeting, suggests that members will rollover production cuts into the second half of this year. But a host of …
Inflation data still too strong, but slump in real spending the bigger story As expected, the PCE deflator data suggest that, although not quite as bad as the first three months of the year, inflation was still running above target in April. At the same …
This page has been updated with additional analysis since first publication. Economy booming on eve of election The GDP figures for Q1 confirm that India’s economy slowed a touch at the start of the year but was nonetheless still booming on the eve of the …
Vietnam rate hike risk The risk of monetary tightening in Vietnam has risen over the past few weeks due to concerns about the currency and inflation. We still think a rate hike is unlikely. But even if the central bank (SBV) did raise rates now, we think …
This page has been updated with additional analysis since first publication. Increase in inflation won’t stop ECB from cutting next week May’s increases in headline and core inflation – and jump in services inflation to a seven-month high – won’t stop the …
The US puts up trade barriers, will Europe follow? The US announced that it is ratcheting up tariffs on Chinese-made electric vehicles, lithium-ion batteries, and solar panels. We covered the announcement and its implications across our Climate, Global, …
Net lending subdued on the back of rising interest rates Following two consecutive quarters of declines, net lending to property reached £891m in April. The increase was driven by a £731m rise in lending to standing investments, but development lending …
This page has been updated with additional analysis since first publication. Drag on activity from high interest rates continues to fade While April’s money and lending figures suggest the recent rebound in the housing market is cooling and households …
Acceleration in growth, with rebalancing under the surface The strength in Turkey’s economy in Q1 – GDP expanded by a whopping 2.4% q/q – was driven by a large boost from net trade while private consumption growth slowed sharply. This offers signs that …
Persistently high mortgage rates cause prices to stagnate Despite a small increase in the Nationwide house price index in May, the big picture is that the slight rise in mortgage rates since the start of the year has caused house prices to stagnate. The …
Will PM Modi secure another majority? Voting in India’s seven-week election extravaganza ends tomorrow, and results are due to be announced on Tuesday 4 th June. Clients can see all of our election insights here . We will also be discussing the election …
Fertility rate may have fallen to fresh lows According to some estimates , Japan’s fertility rate fell from 1.26 in 2022 to 1.21 last year. Although higher than in some other Asian economies, for Japan this would still be a fresh record low. (See Chart …
Disinflation stalling The economic data released this week once again highlighted the dilemma the Reserve Bank of Australia finds itself in. On the one hand, the April Monthly CPI Indicator showed the second consecutive rise in both headline and trimmed …
This report was first published on Friday 31st May covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Monday 3rd June and the Caixin services and composite PMIs on Wednesday 5th June. Recovery still ongoing The PMIs for May …
This page has been updated with additional analysis since first publication. GDP should rebound this quarter On balance, the modest decline in industrial production and the rebound in retail sales in April point to a decent rebound in GDP this quarter. …
This page has been updated with additional analysis since first publication. Slowdown in underlying inflation has further to run May’s rebound in inflation in Tokyo largely reflects a jump in electricity inflation that has further to run, but underlying …
The early results from South Africa’s general election suggest that the African National Congress (ANC) will fall short of securing a majority, and may be forced into forming a coalition with the centre-right Democratic Alliance (DA), or either (or both) …
30th May 2024
Stick or twist for OPEC+ Oil markets are gearing up for Sunday’s OPEC+ meeting which looks set to be a close call on how the group decides to take forward oil policy. OPEC+ has reduced its oil output by 3.2mn bpd since October 2022, but oil prices have …
Overview – Capital values for most property sectors are now close to bottoming out, but with yields set for a period of stability the recovery will be modest by past standards. We expect all-property total returns to average 7.5% p.a. over 2024-28. That’s …
The stronger than expected Q1 GDP data in several major economies suggest that the global economy got off to a strong start in 2024. But we expect global growth to fall back to a slightly below-trend pace in the next few quarters, as China’s fiscal …
How important are elections for the trajectory of economies? The latest episode of The Weekly Briefing from Capital Economics explains why the just-announced general election may not be hugely consequential for the UK economy, but also why South Africa’s …
China’s economy is expanding at a decent pace, with the manufacturing sector a key source of strength. The country has been increasing its global export market share, and it is unlikely that Biden’s new tariffs will do much to erode recent gains. A …
Headline inflation across most of Emerging Asia is now either below or only slightly above central bank targets. Nevertheless, policymakers have struck a slightly more hawkish tone recently due to concerns about currency weakness. But we think that weaker …
During the coming months, we expect falling goods and energy inflation to pull down the headline inflation rate in Sweden. This should encourage policymakers to cut rates from 3.75% currently to 3.00% by the end of the year. However, we are not pencilling …
Labour market gradually cooling We forecast another 175,000 gain in non-farm payrolls in May, with the unemployment rate expected to be unchanged at 3.9%. Wage growth should be unchanged at a muted 3.9%. Healthcare job surge to continue The more modest …
Our China Activity Proxy suggests that economic momentum remains reasonably robust, fuelled by continued gains in manufacturing and a further recovery in services activity. A step-up in fiscal support and new property support measures may continue to …
We suspect that monthly core price growth will accelerate marginally from the very soft rates seen in the first four months of the year but, on the whole, core price pressures should remain muted. That sets the stage for both core and headline inflation …
Rates on hold, SARB to keep a close eye on election results The South African Reserve Bank’s decision to leave the repo rate unchanged at 8.25% was never in doubt. Governor Kganyago said as little about the election as was possible, but the MPC will be …
Repo rate on hold at 6.50% next week, but MPC to drop its hawkish policy stance That should set the stage for an August rate cut We think rate cuts will be a bit more aggressive this year than consensus forecasts The Reserve Bank of India (RBI) will …
After steep falls in values and with interest rates set to fall back, ingredients are in place for a recovery in the UK commercial property market. But have values really bottomed out, and which sectors are likely to see the strongest returns as rates …
Recovery in regional sentiment takes a breather The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) were a mixed bag in May and our regional-weighted measure edged down slightly. Even so, that still leaves …
This page has been updated with additional analysis since first publication. EC Survey points to weak economic growth and easing price pressures The EC business and consumer survey for May is consistent with weak growth in euro-zone GDP, while price …
Early signs point to low ANC vote, rand on the backfoot The early results from South Africa’s election which took place yesterday point to the ruling ANC securing a vote share closer to the low end of projections (at just over 40%), increasing the chances …
We expect the 10-year Bund yield to fall by the end of the year as the ECB loosens policy more than investors are currently discounting. Judging by the initial fall in 10-year Bund yield this morning, German state-level inflation data released earlier in …
29th May 2024
Sovereign bond yields in Russia have surged to multi-year highs this year as markets have increasingly questioned the trade-off between the war effort on the one hand and policymakers’ ability to maintain fiscal stability and control inflation on the …
Following the previous large quarterly increase, improvement in all-property valuations stalled in the first quarter of the year despite a rise in the 10-year Treasury yield. There was little change at the sector level. Industrial continued to look …
Pieces almost in place for the Bank of Canada to cut But economic and labour market resilience means Bank can wait to be 100% sure Rates to be cut by 25 bp at each meeting from July, faster than markets pricing in The rapid easing in core inflation …
A victory for Claudia Sheinbaum in Mexico’s election on Sunday is likely to see a continuation of Amlo’s generous social policies – which will also make Banxico’s fight against inflation harder. The main points of contrast with Amlo are that she will face …
The stickiness of inflation in April has led us to shift back our forecast for the timing of the first interest rate cut from 5.25% from June to August. Even so, our view that CPI inflation will fall from 2.3% in April to below 1.5% by the end of this …
While German property yields stabilised in Q1, further indications of rising distress give us confidence in our view that property values there have not yet reached the bottom. The stabilisation in German prime all-property yields in Q1 has led some to …
