Property yields rose further in Q3, but with risk-free rates now falling back, we think they will flat-line in Q4. That will help stabilise capital values, but given historically narrow yield spreads, we doubt we will see much yield compression ahead. As …
18th December 2023
Africa Chart Pack (Dec. 2023) …
We recently held an online Drop-In session to discuss the December policy meetings and the outlook for monetary policy in the year ahead. (See a recording here .) This Update answers several of the questions that we received. Would the Fed ease policy …
It’s that time of year when economists set out their views of what to expect over the coming twelve months. You can find our contribution on this dedicated ‘ World in 2024 ’ page, and listen to our podcast , in which I discuss the macro outlook for next …
This page has been updated with additional analysis since first publication. “Rezession” to drag on The renewed decline in the Ifo Business Climate Index (BCI) in December echoes the message from the Composite PMI released last week and unequivocally …
Australian households have built up more excess savings than those in other large advanced economies and we estimate that those savings will only be depleted by the end of 2025. Even so, we still expect consumption growth to keep disappointing. Real …
Household net worth fell in the third quarter, although the recent resurgence in bond and equity prices means that should soon be reversed. It is too soon to sound the all-clear for households’ finances, however, given that the debt service ratio is set …
15th December 2023
The Fed gifts the bond market, the EM growth outlook and that COP28 agreement …
The Fed’s shift away from its “higher for longer” messaging (and European central banks attempts at maintaining a hawkish stance) pushed relative interest rate expectations against the US dollar, leaving it weaker against nearly all major currencies this …
This week was a tale of two halves. In the first, prices generally came under pressure , including oil which continued its post-OPEC+ meeting plunge as concerns of oversupply persist. There were signs later in the week that those concerns have some good …
Argentina’s fiscal measures: mission impossible? With Argentina’s economy deep in crisis territory, the new Milei administration wasted no time in announcing a stabilisation plan for the economy this week. This included a steep devaluation of the peso and …
We think China’s equities could outperform those elsewhere in the near term, but suspect their longer-run outlook is fairly bleak. China’s equities got a bit of a boost earlier today from the country’s November activity data, which showed a healthy …
Russia’s economic hit: just how large? Analysis by the US Treasury Department published this week gained a lot of attention for highlighting that Russia’s economy is now 5% smaller due to the war and sanctions than it otherwise would have been. The blog …
Ethiopia restructuring like to drag on after default Ethiopia’s sovereign default appears imminent after the government missed a coupon payment on its 2024 $1bn Eurobond. The prominence of Chinese and private bondholders on the continent continue to …
A weak November but lower mortgage rates ahead November was a weak month all round for housing, with prices falling at a faster pace and starts plunging. Lenders are already cutting mortgage rates in response to the recent drop in bond yields, which could …
Although the flash PMIs ticked up in most cases in December, they suggest that advanced economies will start 2024 on a weak footing. Meanwhile, outside of the US, the subdued outlook for demand seems to be weighing on employment growth, which should take …
Overview – We expect most commodity prices to rise in 2024 as major central banks loosen monetary policy and economic activity starts to pick up. Meanwhile, China’s policymakers have taken steps to support the ailing property sector, which should be less …
Fed & markets catching up with inflation reality The Fed’s embrace of interest rate cuts next year is understandable when the latest data suggest that core PCE inflation is rapidly closing in on the 2% target. The plunge in expectations in the aftermath …
If the main objective this week of the Bank of England’s Monetary Policy Committee (MPC) was to keep interest rates unchanged at 5.25% and avoid fuelling even more bets on rate cuts, then it looks like a case of mission accomplished. Even so, the Bank’s …
EM GDP growth has started to weaken, and we expect activity to enter a slower phase over the coming quarters. While some economies that underperformed this year will start to recover, many of the EMs that fared surprisingly well in 2023 will slow by more …
Manufacturing boosted by end of UAW strike The 0.3% m/m rebound in manufacturing output in November was, in reality, a disappointment, since it included a 7.1% m/m rebound in motor vehicle output, after the UAW union ended its strike at the Big Three …
Overview – Persistent weak growth and elevated (albeit soon-to-be falling) interest rates continue to spell trouble for real estate values. We see NOI growth softening further over the next year as the industrial rent boom gives way to more “normal” …
Sharp fall in inflation adds to pressure for rate cuts, but caution likely for now The larger-than-expected fall in Israeli inflation to 3.3% y/y in November suggests that the inflationary impact of the war and the sharp rise in government spending have …
ECB is not for turning… yet In contrast to the Fed, but similar to the Bank of England, this week the ECB pushed back against expectations that it would start to cut interest rates in early 2024. (See our Drop-in here .) In the ECB press conference, …
Vietnam in the “lean US camp” Vietnam this week played host to President Xi Jinping of China and in doing so became the only country in the world this year to have received state visits from the leaders of both the US and China. During Xi’s visit, the …
Inflation accelerates, pressure mounts on CBN to deliver large rate hikes Nigeria’s headline inflation rate rose further to reach 28.2% y/y in November, as the naira’s weakening continued to pass through. Aggressive interest rate hikes are needed to …
CBR slows down tightening, cycle not yet over Russia’s central bank (CBR) delivered a 100bp interest rate hike at today’s meeting, to 16.00%, and we still think that strong inflation pressures will force another rate hike in Q1. Today’s hike was in line …
Market capitalisation closes in on US$4trn The latest leg up in the Sensex triggered by the announcement of the BJP’s thumping victories in three state elections has continued into this week, helped by a broader rally in global equities following the …
We think that global growth will undershoot consensus expectations in 2024 as the lagged effects of monetary policy tightening filter through. Among the advanced economies, the US will continue to outperform Europe. And while China’s policy-induced …
The drop-back in the euro-zone Composite PMI in December provides more evidence that the economy is in recession as domestic and foreign demand contracts. The fall in the euro-zone Composite PMI from 47.6 in November to 47.0 in December left it lower than …
This page has been updated with additional analysis since first publication. Resilient activity to encourage BoE to double down on high for longer The rise in the flash composite activity PMI, from 50.7 in November to 51.7 in December, increased the …
“Big Australia” isn’t going anywhere We found out yesterday that population growth in Australia hit a record high of 2.4% y/y in Q2, as the post-pandemic boom in net overseas migration continued apace. (See Chart 1.) Moreover, we estimate that, allowing …
This page has been updated with additional analysis and charts since first publication. Recovery still underway The main bright spot was a healthy pick-up in industrial output thanks to the strength in exports. Retail sales and fixed investment remained …
Services sector running red-hot The strong Q4 Tankan released this week adds to the case for the Bank of Japan to abandon ultra-loose monetary policy. Of particular importance is that the Tankan shows mounting signs of overheating in the services …
Weak sentiment isn’t the main headwind China’s leadership gathered earlier this week for the Central Economic Work Conference (CEWC), which is held every December to discuss the economic targets and policy settings for the following year. The …
This page has been updated with additional analysis since first publication. Recession unlikely The composite PMI rebounded in December, which means we think there will unlikely be an incoming recession. The manufacturing PMI edged down further but the …
Rates on hold, February may be too soon for first rate cut Mexico’s central bank left interest rates unchanged at 11.25% again today and there was no further tilt away from the hawkish bias in the accompanying statement. The likelihood that Banxico will …
14th December 2023
Recent falls in Treasury yields have bought mortgage rates back down from a peak of 8% in October to 7% earlier than we had anticipated, setting the scene for a recovery in housing market activity in 2024. That said, as we don’t think borrowing costs will …
While central banks remain reluctant to declare victory over inflation just yet, bond markets appear more than happy to do so on their behalf. With most of the policy rate cuts which we forecast over the next couple of years now already discounted, we now …
Turkey’s gross international reserves have hit a record high recently which, on the face of it, suggests that the policy U-turn since May has helped to diminish the country’s balance of payments vulnerabilities. But the central bank’s large on- and …
Egypt: Year one of al-Sisi’s third term will be crucial Figures over the weekend showed that inflation in Egypt slowed but, with President al-Sisi all but confirmed to be re-elected, policy moves over the coming weeks will dictate how inflation develops …
The ECB left interest rates on hold today and pushed back against expectations that it will start cutting rates as soon as March next year. However, we think inflation and GDP growth will be lower than the ECB forecasts next year and anticipate five 25bp …
This week, we held a series of property roundtable discussions with clients in our London office as part of our World in 2024 series. In this Update, we outline our thoughts on the most interesting questions raised, covering electoral uncertainty and …
A third consecutive decline in sales volumes The slump in manufacturing sales volumes in October suggests that there are downside risks to the flash estimate that GDP rose by 0.2% m/m at the start of the fourth quarter. The 2.8% m/m decline in …
The Bank of England sprung no surprises, leaving interest rates at 5.25% for the third time in a row and pushing back against the prospect of near-term interest rate cuts. While the recent soft wage and inflation data mean the Bank may not wait as long as …
This page has been updated with additional analysis since first publication. Solid consumption growth supports soft landing The rebound in retail sales in November provides further illustration that the continued rapid decline in inflation is not coming …
ECB holding the line for now The ECB’s decision to leave its deposit rate unchanged at 4.0% today and make only limited changes to the policy statement suggests that policymakers are pushing back against market expectations for rate cuts to begin in March …
Few signs Bank of England is starting to contemplate rate cuts The Bank of England sprung no surprises, leaving interest rates at 5.25% for the third time in a row and pushing back against the prospect of near-term interest rate cuts. While the recent …
