Fed delivers a hawkish rate cut The Fed did cut interest rates by an additional 25bp today, as was largely expected, taking the fed funds rate down to between 4.25% and 4.50%. But the vote was not unanimous and, in a hawkish shift, the new median …
18th December 2024
UK equities have kept up with other non-US ones in recent months despite a string of weak domestic activity data and stubborn inflation pressure. We think they will outperform most non-US markets in 2025, with the FTSE 100 hitting 9,000 by end-2025. The …
Africa Chart Pack (Dec. 2024) …
Overview – The near-term economic outlook has brightened, with lower interest rates feeding through and consumption benefitting from the recent strong pace of real income growth. That should help to drive quarterly GDP growth above 2% annualised in the …
Is the current account deficit the biggest risk to US outperformance? The precarious nature of the outlook for the Federal budget deficit is well appreciated at this stage, but what if the bigger crisis risk is the mounting current account deficit? The …
Our new Bank of England Caseometer helps track whether the Bank is becoming more inclined to cut interest rates faster and further or slower and not as far. This dashboard was last updated on 19th December 2024. If you have subscriber access to the data …
Post-hurricane rebound marred by multifamily weakness The decline in housing starts in November was entirely due to weakness in multifamily construction, which outweighed a post-hurricane rebound in single-family construction. The rise in permits to a …
The incoming Trump administration is threatening to put new tariffs on European exports. In our view, given their limited macroeconomic impact, they will not be a game-changer for commercial property. But in some sectors, notably industrial and, within …
Underlying inflation remains high but is on a downward trend and we expect it to fall much further next year. This should prompt the ECB to cut interest rates a bit further than investors anticipate. Data published this morning revealed that euro-zone …
A collapsing currency. A gaping budget deficit. And a president adding fuel to the fire. As a sense of crisis envelopes Brazil, economists from our EM and Markets teams held this special briefing on the market, policy, and the implications for Latin …
BoT to resume easing cycle next year Thailand’s central bank (BoT) today left interest rates unchanged (at 2.25%), but kept the door open to rate cuts next year. With inflation set to stay very low and growth likely to struggle, we are expecting a total …
Currency concerns to keep Bank Indonesia on the sidelines Bank Indonesia today left interest rates on hold at 6.00%, and given worries about the exchange rate we don’t think it will be until the second half of next year at the earliest that it resumes …
This page has been updated with additional analysis since first publication. Further rebound rules out an early Christmas present from the BoE Coming on the back of the stronger-than-expected rise in wage growth in yesterday’s release, the further …
We expect the US dollar to appreciate a bit further in 2025 as the US economy and stock market continue to outperform peers and president-elect Donald Trump brings in extensive tariffs next year. As widely anticipated, the Republican sweep in the November …
17th December 2024
The sharp rise in transactions in October and the acceleration in house price growth in November suggest some relief rally or pent-up demand after the Budget is more than offsetting the recent rises in mortgage rates. In any case, if we’re right that Bank …
We think corporate credit spreads in the euro-zone will widen only slightly next year, despite dim economic prospects. Corporate credit spreads, as captured by the option-adjusted spreads (OAS) of ICE BofA Corporate Investment grade (IG) and High Yield …
What are the risks and opportunities in global macro in 2025? In our latest briefing, Capital Economics’ senior economists shared their perspectives on the key themes for the coming year. From the implications of a second Trump administration to European …
Overview – Slowing growth across Emerging Europe in recent quarters has set a downbeat tone heading into 2025. With domestic and external headwinds remaining strong, we think that most economies in the region will disappoint consensus expectations for …
Overview – Falling inflation and looser monetary policy will help GDP growth to accelerate across Sub-Saharan Africa next year. A shift towards trade protectionism in the US will hurt certain sectors in certain countries, but is unlikely to have a …
Output falls further, as post-strike aerospace manufacturing recovery delayed The fall in industrial production in November, despite the partial reversal of the earlier temporary disruptions caused by the hurricanes and strike at Boeing, highlights that …
Underlying inflation pressures building despite downside headline surprise The surprise fall in headline inflation back below the 2.0% target in November reflected steep price falls in a handful of components related to consumer goods, driven by Black …
We think US equities will fare better in 2025 than the other major asset classes we monitor, as the AI bubble inflates further. But we expect equities elsewhere generally to lag those in the US and provide worse returns than “safe” sovereign bonds. We …
The region recorded robust growth in Q3 but we think that tight policy, worsening terms of trade and US trade protectionism will keep GDP growth in Latin America below consensus expectations in the coming years. Fiscal risks have intensified, in …
This page has been updated with additional analysis since first publication. Broad-based strength shows consumer resilience The solid rise in retail sales in November was led by vehicle sales but still showed signs of broad-based strength, with control …
Rates on hold, new MNB Governor will have little scope to cut in 2025 The Hungarian central bank (MNB) left its base rate on hold again today, at 6.50%, and we think that a rise in inflation in early 2025 will keep rates on hold until at least the new …
Given the deterioration in the outlook for Chinese equities and the prospect of a markedly weaker renminbi, China’s demand for gold in 2025 will be stronger than we had previously expected. In turn, this will help offset the downward pressure on gold …
Overview – China’s leadership has signalled that policy will be loosened further, which will provide a near-term prop to activity. But we still expect China’s growth to slow next year, because of the more challenging external environment and a further …
After a stellar run, India’s economy has entered a softer patch that will continue for a few more quarters. We think that will portend an underperformance in local equities relative to other major benchmarks. Headline CPI inflation has fallen back within …
This page has been updated with additional analysis since first publication. German economy set to remain weak The Ifo Business Climate Index (BCI) remained deep in recessionary territory in December. While the survey has overstated the weakness in the …
This page has been updated with additional analysis since first publication. Rebound in wage growth will add to BoE’s inflation concerns The big rise in regular private sector pay growth in October will increase the Bank of England’s concerns about a …
The Fall Economic Statement (FES) showed a much larger budget deficit for the previous fiscal year than previously estimated, but that was largely due to one-off charges related to indigenous settlements. Compared to Budget 2024, the new net spending …
16th December 2024
While equities in Germany have managed to ride out weak growth and political uncertainty this year, those in France have not. We suspect that they will all fare poorly next year, as those adverse conditions remain and a trade war takes a toll. Today …
The latest batch of PMIs suggests that the US economy is growing strongly while Europe is stagnating or contracting. The US economy is no doubt growing more strongly than its advanced economy peers heading into 2025, but the PMIs are probably overstating …
Housing market heating up The rise in home sales in November builds on the jump in October and is particularly positive considering some buyers may have held off from purchases ahead of the new mortgage rules that took effect this month. Prices are set to …
EM GDP growth picked up in the second half of the year but faces headwinds in 2025 from tight policy at home and challenges abroad. Our growth forecasts generally sit below the consensus. Monetary easing will continue but, outside Asia, high inflation …
Immigration has probably added around 0.6%-pts to GDP growth per year on average across advanced economies since the pandemic. But tighter restrictions on immigration will weigh heavily on GDP growth in the US and Canada over the next few years. And the …
Earlier this month, we published our key macro and market themes for 2025. It has also become tradition at this time of year to publish a list of key risks to watch for in the coming 12 months. This can be a fool’s errand: too often, these descend into a …
Overview – We expect economic growth in the euro-zone to remain sluggish. This is partly due to adverse demographics and structural forces hampering the competitiveness of industry. But past monetary tightening will continue to weigh on investment and …
This page has been updated with additional analysis since first publication. PMIs raise concerns over the prospect of stagflation Despite the composite PMI staying at 50.5 in December, at face value it’s consistent with the 0.1% q/q rise in real GDP in Q3 …
This page has been updated with additional analysis since first publication. PMIs strengthen the case for looser monetary policy December’s PMI survey for the euro-zone suggests that the economy is contracting and that price pressures remain largely under …
An unexpected loss of momentum China’s economy appears to have slowed last month, despite tailwinds from recent policy easing. Growth still looks on course to pick up this quarter, but the disappointing November data underscores the challenge policymakers …
In the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil Shearing outlines the three big policy quandaries facing three big DM central banks. He unpacks the ECB’s December decision, previews the upcoming Fed and Bank …
13th December 2024
Halfway through the December round of central bank policy announcements the US dollar remains on the front foot, with the DXY index again close to its post-2022 high. Arguably, the dollar’s strength this week mainly reflects continued disappointing news …
Winner and losers from Assad’s downfall The fall of Syria’s President Bashar al-Assad last weekend is a monumental development after a period of 54 years in which his family had ruled the country. While there is still a high level of uncertainty over the …
South Africa October activity data point to recovery While data out this week showed renewed struggles in South Africa’s mining sector, other figures suggest that a recovery has taken hold in Q4. The retail sector recorded a 1.6% m/m gain in October, more …
Bank of Canada signals caution The Bank continued its easing cycle this week with another 50bp cut, taking the policy rate down to 3.25%. While that was widely expected, the hawkish tone of the policy statement prompted investors to pare back expectations …
