Second month of declining loan balances and plenty more to come The second consecutive monthly decline in outstanding commercial real estate loan balances held by US banks in October means the data are starting to reflect the pullback in real estate …
13th November 2023
This page has been updated with additional analysis since first publication. Renewed food price spike the key inflation threat Headline consumer price inflation edged down to a four-month low of 4.9% y/y in October, but that’s already old news given the …
Bond markets have been on the proverbial rollercoaster over the past month, with long-dated yields shooting up over the second half of October only for both long and short-dated yields to collapse over the past week. The net result is that 10-year US …
While the official measure of rental growth is running at record highs, pay has risen even faster. So, at face value rental affordability is good by historic standards. But that doesn’t account for the fact that market rents have jumped by more than the …
Economy likely to have slowed sharply in Q3 Turkish retail sales and industrial production both fell again in m/m terms in September and GDP growth looks to have slowed sharply in the third quarter as a whole. The impact of policy tightening will take a …
Kenya 2024 Eurobond risks fall back Kenya’s partial payment of its $2bn Eurobond will improve its chances of avoiding a sovereign default next year. Extra IMF funds and an improved balance of payment position will also help, but sticking with austerity …
10th November 2023
Although yesterday’s poorly digested auction of 30Y Treasuries served as a reminder that the outlook for fiscal policy has the potential to undermine US long-dated government bonds, we still think their yields will end 2024 lower than they are now given …
Climbing inflation will keep pressure on the CBR The further chunky rise in Russian inflation to 6.7% y/y in October provides additional evidence that demand is outstripping supply in Russia’s economy. We think that inflation will continue to rise over …
Central bankers have a tough task when it comes to communicating with markets – just ask the Bank of England’s Huw Pill, who started the week hinting at rate cuts and ended it with an insistence that the current setting has to remain in place to quash …
The Bank of Canada’s latest Summary of Deliberations was more hawkish than most probably expected, with some members of the Governing Council still seemingly arguing for further rate hikes. That said, the weak GDP data released since the Bank’s last …
Energy disinflation; credit conditions still tight Crude oil price slump to bolster disinflation Despite the ongoing war in the Middle East, crude oil prices have slumped – with the WTI benchmark down from a peak of more than $90 per barrel in late …
In an otherwise quiet week, the greenback seems set to close higher against most major currencies, reversing much of its decline following the October payrolls data release . We think the dollar’s rise is largely due to the renewed rise in US Treasury …
With vacancy set to stay elevated, development finance remaining expensive, and values to continue falling next year, we expect construction starts will be weak in all sectors over the next 12 months. This will weigh on completions into the medium term, …
Copom’s inflation and fiscal worries There were two key-takeaways from the minutes to last week’s Brazilian central bank meeting, which were released earlier this week. First, despite the recent falls in inflation, Copom remains concerned about …
Inflation risks stop CEE easing cycles in their tracks Communications from central bankers across Central and Eastern Europe (CEE) this week struck a decisively hawkish tone, suggesting that interest rates could be left on hold across most of the region …
Renewed inflation concerns The continued rise in consumers’ inflation expectations in November showed that October’s jump was not a one-off and will be of some concern to the Fed. However, the headwind from persistently weak confidence is likely to weigh …
We may have to wait a bit longer for the start of the mild recession that we have been forecasting. The published quarterly growth rate of real GDP of 0.0% in Q3 implies that the economy stagnated. Although technically real GDP fell by 0.03% q/q (or £163 …
This page has been updated with additional analysis since first publication . In this Update , we present our sovereign debt heat map that provides a snapshot of debt risks across Sub-Saharan Africa. Government debt is still above pre-pandemic levels and …
Edging away from ultra-loose policy The “Summary of Opinions” from last week’s Bank of Japan Monetary Policy Meeting released yesterday show a Policy Board increasingly confident that the long-term 2% target is coming into sight. The likelihood of …
BSP on a knife edge The Philippines central bank (BSP) hiked interest rates at an unscheduled monetary policy meeting on 26 th October, and at the time warned the upcoming data on GDP and inflation (both published this week) would be crucial in deciding …
Limited fiscal impact from grain scheme extension The latest batch of state elections in India kicked off this week. Voting started in Chhattisgarh and Mizoram on Tuesday and voters will go to the polls in Madhya Pradesh, Rajasthan and Telangana over the …
It’s been a busy week in politics on the Iberian peninsula. In Portugal, a snap election has been announced for March 2024 after Prime Minister António Costa was forced to resign amidst a corruption investigation. And after months of negotiations, Spanish …
Resilience of export volumes unlikely to last China’s exporters are doing better than the headlines suggest. Most analysis focuses on what is happening in y/y terms to export values – they have been contracting for six months. Less widely understood is …
The fall in Brazilian inflation to 4.8% y/y in October confirms that the mini inflation cycle has now topped out. Inflation will continue to fall in the coming months, paving the way for further interest rate cuts. That said, we expect inflation to remain …
Flows out of EM bond and equity markets have eased since early October, but we think the recent dollar weakness which has helped to support capital flows into EMs is unlikely to continue. The good news is that current account deficits have narrowed in …
One and done for the RBA The main event this week was the RBA delivering a widely-anticipated 25bp rate hike at its meeting on Tuesday. Our assessment is that the increase in the cash rate is essentially something of an insurance policy, aimed at ensuring …
This page has been updated with additional analysis since first publication. Jump in inflation not enough to prompt another rate hike Despite the unexpected jump in Norway’s headline and core inflation rates in October, we still think the Norges Bank is …
This page has been updated with additional analysis since first publication. Recession or not, economy not weak enough to quash price pressures The Q3 GDP data will spark a big debate about whether or not a recession has just begun (the published growth …
Even though we expect the S&P 500 to end 2024 at a much higher level than it is now, we doubt it will build on its recent gains over the coming months given the outlook for the economy. The story for much of this year has been the surprising resilience of …
Banxico remains hawkish, but may be starting to contemplate cuts Mexico’s central bank sprung no surprises and left its policy rate at 11.25% at today’s Board meeting and the accompanying statement retained its hawkish bias. That said, there was a very …
9th November 2023
High carry EM currencies have rallied as US bond yields have fallen back and risk sentiment has improved, but we still expect most of these currencies to come under renewed pressure in the coming months. Since the peak in 2-year Treasury yields on 18th …
While the US dollar has bounced back a bit this week, its struggles over the past month or so are in some ways similar to the lead up to its sharp fall in Q4 of last year . But we think a comparable slide over the coming months looks unlikely . After …
Following the release of our new analysis on real equilibrium interest rates (R*) last month, we held an online Drop-In last week and in-person Roundtable events with clients yesterday to discuss our findings. This Update answers several of the questions …
Governments across Central and Eastern Europe (CEE) need to deliver significant fiscal tightening over the coming years to prevent public debt ratios from grinding higher. The risk of an imminent fiscal crisis across the region looks low relative to many …
Shortly after the release of the October CPI report, our US Economics team held a client briefing all about the October report and the inflation and growth outlooks and how they’ll shape Fed policy. They answered client questions and addressed key issues, …
Saudi’s FDI revision paints a slightly better picture The Saudi Press Agency released a statement on Tuesday revealing that foreign direct investment (FDI) into the Kingdom has been much stronger than previously thought. But there is still work to be done …
The bankruptcy of WeWork in the US was a predictable end to a long-running saga. Its effects on office markets will not be systemic, but they will reinforce existing weaknesses and pile more bad news on the sector just at the wrong time. The announcement …
The US dollar’s struggles over the past month or so are reminiscent of the lead up to its sharp fall in Q4 of last year, but a similar slide over the coming months looks unlikely. Instead, we continue to think that the greenback will muddle through, …
Persistent balance of payments strains brought pressure on some of the region’s non-oil producing countries who employ fixed exchange rate regimes. FX reserves have been depleted to support currencies and, in some cases, these are insufficient to cover …
Protests against a large copper mine have raged in Panama over the past few weeks. If mine production ceased, there would be noticeable impact on global supply but the risk of this happening is small. The mine is a key part of Panama’s economy and is only …
Higher services inflation to keep Banxico in hawkish mood Mexico’s headline inflation rate dropped to a 32-month low of 4.3% y/y in October, but the fresh rise in services inflation will alarm officials at Banxico. We doubt this will prompt a restart to …
GDP growth appears to have all but stalled in Q3 but that was after a very strong first half. There are mounting signs that a virtuous cycle is forming between wages and prices. This is making the Bank of Japan increasingly confident that it can steer …
Bank lending data from the major advanced economies confirmed that lending was very subdued in September and the latest bank lending surveys show that banks have since tightened their lending criteria further. With demand for loans also falling, the drag …
We have raised our gold price forecast to reflect the current heightened geopolitical risk. We think the price will rise further next year as the limited fallout from the conflict won’t prevent the US Fed from starting to cut interest rates in 2024. Our …
An opposition win in Taiwan ’ s upcoming presidential election could lead to a complete or partial reversal of the economic sanctions that China has imposed on Taiwan ’ s economy during Tsai Ing-wen ’ s presidency. The restrictions on tourism are the …
GDP rebounded strongly in the third quarter of the year but we don’t expect this strength to last as high interest rates and weaker global growth lead to renewed economic weakness in the near term. According to the data published today, GDP rose by 3.3% …
This page has been updated with additional charts and analysis since the first publication. Deflationary returns but is unlikely to persist CPI slipped back into deflationary territory last month. This was mostly due to a drop in food inflation. But core …
A tentative improvement The past prices balance remained deeply negative in October contradicting the 1% m/m increases in house prices recorded by both Halifax and Nationwide. But a recovery in buyer enquiries suggests the decline in mortgage rates since …
8th November 2023
The ECB’s recent decision to leave interest rates on hold, and its associated communications, confirm that its tightening cycle is now almost certainly over. But despite inflation having fallen sharply, we believe the strength of the labour market, …
