The large falls in Nigeria’s currency will push inflation up even further and is one reason behind our below consensus near-term GDP growth forecasts. But the good news is that the banking sector looks relatively well placed to weather this devaluation …
25th October 2023
The proposed extension to the Mortgage Guarantee Scheme could prove a good counter-cyclical policy in areas where house prices are relatively low. But the scheme has far less impact in London and the South where a much bigger deposit than 5% is needed to …
We suspect that more weakness in the housing market will weigh on real GDP by further reducing residential investment and consumer spending. This is one reason why we think the economy is close to a mild recession, if it isn’t already in one. Higher …
The euro-zone money and credit data have been very weak all year and September’s data, released this morning, were more of the same. The activity surveys are now turning downwards too, supporting our below-consensus forecasts that the economy contracted …
Our China Activity Proxy (CAP) suggests that growth slowed in Q3. But the economy was regaining momentum at the end of the quarter, led by gains in the service sector. With stimulus still flowing, this recovery should continue over the coming quarters. …
This page has been updated with additional analysis since first publication. German economy still contracting The small rise in the Ifo Business Climate Index (BCI) in October still left the index in contractionary territory, echoing the downbeat message …
This page has been updated with additional analysis since first publication. RBA to hike again as inflation surprises on the upside With price pressures being slower to abate than the RBA had anticipated, we think the Bank will deliver one final 25bp …
The October flash PMI surveys suggest that economic activity got off to a weak start in Q4, especially in Europe. And with weak activity taking some of the steam out of labour markets and inflation, we are growing more confident in our view that the Fed, …
24th October 2023
Long-term Treasury yields have risen to new cyclical highs despite a generally weak global economic backdrop. Short-term “technical” indicators also suggest to us the surge in yields may have run its course. PMI survey data released earlier today was …
Overview – Global headline inflation has fallen sharply from its peak a year ago and, despite a temporary setback due to higher fuel inflation, we expect it to fall a lot further over the coming year. The huge drag from energy inflation is now largely in …
Further falls in global steel supply are likely Monthly global steel output in September fell in year-on-year terms for the first time in 2023, in large part due to a contraction in China’s production. With demand set to remain weak and low profitability …
Active demand for London office space hit a four year high in Q3, but we doubt that will drive a decline in vacancy rates. Most of the rise will reflect churn as firms make moves that had been delayed by the pandemic, including those looking to reduce …
Reforms introduced by President Joko Widodo (commonly known as Jokowi) should enable the economy to continue growing rapidly once he steps down next year. The key question as the election approaches is whether his successor will build on the progress he …
This page has been updated with additional analysis from the post-meeting press statement and press conference. MNB slows the pace of easing, but only slightly The Hungarian central bank’s (MNB’s) larger-than-expected 75bp cut to its base rate, from …
The additional fiscal support approved today is the intervention we had been expecting and that was needed to prevent an abrupt fiscal tightening in China in the closing weeks of the year. Fiscal policy has been a prop to growth in China over the last few …
This page has been updated with additional analysis since first publication . Pick-up in services inflation to keep Banxico in hawkish mood The fall in Mexico’s headline inflation rate to a 31-month low of 4.3% y/y in the first half of October masked a …
We expect euro-zone export growth to remain weak in the coming months against a backdrop of slow economic growth in key export markets and a stronger euro. Euro-zone exports recovered well from the pandemic, outperforming the wider economy since late …
After a sharp slowdown this year, GDP growth across the Middle East and North Africa will improve in 2024 as OPEC+ starts to raise its output quotas and high oil prices allow the Gulf economies to keep fiscal policy supportive. Outside of the Gulf, …
This page has been updated with additional analysis since first publication. PMIs consistent with recession and falling inflation The further decline in the euro-zone Composite PMI in October left it well into contractionary territory and the breakdown …
This page has been updated with additional analysis since first publication. Signs that recession may be underway, but services price inflation still sticky The composite activity PMI inched up from 48.5 in September to 48.6 in October after five months …
This page has been updated with additional analysis since first publication. Faint signs the labour market hasn’t loosened as much The labour market appeared not to loosen as much as we thought in August based on the Office for National Statistics’ (ONS) …
Board will revise up FY2023 inflation forecasts but signal below-target inflation in 2025 We don’t expect any tweaks to Yield Curve Control but the policy is effectively over Negative rates will end in early-2024, YCC will formally be abandoned by …
In light of the Bank of Japan’s policy announcement this today, our Asia team hosted an online briefing all about the impact of rising bond yields on Asia’s economies and markets. Marcel Thieliant, our Japan research lead, answered questions on the BOJ …
23rd October 2023
Concerns over supply -demand dynamics in the Treasury market seem to be a key factor pushing up Treasury term premia. But we think rising inflation uncertainty among investors has also played a part. The ACM estimate of the 10-year Treasury term premium …
The Bank of Israel (BoI) left its policy rate on hold at 4.75% today and, while its communications provided little firm policy guidance, policymakers clearly have one eye on the currency and will probably keep rates unchanged while inflation risks remain …
Our forecast that the Bank of England won’t start cutting interest rates until the second half of 2024 means mortgage rates are likely to stay between 5% and 6% until mid-2024. While transactions volumes have only seen a modest decline so far, very weak …
It’s been a grim year for UK and European commercial property investment as yields have surged on the back of rising interest rates. But is a recovery on the cards now that central banks have finished hiking? When will transactions bounce back, and how …
The strong showing for Peronist candidate and current Economy Minister Sergio Massa in Sunday’s presidential election in Argentina means that the run-up to the second round vote in November is likely to see further pre-election fiscal giveaways. But these …
An intense flurry of diplomatic activity last week laid bare the fault lines of a fracturing global economy. In the Middle East, Joe Biden, Olaf Scholz and Rishi Sunak made separate visits to Israel to show their support for the country following Hamas’s …
Tunisia is stuck in a deep economic and political crisis, and with the IMF’s staff-level agreement yet to be approved, and it is only likely to get worse. We have long held the view that Tunisia is heading toward a messy balance of payments crisis and …
Amid the surge in Treasury yields and the fall in global equities, the US dollar seems set (somewhat surprisingly) to end the week broadly unchanged. In our view, the key reason the dollar has failed to rally on the back of what looks in many ways like a …
20th October 2023
US financ ial conditions may soon tighten further, as t he economy slows and credit spreads rise. But, by then, the 10-year Treasury yield may be falling. On Thursday, the 10-year Treasury yield briefly broke through 5% for the first time since 2007. That …
Which countries are leading the AI race? What role is AI playing amid growing strategic competition between the US and China? Does AI spell doom for EM outsourcing industries? Moneli Hall-Harris from our Consultancy division and Deputy Chief EM …
5% Treasury yields, geopolitics vs the Fed, China’s dollar dilemma, an AI stock bubble and more …
The diffusion of AI technologies should be a fillip for the global economy over the coming years. That will bring benefits for real estate performance in developed economies, particularly in those office markets with concentrations of knowledge …
It was generally a strong week for commodity prices as mounting geopolitical tensions boosted the oil price. In turn, higher oil prices put upward pressure on most agricultural prices. (See Chart 1.) Chart 1: Price Changes (%, w/w) Source: Refinitiv …
The apparent strength of third-quarter GDP growth won’t convince the Fed to resume hiking its policy rate, particularly with the ongoing surge in long-term bond yields presenting a growing threat to the economy. Q3 GDP growth strong Despite the recent hit …
Fiscal support coming in Israel, rates to stay on hold There remains significant uncertainty around how the Israel-Hamas war will evolve, but developments this week confirm that fiscal policy will be loosened as policymakers provide support to the …
The renewed weakness in the housing market and likelihood that mortgage interest cost inflation will soon ease are reasons to expect core inflation to trend lower in the coming months. Next week, the Bank of Canada’s new forecasts may show that it thinks …
Africa’s debt challenges look set to continue Sovereign debt restructuring discussions between Zambia and Ghana and their bilateral creditors have been encouraging. But the next challenge is talks with private lender, which may prove lengthy. Zambia …
Argentina’s election also a vote on its China stance Argentines head to the polls on Sunday in the first round of what’s arguably one of the most important presidential elections in the country’s recent history. You can find a note previewing Sunday’s …
Government is gearing towards elections Several policy measures announced by India’s government this week are likely geared towards shoring up popular support ahead of next month’s state elections and next year’s general election. The cabinet approved …
Continued currency weakness Asian currencies have continued to weaken against the US dollar over the past week on the back of a further rise in US bond yields and growing concerns about the worsening situation in the Middle East. Most are now down by 1-6% …
Although we have revised up our forecasts for the 10-year Treasury yield between now and the end of 2025, we aren’t inclined to change our upbeat projection for the S&P 500 over this period . This is because the big increase in equity prices that we are …
Weakness in sales volumes adds to recession fears The weakness of retail sales volumes in August and September suggest that consumption is stagnating at best, and that “excess demand” has faded faster than the Bank of Canada initially expected. That is …
Robust supply growth, but it is mostly a China story After reaching a record high in August, global aluminium production eased back in September but remained strong. Given that demand growth is relatively subdued, the increase in global supply may only …
Data released this week reinforce the case for the ECB to keep rates on hold at its meeting next week . There was more evidence of economic weakness in the construction activity figures, which showed that output fell by 1.1% m/m in August and is likely …
Q3 acceleration may be statistical mirage The GDP figures published earlier this week were stronger than most had expected . They showed that growth accelerated from 0.5% q/q in Q2 to 1.3% in Q3, an annualised rate of 5.3%. But the official q/q …
The renewed surge in long-term Treasury yields illustrates that the full impact of Fed tightening is still feeding through, and we continue to expect economic growth to slow sharply over the coming quarters. With core inflation still looking on course to …
