Drop in inflation sets the stage for rate cut tomorrow The dip in South Africa’s headline inflation rate, to 4.4% y/y, in August and the further decline in core inflation all but seals the deal on the SARB start an easing cycle tomorrow. We have pencilled …
18th September 2024
Bank Indonesia today kicked off its easing cycle with a 25bps cut, taking its main policy rate to 6.00%. With inflation under control and the rupiah rebounding against the US dollar, further cuts are likely. While the decision was unexpected (it was …
The US Federal Reserve looks certain to start its loosening cycle this evening and, by virtue of their dollar pegs and open capital accounts, central banks across the Gulf will follow suit. Lower interest rates may provide relief to firms and households …
This page has been updated with additional analysis since first publication. Rise in services inflation makes September rate cut even less likely CPI inflation stayed at 2.2% in August (consensus & CE 2.2%, BoE 2.4%), but the rise in services inflation …
Even though state and federal budgets point to a sharp slowdown in public demand in 2024/25, our analysis suggests that the public sector will keep providing a sizeable boost to GDP growth. And if we’re right that private demand will pick up as real …
We doubt the gap between expected interest rates in the US and its trading partners will keep shrinking, given what’s priced into the money markets. That could potentially buoy the dollar in time, assuming the Fed shies away from slashing its policy rate …
17th September 2024
Rent growth slowing rapidly Increased supply and weaker demand are pushing down rents in several cities. That raises the risk of another leg down for apartment prices, despite the recent drop in mortgage rates. The housing market is struggling for …
Despite the US being a net oil exporter, the recent plunge in the oil price will be a tailwind for the economy, as lower gasoline prices support consumer confidence and real consumption. The Fed will largely look through the impact on headline inflation, …
We doubt the small fall in Nationwide house prices in August was the start of a renewed downturn. Surveys suggest the recent declines in mortgage rates have led to an increase in housing demand, while a significant near-term pick-up in supply appears …
Overview – We have generally revised down our growth forecasts for this year and next. Weakness in the euro-zone will remain a drag on export sectors across Central and Eastern Europe (CEE) in the coming quarters, while tight policy will take some heat …
Reports of retail’s death have been exaggerated. After a long and painful adjustment, the retail’s potential to deliver decent returns means our commercial real estate team now thinks it’ll be the second best performer among the major sectors over our …
Manufacturing output rebounds, but challenges remain Manufacturing output rebounded strongly in August as the temporary disruptions to production from the previous month were reversed. Together with last month’s solid gain in control group retail sales, …
Despite the peso’s recent rebound, we suspect that an unstable political and economic outlook means that it, and Mexican financial assets more generally, will perform poorly over the next year or so. Since early April, when the MXN/USD rate hit its lowest …
Consumers remain resilient The stronger-than-expected retail sales data for August suggest that, boosted by rapid wealth gains and falling energy prices, consumers continue to spend freely despite the labour market slowdown. With control group sales …
Mission almost accomplished The return of headline inflation to the 2.0% target in August was mainly due to favourable base effects and is likely to be short-lived, with inflation rebounding to as high as 2.5% by the turn of the year. Nonetheless, the …
After two disappointing years, recent data suggest Europe’s commercial real estate market is stabilising. But will recovery follow and how strong will it be? Join our 20-minute online session on Wednesday 25th September at 10:00 BST as we discuss the …
Germany is heading for a second technical recession in as many years, France’s new prime minister has inherited an intractable public finance problem, and the ECB is planning to lower interest rates only gradually as the euro-zone economy struggles. Our …
EM recoveries are beginning to slow and will continue to do so over the coming quarters. Within this there will be regional variation, with Asia the outperformer and Latin America the laggard. Headline inflation rates will end the year above target in …
Drag from net trade will moderate Q3 GDP growth Even though the trade balance held up much better than most had anticipated in August, net trade will still provide a large drag on Q3 GDP growth. The 5.6% y/y rise in export values was much weaker than the …
Limited data flow since August meeting broadly in line with RBA’s expectations Bank will therefore reiterate pledge to keep rates unchanged this year First rate cut will happen in Q2 next year The Reserve Bank of Australia will probably stick to its …
After two disappointing years, recent data suggest Europe’s commercial real estate market is stabilising. But will recovery follow and how strong will it be? Our property experts held this online briefing about the size and shape – and timing – of …
16th September 2024
We recently held a series of EM-focused client meetings in Switzerland and Germany which covered a wide range of topics, including the impact of global fracturing , AI and the green transition on emerging markets. This Update answers several of the …
Low saving rate not a major concern The continued decline in the saving rate, which is now close to a 16-year low, is not a major concern given the recent surge in household net wealth. Furthermore, as the saving rate is calculated from two different …
A brief respite for the manufacturing sector The 0.9% m/m rise in manufacturing sales volumes in July implies there are upside risks to the flash estimate that total GDP was unchanged at the start of the third quarter, although the negative tone of the …
This week is set to be dominated by one question: will the Federal Reserve kickstart its easing cycle with a 25 or 50 basis point interest rate cut? Market pricing on this question has been swinging around. Having effectively priced out a 50bps cut …
Disinflation continues, CBN in place to cut rates yet Nigeria’s headline inflation rate dipped to 32.2% y/y in August, confirming the disinflation trend is firmly on course as the pass through from previous sharp falls in the naira continues to fade. This …
China’s renminbi looked, before the country’s markets closed for the mid-Autumn festival, to have finally beaten this year’s depreciation pressure. Not only did it break its string of weakness to rally against the dollar last month, but measures of …
A disappointing outturn Activity growth slowed last month, falling short of expectations across the board. The service sector is still faring reasonably well and the fiscal support that’s already in the pipeline should help to stabilise wider growth over …
As the much-anticipated start of Fed easing approaches, the debate has centred on whether Powell & Co. will opt for a 25 or a 50-basis point rate cut. On the latest episode of The Weekly Briefing from Capital Economics, Group Chief Economist Neil …
14th September 2024
The US is moving to limit the de minimis tariff exemption that has supported a surge in low value shipments from China over recent years. Only a subset of the roughly 8% of China’s exports to the US that are currently tariff-exempt would be at risk under …
13th September 2024
US households’ appetite for equities often depends on how confident they feel. Its strength in recent years is therefore rather surprising, given that their mood hasn’t been upbeat. Sentiment did perk up this month, judging by the University of Michigan’s …
The US dollar is ending the week on the back foot against most currencies amid mounting expectation for a 50bp cut by the Fed next week. That comes in the wake of two seemingly coordinated pieces in the FT and WSJ which suggested it will be a close call …
The Office for Budget Responsibility’s (OBR) “Fiscal risks and sustainability report”, published this week, showed that if left unchecked the public debt to GDP ratio would spiral from 98% now to 274% by the mid-2070s. Assuming a recession comes along …
25bp vs 50bp debate finely poised The 25bp vs 50bp debate seemed settled following Governor Christopher Waller’s speech shortly after the August Employment Report, in which he suggested that he was leaning toward the smaller move. The cautious tone of …
Consumer mood improves, but remains sour Despite the small rise in the University of Michigan consumer sentiment index in September, consumer confidence remains in a slump. At face value, weak sentiment points to softer consumer spending, but confidence …
The sharp rebounds in both residential and non-residential building permit issuance in July eased concerns that the construction sector is about to take a turn for the worse. Risks remain, however, particularly for residential construction in Toronto. …
By making life harder for unscrupulous landlords, the Renters’ Rights Bill may help drive tenant demand toward institutional landlords who are already complying with most aspects of the proposed legislation. That said, an apparent ‘win-win’ ability for …
Mexico: judicial reform clears final major obstacle Outgoing Mexican President Amlo’s controversial judicial reform passed the final major hurdle this week with approval in the senate. This has contributed to a sharp fall in the peso – the currency is …
“Gold’s poor cousin” to lag behind For all the attention on gold this year, silver has been the better performer with prices increasing by over 25% year-to-date. Some of the tailwinds that have boosted the gold price, like lower Treasury yields and a …
Renewed slowdown in credit Both broad credit and bank loan growth slowed in August, coming in below expectations. (See Chart 1.) While stronger government spending should give the economy a boost over the coming months, that doesn’t seem likely to be …
The ECB’s easing cycle continued this week and the first Fed rate cut is just around the corner, but we still think that central banks in Central and Eastern Europe (CEE) are now at the beginning of a slower phase of their easing cycles and will loosen …
The main event of this week was the ECB’s meeting on Thursday, where the Bank cut its deposit rate by 25bp, to 3.5%, as widely expected. Christine Lagarde made clear in the press conference that further rate cuts are on the cards, but she gave little away …
A temporary boost to employment growth After years of delay, China’s legislature today passed a bill that raises the statutory retirement age for the first time since 1978. In January, it will increase from 60 to 63 for men, 55 to 58 for white-collar …
SARB set to join the EM rate-cutting party The current make-up of the MPC means that it will be a close call, but we expect the South African Reserve Bank to embark on an easing cycle next week. How quickly rates come down, though, partly depends on …
CBR delivers surprise hike The decision by the Russian central bank (CBR) to hike its policy rate today by 100bp, to 19.00%, suggests that policymakers are even more concerned about the inflation outlook than we’d previously thought. While our forecast is …
We think the markets are wrong to expect two more interest rate cuts this year But we think rates will be cut more quickly next year and to 3.00% in early 2026 MPC may speed up QT by announcing a £110bn reduction in the balance sheet We agree with the …
