Our fair value analysis suggests that appraisal-based NOI yields need to rise by 50-60 bps from Q2 levels. But downgrades to our expectations for Treasury yields in the latter years of our forecast horizon mean the cyclical peak in yields implied by this …
27th August 2024
While the S&P 500 is now nearly back to its all-time high in the wake of Fed Chair Powell’s dovish message at Jackson Hole, underlying risk premia are still somewhat larger than before the July correction began and the previously all-conquering “AI” …
The economy is on course to grow by 6.5-7% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy in the next couple of years. Headline CPI inflation is likely to have accelerated in August, but it …
Softer house price gains reflect looser market The muted 0.2% rise in the national Case-Shiller house price index in June was no shock considering that buyer demand collapsed that month, while supply kept growing. With the spring selling season now over …
Rates left on hold, easing cycle will be more “stop-start” from here The Hungarian central bank (MNB) suggested that its decision to leave the policy rate on hold today, at 6.75%, was likely to mark a temporary pause in the easing cycle, rather than an …
The small fall in Brazil’s headline inflation rate, to 4.35% y/y in the first half of August, alongside the prospects of a Fed rate cut next month, means that Copom is most likely to leave rates unchanged (rather than hike) at its meeting next month. The …
We expect most Asian currencies to make further gains over time, even if their biggest rallies may now be behind them. Much attention in FX markets over the past month or two has focused on the surge in the yen, which has continued to make headway over …
The persistent strength in producer price inflation probably still mostly reflects the lagged influence of the surge in import costs rather than any pick-up in wage growth. If the yen keeps strengthening over the next couple of years, inflation will fall …
26th August 2024
Durable goods boosted by aircraft rebound The bigger than expected 9.9% m/m rebound in durable goods orders in July was entirely due to a massive rebound in aircraft orders. Excluding transport, core orders fell by 0.2% m/m in July, while June’s gain was …
Wage growth is starting to outpace inflation and with real incomes rising, the rebound in consumer spending has further to run. While underlying inflation will fall further below 2% over the coming months, we still expect the Bank to hike rates once more …
On the latest episode of The Weekly Briefing from Capital Economics , Group Chief Economist Neil Shearing and Stephen Brown, our Deputy Chief North America Economist, give their take on what Jerome Powell said to the Fed’s annual gathering at Jackson …
23rd August 2024
Fed Chair Powell’s dovish keynote speech at the Jackson Hole conference today has reinforced the sense that not only are FOMC rate cuts imminent, but they may also be front-loaded. That suggests downside risks to our forecasts for US Treasury yields and …
The dovish speech by Fed Chair Jerome Powell at Jackson Hole and the minutes of the FOMC Meeting in July released on Wednesday have left the greenback lower against all G10 currencies this week. This adds to the batch of weaker-than-expected activity and …
The dovish speech from Chair Jerome Powell at the Jackson Hole Symposium suggests that the Fed will be choosing between a 25bp and a 50bp cut at its meeting in September. A 50bp cut would look less likely if the unemployment rate drops back this month, …
Nigeria businesses downbeat, but economy turning A CBN business survey published this week suggested that businesses are still downbeat on the economy, but we think slowing inflation and a more stable naira may soon bring some near-term cheer. The …
Drop in mortgage rates drives surge in new home sales The surge in new home sales in July was driven by pent-up buyers taking advantage of the sharp drop in borrowing costs last month, after having been sidelined earlier this year by high mortgage rates. …
China retaliates to EU tariffs on EVs This week the EU announced a series of additional levies on Chinese EV imports on top of those announced a few months ago. China retaliated by making a complaint to the WTO and launching an anti-dumping investigation …
Ukraine’s surprise incursion Ukraine’s incursion into Russia continued this week. Ukraine found a weak spot in Russian defences two weeks ago and mobilised resources to exploit it. The scale of the incursion is significant, with some suggesting that …
The apparent stall in the ceasefire talks between Israel and Hamas limited the fall in oil prices this week. While we think a deal wouldn’t be a game-changer for oil prices, a further breakdown in talks could cause prices to spike. Meanwhile, data …
Dovish Powell hints at potential for 50 bp cut Fed Chair Jerome Powell’s dovish tone at Jackson Hole today and pledge to do “everything we can to support a strong labour market” implies that a 50 bp cut could be on the table at the September meeting, …
The muted gains in the Bank of Canada’s preferred core price measures in July make another interest rate cut at the September meeting seem inevitable. The Bank will be encouraged by the second soft monthly gain in rents, which may be a sign that we have …
At first glance, the 1.1% m/m increase in Adzuna job vacancies in July, the first monthly rise this year, together with the fall in the unemployment rate to 4.2% in June and the 127,000 rebound in employment between April and June, suggests the recent …
Mexico: likelihood of September cut increasing The inflation and activity data out of Mexico this week, alongside the minutes to the central bank’s August meeting, mean that Banxico is likely to continue its easing cycle with a 25bp cut, to 10.50%, at its …
Although the EU is making progress in expanding its semiconductor production capacity, including through a new plant in Dresden, it is still a long way behind the US and Asia and is unlikely to catch up anytime soon. This will keep the EU reliant on …
Heading for a better third quarter Despite the 0.1% m/m gain in June, retail sales volumes contracted last quarter, suggesting that household consumption growth also slowed. Prospects for the third quarter look better, with the preliminary estimate …
Africa Chart Pack (Aug '24) …
Still trying to fix the destocking scheme At a press conference today, the Ministry of Housing pledged to accelerate the purchase of unsold homes for conversion into affordable housing. Exactly how it intends to go about that is unclear. The national …
RBI Governor pushes back against change to target A longstanding debate in Indian policymaking circles over which measure of consumer price inflation the RBI should target has been reignited in recent weeks. In the Government’s Annual Economic Survey …
Europe Commercial Property Chart Pack (Q3 2024) …
Underlying inflation falling below 2% According to a recent survey, 57% of analysts predict another rate hike by year-end, with one-third thinking it will happen in October and the remainder favouring the December meeting. In his parliamentary hearing …
Restrictive policy will do its job Earlier this week the Reserve Bank of Australia published the minutes of its August meeting, which showed that the Board remains concerned about upside inflation risks. In particular, the Bank noted that there was likely …
Currency concerns abating Three central banks announced policy decisions this week and all three kept rates on hold. At first glance then, an uneventful week. But there were dovish signs across the board that suggest all three will ease policy soon. We …
Underlying inflation will fall below 2% With underlying inflation falling below 2% for the first time since 2022 and set to decline further, the case for further monetary tightening is starting to diminish. Headline inflation held steady at 2.8% in July, …
After six consecutive years of underperformance, retail outperformed the all-property average in 2023. With the sector well down the road to dealing with the combined effects of e-commerce, oversupply of retail space and the pandemic lockdowns, we think …
22nd August 2024
Even though Treasury yields have edged up today ahead of Jerome Powell’s speech at Jackson Hole tomorrow, we think there’s still some scope for them to rise further, as we think too much easing is now discounted in money markets. That said, we don’t think …
The Q2 GDP data out of Emerging Europe have generally disappointed to the downside, and leading indicators have weakened at the start of Q3. With interest rates likely to be kept high in Russia and Turkey over the coming months, we think that a further …
The latest flash PMIs suggest that strong activity in the service sector has continued to support GDP growth in advanced economies in Q3, but that the outlook has worsened somewhat. Meanwhile, services price pressures have continued to ease, meaning …
Lower rates set the stage for a recovery in activity The small rebound in existing home sales in July seems underwhelming after last month’s large drop in mortgage rates, but the data are based on completed transactions and so it will take at least …
Overview – Commercial property yields and capital values have stabilised in recent months, which has encouraged investors to dip their toes back into the sector. But the recovery is set to be a weak one. Admittedly, we expect rental growth will be a …
You can find all our research on Mexico's election on a dedicated webpage . The swearing in of a new congress next month gives Mexico’s outgoing president, Amlo, a one month window to re-start plans to pass controversial planned constitutional …
US corporate credit spreads have all but unwound the rise they saw during the recent market turbulence, and are back at very low levels by past standards. (See Chart 1.) We expect them to remain compressed over the next year or so, as long as the US …
The fall in Mexican inflation in the first half of August, to 5.2% y/y, alongside clear signals from the Fed that it will start loosening monetary policy next month, supports our view that Banxico will continue its easing cycle with another 25bp cut in …
Ceasefire seems a long way off Despite the US government’s efforts to push for a ceasefire agreement between Israel and Hamas this week, a deal seems some way off. The economic spillovers from the war in Gaza have been largest for the economies of Egypt, …
There’s growing optimism that South Africa’s economy is set for a period of faster growth under the Government of National Unity (GNU). And we think a combination of lower interest rates and higher consumer spending will help to lift demand in the near …
The scale of the fall in negotiated wage inflation in Q2 was largely due to one-off payments made in Germany in March but not repeated in Q2. However, the underlying trend in wage inflation is clearly downwards and is a good reason to expect the ECB to …
This page has been updated with additional analysis since first publication. August PMIs still consistent with economic slowdown The rise in the flash PMIs for August is not as good as it looks as it was largely due to a boost from the Paris Olympics and …
This page has been updated with additional analysis since first publication. Fading price pressures support the case for more rate cuts this year August’s composite PMI provides further evidence that some of the recent strength of activity in the first …
A soft start to Q3 The weaker-than-expected batch of Polish activity figures for July is more likely to be a blip than the start of a soft patch. We remain comfortable with our view that Poland’s economy will expand by around 3% over the year as a whole, …
The Bank of Korea left rates on hold again today but sounded very dovish. With policymakers now more confident about achieving their inflation target and domestic demand set to remain weak, we think the BoK will start to cut rates in October and that the …
