The theme of the week has been one of diverging inflation stories which have helped boost the US dollar. These divergences came not just between economies (hot in the US and cold in the UK, for example) but also within economies, with mixed messages from …
16th February 2024
Ratings downgrade highlights realities in Israel The decision by Moody’s to deliver Israel’s first credit rating downgrade in its history late last week is a warning sign to policymakers that the strength of the public finances should not be taken for …
Little change in confidence The surge in consumer confidence due to falling inflation expectations has stalled, with confidence little changed in February. However, with plenty of downward pressure on inflation in the pipeline, there is scope for …
Can Milei tame inflation? The jump in inflation in Argentina to 254% y/y in January underscores the scale of the challenge the Milei administration faces stabilising the economy. The rise (from 211% y/y in December) reflected the full impact of the 50%+ …
This week we held a Drop-In on commercial property distress across the US, UK and Europe. Clients can access a recording here and find related analysis on our dedicated landing page . This Update provides answers to several questions on the UK and …
Multi-family starts slump to lowest level since 2020 Housing starts fell by the largest amount since April 2020 in January, led by a huge drop in multi-family starts. We suspect the multi-family sector will continue to be a drag on new development this …
It’s debatable whether the 0.1% q/q and 0.3% q/q contractions in real GDP in Q3 and Q4 2023 should be labelled as a recession given the falls were so small. While it satisfies the usual definition of a recession being two consecutive quarters of falling …
The German Economy Minister Robert Habeck admitted this week that the economic situation was “dramatically bad” and said the government would reduce its 2024 growth forecast from 1.3% to 0.2%. The new forecast is a bit lower than the Bundesbank’s latest …
Will the Bank of Korea turn dovish? The BoK looks almost certain to leave interest rates unchanged at its meeting on Thursday. Instead, the focus will be on the tone of the statement. We expect the central bank to start sounding more dovish, as concerns …
South Africa's Finance Minister Enoch Godongwana faces an uphill task in next week's Budget to convince investors that the government will be able to place the public finances on a sustainable footing. Mr. Godongwana will start his speech in parliament …
Tightening cycle comes to a close, but rates to stay high Russia’s central bank (CBR) left its policy rate on hold at 16.00% as expected today and we think that inflation pressures will prevent it from cutting interest rates for most of this year. Today’s …
Farmer protests won’t lead to big fiscal giveaways Widescale farmer protests have returned and have dominated the headlines this week. Farmers are currently marching from neighbouring states towards New Delhi in demand of higher prices for key crops; …
The Czech economy has had the weakest performance of any EU country since the pandemic, and we think that growth will disappoint expectations again in 2024. This will keep inflation contained and put pressure on the central bank to loosen monetary …
This page has been updated with additional analysis since first publication. Strong rebound suggests the retail recession will soon be over The 3.4% m/m rebound in retail sales volumes in January suggests the retail recession, and perhaps the economy …
Services inflation will slow sharply Australian labour market data published yesterday garnered considerable attention, largely because they showed that the unemployment rate overshot analyst expectations and jumped to a two-year high of 4.1%. However, we …
Japan’s economy is not in recession The preliminary estimate of Q4 GDP showed the second consecutive contraction in output, but we doubt it will scupper the BoJ’s plans to end negative interest rates. For a start, the quality of Japan’s preliminary GDP …
We expect India’s stocks, bonds, and currency to rally over the remainder of this year. It’s been a strong start to the year for India’s financial markets. The MSCI India Index of the country’s equities has been the strongest performer of MSCI’s large …
While we expect the office and multifamily sectors to account for the lion’s share of distressed assets over the next couple of years, there is an important distinction between the two. Unlike multifamily, we expect impacts on offices to be widespread, …
15th February 2024
We think that global growth will undershoot consensus expectations in 2024 as various props to growth from 2023 fade and as the lagged effects of past rate hikes continue to feed through. Among the advanced economies, the US will continue to outperform …
Although house prices continued to fall in January, lower mortgage rates are beginning to support affordability and stimulate home sales. With the sales-to-new listing ratio now pointing to positive house price inflation, we expect house prices to be …
Weaker economic data from the US have bolstered our view that the Federal Reserve will be able to cut rates by more than investors currently expect. As a result, we continue to think that Treasury yields will generally fall by the end of the year. …
Higher aluminium prices and lower production costs should incentivise Europe’s smelters to restart some production in both 2024 and 2025. The introduction of CBAM in 2026 means prices will then probably trade at a premium to other regions, particularly as …
Weak end to 2023 The stagnation in Colombia’s GDP in Q4 confirmed that the economy remained very weak at the end of last year and we think the recovery this year will be slower than most anticipate. At the margin, the weakness of the latest activity …
Saudi’s loose fiscal stance to continue (for now) Data released yesterday confirmed that Saudi Arabia ran a budget deficit over 2023 as a whole and, as the government maintains high spending levels despite lower oil prices, the Kingdom will run larger …
Adverse weather hits manufacturing & mining, but boosts utilities Adding to the weaker news on retail sales, manufacturing output declined by 0.5% m/m in January although, as with the former, the unseasonably severe winter temperatures and snow storms in …
South Africa’s fiscal strains have seen the government explore tapping revaluation gains on the country’s FX reserves held at the SARB. Utilising these funds to pay down the government’s debt would help to improve South Africa’s fiscal health. But there’s …
Consumption growth finally faltering The 0.8% m/m fall in retail sales in January might partly reflect the unwinding of a previous weather-related distortion, but should temper recent suggestions of an economic resurgence. We continue to expect GDP growth …
Argentine President Javier Milei’s ambitious economic reform plans have quickly run into political obstacles. There’s still plenty of fiscal tightening that Milei is likely to undertake and there have been some areas of success such as the peso …
Sales dragged down by vehicle plant shutdowns The 0.7% m/m decline in manufacturing sales values in December was actually a positive outcome, since the more downbeat export data had suggested that the fall would be far bigger than the 0.6% m/m provisional …
Trump's second term: Key insight into Trump's policies …
Inflation at near-30%, all eyes on CBN Nigeria’s headline inflation rate rose further to 29.9% y/y in January and the latest sharp fall in the naira means that it is likely to reach close to 35% y/y over the coming months. We expect the central bank to …
There’s even greater scrutiny on South Africa’s fragile fiscal position as pressure to increase spending builds ahead of this year’s election. In the coming week, all eyes will be on Finance Minister Enoch Godongwana’s budget speech to see if the …
Plunge in inflation seals the deal on a larger rate cut We’d expected a large fall in Czech inflation in January, but the collapse from 6.9% y/y in December to just 2.3% y/y shows that price pressures are dissipating even more quickly than we’d …
This webpage has been updated with additional analaysis, as well as a chart and table of key data. Inflation to remain low this year and next Saudi Arabia’s headline inflation rate edged up from a two-year low of 1.5% y/y in December to 1.6% y/y in …
Non-labour input costs are now moderating which should soon result in a more rapid slowdown in consumer price inflation than most are anticipating. In a recent Bulletin article, the RBA argued that “large cost increases over recent years are still flowing …
Easing cycle to begin around the middle of the year The central bank in the Philippines (BSP) today left its main policy rate unchanged (at 6.50%), but sounded a little more dovish than after previous meetings. With inflation likely to stay low and …
This page has been updated with additional analysis since first publication. In the mildest of mild recessions, but recovery is in sight The news that the UK slipped into technical recession in 2023, will be a blow for the Prime Minister on a day when he …
The rise in US bond yields has put renewed pressure on the yen, but we think further downside is limited. We still expect Treasury yields to resume their downward trend and for the yen to benefit most among G10 currencies vis-à-vis the dollar from this …
This page has been updated with additional analysis since first publication Unemployment rate starts the year with a 4-handle The stronger-than-expected rise in unemployment in January may have been influenced by changes in seasonal employment patterns. …
Economic growth in Singapore remained strong in Q4 but we expect the economy to weaken in the near term as external demand softens and the weakening labour market takes its toll on consumption. According to the final estimate of Q4 GDP published today, …
This page has been updated with additional analysis since first publication. Continued contraction in GDP won’t prevent ending of negative interest rates While the second consecutive contraction in GDP in Q4 would suggest that Japan’s economy is now in …
14th February 2024
The strong reaction to the January CPI data demonstrates that markets still don’t fully comprehend that the Fed is focused on the alternative PCE measure of inflation. While core CPI inflation was unchanged at 3.9% last month, we estimate that core PCE …
The precipitous drop in US natural gas prices won’t persist for the rest of the year. Prices should rise by Q4 as US production growth slows and LNG exports rise. US natural gas prices have collapsed recently, falling around 18% week-on-week and 23% …
We think that UK inflation will continue to fall faster and further than many seem to be expecting, paving the way for the Bank of England (BoE) to cut interest rates by more than is now discounted in markets. That helps to inform our view that today's …
Inflation pressures unlikely to prompt another hike The stabilisation in Russian inflation in January, at 7.4% y/y, should provide cover for the central bank to leave its policy rate unchanged at 16.00% at its meeting on Friday, rather than continue the …
Capital inflows into EM bonds and equities have fallen sharply since January after the Fed pushed back expectations of the timing of rate cuts. The good news is that current account deficits in EMs have narrowed over the past year, meaning many EMs have …
The effects of El Niño will cause cocoa harvests in Côte d’Ivoire and Ghana, which account for more than half of global output, to fall by around 20% this year. But the related surge in cocoa prices means that, if anything, overall incomes are likely to …
South Africa’s latest hard activity data show that the economy finished last year with a whimper, but we think that easing electricity outages, weaker inflation pressures and less restrictive fiscal policy will support a modest pick-up in growth this …
The result of Indonesia’s presidential election won’t be officially confirmed for a few days yet, but based on unofficial “quick counts” it looks as though the favourite, Prabowo Subianto, has won over 50% of the vote, thus avoiding the need for a …
With activity and inflation both softer than it had expected a few months ago, the RBNZ will likely stay put at its meeting at the end of the month. However, with a still-tight labour market fuelling uncertainty about domestically-sourced price pressures, …
