Given the thick smog covering parts of South Asia, forcing schools to shut down and disrupting activity, this Update takes a closer look into the economics of air pollution. Air pollution is mostly caused by the burning of fuels and biomass, vehicle …
8th January 2024
Although bonds and equities have started the year on the back foot, which may continue in the near term, we think they’ll fare better over the year as a whole. We project especially large gains for equities. Any renewed hopes for a “soft landing” prompted …
The optimism about Mexico’s economic prospects from the “nearshoring” of supply chains looks overdone in our view. Sectors where Mexico is already well established, such as autos and some electronics products, stand to benefit. But without major reforms …
This page has been updated with additional analysis since first publication. Euro-zone activity fell in Q4, services price pressures still look strong The data published this morning are consistent with our view that euro-zone GDP is more likely to have …
This page has been updated with additional analysis since first publication. Regional sentiment continues to recover The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally continued to rise in December and …
Entering 2024 on a slightly stronger footing South Africa’s manufacturing PMI rose to an 11-month high in December, helped by an easing of loadshedding. Alongside hopes that recent freight problems are past the worst, this chimes with our view that there …
This page has been updated with additional analysis. Rise in Swiss inflation will be reversed in January The unexpected increase in Swiss inflation in December raises some doubt as to whether rates will be cut soon. However, we suspect that the headline …
The recent sharp fall in Japan’s ratio of public debt to GDP reflects one-off factors that won’t be sustained. While the influence of rising bond yields on the trajectory of the public finances will largely be offset by higher inflation and nominal GDP …
The Fed-triggered financial market exuberance which ended 2023 hasn’t carried into the new year, with yields rising and equities struggling. Group Chief Economist Neil Shearing explains what’s changed – and what hasn’t – to explain this mood shift. He …
5th January 2024
In what was an extremely volatile year for the housing market, we made two key forecasting errors. Firstly, we didn’t anticipate the extent of the rise in mortgage rates. Because of that, we underestimated how tight supply in the existing housing market …
The dollar’s strong start to 2024 has partly reversed today as the surprisingly weak US ISM non-manufacturing survey has more than offset another robust US non-farm payrolls report . Even so, the greenback remains up on the week as interest rate …
Nigeria spending up, but no more deficit financing This week, Nigeria signed its 2024 budget into law. Spending is projected to be higher than originally anticipated, although officials are signalling that it will be financed by higher revenues rather …
Today’s plunge in the employment component of the US ISM services survey more than took the shine off a slightly stronger than expected US Employment Report . In doing so, it appears to have called at least a temporary halt to the recent correction in the …
This week was a mixed bag for commodities . Gold and silver prices fell as US interest rate expectations rose and the dollar strengthened. By contrast, natural gas prices in the US and Europe edged higher on the back of forecasts for colder weather in the …
Conditions in the housing market seem to be improving, with the local real estate board data pointing to a big improvement in the home sales-to-new listing ratio in December. While the unseasonably warm weather may have played a role and house prices …
Fed still coy about QT end-game FOMC minutes put focus on inflation data The minutes of the mid-December FOMC meeting did not dissuade us that the Fed will start to cut interest rates from this March onwards. Admittedly, officials warned that “they would …
BoI starts easing cycle, but uncertainty remains high Israel’s central bank started its monetary easing cycle this week with a 25bp interest rate cut – a move that came a bit sooner than we’d expected. But inflation risks are greater than most anticipate, …
Weak ISMs should probably be taken with a pinch of salt The plunge in the ISM services index to a 7-month low in December suggests, at face value, that the economy is sliding into recession. But the poor relationship between the surveys and the hard …
There are still plenty of downside risks to our below-consensus forecast that the economy will stagnate in 2024 with GDP growth of 0.0%. (See here .) But the news over the past week has highlighted three upsides. First, the slide in 2-year and 5-year …
Will the BoK turn dovish? The Bank of Korea looks almost certain to leave interest rates unchanged at its meeting on Thursday. But with inflation falling and concerns about the economy mounting, we expect the central bank to strike a more dovish tone …
This page has been updated with additional analysis since first publication. Jump in wage growth a concern for the Bank The unchanged level of employment in December is consistent with the message from the business surveys that labour demand has weakened …
Employment gains still dominated by non-cyclical growth The slightly bigger-than-expected 216,000 gain in non-farm payrolls (consensus estimate was 170,000) in December coupled with a second consecutive 0.4% m/m gain in average hourly earnings means that …
Data released this week support our key calls on the euro-zone for the upcoming year. First, the economy looks likely to be weaker than most anticipate. Although the final euro-zone Composite PMI for December, released on Thursday, was revised up from the …
Argentina and the IMF to tango again? An IMF delegation is set to meet with Argentine officials in Buenos Aires today to discuss the country’s $44bn program that – in the Fund’s words – had “ gone off track ” in August under the previous Peronist …
Commodities Overview Chart Pack (Jan. 2024) …
Stubbornly high inflation pushed risk-free rates, and yields, somewhat higher than we had anticipated by the end of 2023. By contrast, rental growth proved surprisingly resilient even as the economy slowed to a crawl. But with economic growth set to be …
Our forecast of earlier Bank Rate cuts means that mortgage rates will be significantly lower than we had anticipated this year, which will lead to a stronger recovery in demand from mortgaged buyers. With little reason to think that demand from cash …
PSL injection to provide modest lending boost While bond yields in developed economies have regained some ground this week, the opposite has been the case in China, with the 10Y CGB yield dropping to a near four-year low of 2.52% today. This suggests …
This page has been updated with additional analysis since first publication. Jump in headline inflation is just a blip December’s jump in headline inflation in the euro-zone was widely anticipated and entirely due to a base-effects driven increase in …
Falling interest rates will herald the end of the commercial property downturn in 2024. However, owing to price declines in H1 we still think values will end the year lower. Our forecast for marginally positive euro-zone returns – while a considerable …
This page has been updated with additional analysis since first publication. Construction PMIs still subdued in December The rise in the headline CIPS construction PMI from 45.5 in November to 46.8 in December was driven by the increase in the housing …
Lower mortgage rates see house prices jump in December The big 1.1% m/m increase in the Halifax house price index confirms that falls in mortgage rates are translating into renewed increases in house prices. Given further recent falls in mortgage rates, …
Remittance inflows to remain robust The World Bank reported in its latest Migration and Development Brief that India remained the world’s largest recipient of remittances in 2023. Remittances jumped to US$125bn (3.4% of GDP) last year, from US$111bn in …
Manufacturers keep losing market share overseas Just as we predicted a few months ago, the outperformance of Japan’s stock market relative to US stocks has unwound as the yen has strengthened in recent weeks. (See Chart 1.) Chart 1: Yen/Dollar vs. …
A cooling economy will give the RBA cover Earlier this week, the Australian Financial Review published its quarterly survey of economists. By and large, the perception amongst forecasters seems to be that the RBA will retain its hawkish bias for the …
Energy prices will fall in 2024, although we think the big falls are now behind us. Supply has not been directly affected, but the Israel-Hamas conflict together with the tensions in the Red Sea have increased volatility in energy markets. We expect oil …
4th January 2024
The redirecting of trade ships away from the Red Sea and the associated rise in shipping costs are unlikely to lead to a resurgence in global inflation. However, if the warfare underpinning the disruption to shipping escalates into a wider regional …
While we estimate the US dollar remains only somewhat above “fair value”, the valuations of some other major currencies are at extreme levels. For these currencies – notably the Mexican peso and Czech koruna – we think reversion towards fair value could …
We expect the Japanese yen to make larger gains this year than the Chinese renminbi. The yen and the renminbi, which had rallied over November and much of December, have begun the year on the back foot. Soft PMIs in China earlier this week (even though …
While equities in China might make up some lost ground over the next few months relative to those in India, we suspect they’ll underperform over the longer term. In the fifteen years or so that preceded the COVID-19 pandemic, equities in China and India …
The run of softer-than-expected news on CPI inflation and wage growth means we now expect the Bank of England to cut interest rates sooner than before. Our forecast is that rates will be cut from 5.25% in June and will fall to 3.00% in 2025. The markets …
Egypt tightening the purse strings as IMF deal nears In Egypt, 2024 started off with a raft of price hikes as officials seek to tighten fiscal policy and warm relations with the IMF ahead of an anticipated enhancement of the current deal. The increases …
Office-based jobs contractions focused in Midwest and West Coast Total employment growth in November across our 30 metros was weak compared with the rest of 2023, growing by 0.3% 3m/3m once seasonally-adjusted. On average, office-based jobs contracted for …
Rebound in inflation won’t last The jump in Germany’s headline inflation rate in December came as no surprise as it was driven by energy price subsidies introduced more than a year ago. With core inflation continuing to trend down, it should not affect …
In another year of upheaval for commercial property in Europe, our forecasts were broadly correct in terms of direction, but underestimated the severity of the downturn. Some, though not all, of this was the result of unexpected macroeconomic factors, …
Rise in mortgage approvals set to continue The rise in mortgage approvals in November was little surprise given the sharp drop back in mortgage rates since July. Given recent further falls in swap rates, mortgage rates are likely to continue to fall from …
Mexico has become an investor darling, with investment surging, GDP growth beating expectations and the currency climbing to multi-year highs. This turnaround in the economy’s fortunes has been pinned on the “nearshoring” of manufacturing supply chains, …
Output from Nigeria’s oil refinery sector has been in terminal decline, inflating the fuel import bill at a time when the economy is already suffering from a shortage of hard currency. The new Dangote refinery and President Tinubu’s broader plans to …
Strong November lending, but subdued investment volumes Net lending to commercial property increased for the ninth consecutive month in November, but that wasn’t reflected in investment volumes which dropped further. But throughout H1 2024 we expect …
This page has been updated with additional analysis since first publication. PMIs point to recession The final Composite PMI for the euro-zone in December was revised up significantly from the flash estimate of 47.0 to 47.6, meaning that it was unchanged …
