The outlook for emerging markets is looking better than it did just a few weeks ago. Most obviously, China’s shift to living with COVID means that its economy will rebound far sooner than we had previously thought. That will provide a lift to countries …
24th January 2023
The sharp fall in hiring intentions in the Bank of Canada’s Business Outlook Survey suggests that the 104,000 surge in employment in December is not a sign of things to come. The survey points to a slowdown in average monthly employment growth to just …
23rd January 2023
First came the inversion of the yield curve. Next the index of leading indicators began to fall. Then the survey-based activity indicators plunged well below the 50 mark. Finally, this week we learned that the weakness had spread to the hard data on …
19th January 2023
India has historically remained unaligned geopolitically but we made the case last year that, in a fracturing global economy , it was more likely to lean towards a US-led bloc and away from a China-led bloc. Events over the past month have strengthened …
18th January 2023
The past month has brought a string of positive developments on the activity and inflation side. The biggest news has been China’s decision to throw in the towel on its zero-COVID policy, which brightened the prospects for the world’s largest economy …
13th January 2023
There are growing signs that housing market activity may be close to a trough. The decline in mortgage rates over the past couple of months has led to a small improvement in affordability and a rise in homebuyer sentiment, albeit from a record low. …
12th January 2023
There has been a further slight improvement in prospects for the euro-zone in recent weeks. Business surveys suggest that activity is no longer contracting sharply, headline inflation seems to be past its peak, and wholesale gas prices have plunged. …
10th January 2023
In less than two months, we should know who will replace Bank of Japan Governor Kuroda Haruhiko, whose term ends on 8 th April. Whoever replaces him will be under increasing pressure from the government to abandon Yield Curve Control (YCC), which has an …
9th January 2023
The 0.3% q/q contraction in Q3 left real GDP 0.8% below its Q4 2019 pre-virus level and the UK economy lagging even further behind its major counterparts. In contrast, GDP has risen above its pre-pandemic level in all G7 economies, including the US …
5th January 2023
It is three years since a cluster of cases of severe pneumonia started to draw attention in Wuhan. Chart 1 maps economic developments in China since then. The blue bars show cumulative growth since the end of 2019 and the black outlines show growth over …
4th January 2023
London house prices are likely to continue to underperform even if the shift in buyer demand away from the capital due to remote working ends. More stretched house prices in the capital prior to the jump in mortgage rates means the impact of higher …
3rd January 2023
A renewed pullback in global equity markets and rise in bond yields in December is set to cap off a historically poor year for returns from both “risky” and “safe” asset classes. In fact, once the surge in inflation in 2022 is accounted for, returns …
22nd December 2022
We think investors are still too optimistic on global growth, and that “risky” assets will struggle over the first half of 2023 as a result. Investors seem increasingly to have come around to our view on inflation over the past couple of months, namely …
Even though we expect the Bank of England to raise interest rates further from 3.50% now to a peak of 4.50%, we doubt the recent increase in gilt yields will be sustained. Instead, we think yields may fall from 3.60% currently to 2.75% by the end of 2023 …
21st December 2022
The November CPI report marked the second successive undershoot in inflation and there is mounting evidence that it will continue to fall sharply in 2023. (See Chart 1.) Core goods prices are coming under broad-based downward pressure, as easing supply …
The dollar has stabilised over the past month after its sharp fall in November, and we continue to think that a slowing global economy and worsening risk sentiment will lead to another (possibly final) leg up in the dollar over the first half of 2023. …
The renewed rise in the three-month annualised rates of CPI-trim and CPI-median inflation in November call into question the idea that the Bank of Canada has already finished its tightening cycle. Those rates are not published by either Stats Can or the …
Tightening cycles have been a key feature of 2022 across the emerging world, but the end is in sight as we enter 2023. Some EM central banks that began tightening early – for example Brazil, Chile and Czech Republic – have already brought an end to …
The slide in the price of oil since November has a little further to go in early 2023 and, while we think prices will recover later in the year, hydrocarbon revenues in the Gulf will be lower than this year. Even so, most of the Gulf economies will run …
According to RBA estimates, household interest payments jumped from 5.1% of disposable income in Q1 to 6.9% last quarter and we expect them to reach 12.5% by end-2023. (See Chart 1.) With household debt around record highs of 189% of disposable income, …
The government’s reform agenda struggled for momentum in 2022 as key state elections (notably in Uttar Pradesh in March and Gujarat in December) dominated the calendar, and surging food and fuel prices set a tricky political backdrop. But the results of …
20th December 2022
The past few weeks have brought mostly good news on the inflation front, with the headline rate dropping back in most countries in November. (See Chart 4.) Less encouragingly, however, core inflation has continued to rise and is now at multi-year highs …
While we had expected the rise in risk-free rates and upcoming recession to boost yields, the speed at which they have increased has been surprising. All-property equivalent yields rose by a total of 78bps in October and November, reversing all the …
The performance of African economies diverged early this year, but the latest data provide clearer signs that growth across the region is now slowing. Economic weakness seems most pronounced in Ghana, where the impact of the country’s sovereign debt …
The return of inflation for the first time in the inflation-targeting era has led to the biggest jump in Bank Rate and mortgage rates since the late 1980s. (See Chart 1.) The steady downward trend in mortgage rates from 6.5% in 2008 to 1.5% at the end …
19th December 2022
Central banks across Central and Eastern Europe (CEE) have left interest rates on hold over the past month or so but their communications have continued to strike a relatively hawkish tone. Hungary’s central bank has suggested that interest rates may be …
A fall in mortgage rates from 20-year highs supported the first rise in home purchase demand in eight months in November. Given that mortgage rates are likely to continue to trend lower from here, sales should soon bottom out. But the big picture is …
14th December 2022
Peru ’s newly-inaugurated President Boluarte’s call to bring forward the next general election to 2024 has failed to pacify protesters who took to the streets following the impeachment of President Castillo last week. The unrest is already causing …
Data over the past month have brought the clearest signs yet that inflation is starting to ease. Our estimate of world CPI inflation fell for the first time in 15 months in October, from 7.9% to 7.7%. Of course, that is still a very high rate, but there …
7th December 2022
Overview – We think slower global economic activity and a somewhat stronger US dollar will weigh on commodities prices in the coming months. However, the recession should prove relatively shallow and we expect prices to be picking up in late 2023, boosted …
5th December 2022
Although Chinese stocks have reversed a two year or so downward trend in the past month amid hopes that zero-COVID policies will end, we doubt this is a sign of things to come in the near term. Since its trough on 31 st October, the MSCI China Index has …
1st December 2022
Renewed optimism in global markets – in large part tied to hopes for a Fed “pivot” – pushed the US dollar down against most major currencies last month. But with a global recession on the horizon, we continue to think that the dollar rally will resume …
Third quarter data showed growing evidence of a softening in tenant demand in many metros. In particular, demand appears to be slowing in a number of West Coast markets, as hybrid and remote work becomes embedded in work patterns and the cost of real …
29th November 2022
Concrete signs of an effort to exit from zero-COVID are emerging, with a notice today of a push to vaccinate the elderly. The low level of vaccine coverage of the most vulnerable is, along with a lack of healthcare capacity, the major constraint on …
Most central banks across Sub-Saharan Africa raised interest rates over the past month and, in contrast to many other parts of the emerging world, we think tightening cycles will last a while longer. Interest rates were hiked in Nigeria, South Africa, …
Most countries in the region have now reported GDP figures for the third quarter, and growth was generally faster than we (and the consensus) had expected. One factor behind this resilience was the strength of private consumption, which held up well in …
Most developed market (DM) government bonds and equity benchmarks have rallied over the past month or so, but we doubt this twin rally will persist. While we think bond yields will end 2023 lower than they are now as inflationary pressures ease, we expect …
25th November 2022
The big surprise so far this year has been the resilience of housing starts which, despite falling from their 10-month high of 300,000 annualised in September, remained at a relatively strong 267,000 in October. While developers have largely shrugged …
24th November 2022
Growing domestic and external headwinds have taken a bigger toll on the region’s economies in recent months, with growth slowing sharply in Turkey and Israel in Q3 and GDP contracting outright in Czechia, Hungary and Latvia. Admittedly, there have been …
Having surged for the best part of two years, EM inflation appears to have passed the peak in this cycle. Our measure of aggregate EM inflation dropped from 7.8% y/y in September to 7.4% y/y in October. (See Chart 1.) Looking ahead, we think that …
23rd November 2022
Property yield rises stepped up in Q3, causing all-property capital values to fall on a quarterly basis in the CEE markets except for Bucharest. (See Chart 1.) This was despite solid office and industrial rental growth. Looking ahead, stretched …
Economies across North Africa have endured severe balance of payments strains this year and governments in Egypt and Tunisia finally secured staff-level agreements with the IMF over the past month. Markets have welcomed the news with sovereign dollar bond …
The sharp rise in Treasury yields this year has finally begun to feed through to the property data. Q3 investment activity fell by more than 20% on both a q/q and y/y basis, with loan originations also falling back notably. And valuers have begun to …
22nd November 2022
The resilience of consumer spending is keeping hopes of a soft landing alive. Although GDP growth looks to have slowed in the fourth quarter, and most leading indicators of recession are flashing red, solid retail sales and a jump in vehicle sales …
Prime property yields rose significantly in Q3. (See Chart 1.) This caused a sharp slowdown in capital value growth, even though rental growth was solid in the Scandinavian office and industrial sectors. Stockholm and the Swiss markets fared worst, with …
The RBI has hiked interest rates by 190bps since May and, while that is relatively benign compared to the moves seen in many other EMs, this tightening is now feeding through to the economy. Purchases of big ticket items such as passenger vehicles have …
21st November 2022
Headline inflation shot up to 3.7% y/y in October , the strongest since December 1990 while inflation excluding fresh food and energy rose from 1.8% to 2.5%. Although this puts inflation well above the Bank of Japan’s target, the case for tightening is …
Higher interest rates and a weaker outlook for economic activity led to a more significant rise in property yields in Q3. While quarterly rental rises remained solid, particularly for offices and industrial, this meant that all-property capital values …
18th November 2022
Data released over the past month or so suggest that most economies across the region fared well in Q3. GDP growth in Mexico and Colombia came in well above expectations and hard activity data from Brazil point to another solid expansion last quarter too. …
17th November 2022
Many of the Q3 GDP releases of early-reporting economies have beaten consensus expectations in the past few weeks, especially in Europe. Not only did energy-crisis-laden Germany grow in Q3, rather than contract as expected, but the economy managed to …
11th November 2022
