Inflation in many economies in the region has risen to multi-year highs in recent months. In general, this has been driven higher by a combination of unfavourable base effects from the pandemic, as well as some re-opening inflation and the effects of …
28th September 2021
Falling new virus cases and the lifting of restrictions have boosted economies across the region in Q3, but the deteriorating external backdrop will put a lid on growth from here. Even with an orderly resolution to the Evergrande saga , a slowdown in …
Labour shortages have intensified in recent months, which could both act as a brake on the recovery and lead to a stronger acceleration in wage growth. According to the CFIB Business Barometer, the share of small firms suffering from labour shortages …
27th September 2021
The recovery in UK commercial property continued into August, despite a backdrop of more equivocal economic data. But, while the economic softness should be short-lived and returns for 2021 are likely to remain healthy, we suspect that the real estate …
24th September 2021
Even if the current concerns around Evergrande abate, we think China’s stock market will continue to underperform many of those elsewhere over the next couple of years. Worries about Evergrande have continued to weigh on stock markets in China and …
22nd September 2021
Speculation is building that India will be included in major global bond indices over the next year or so. If that happens, it would highlight the local bond market’s growing maturity and be cast as a coup by the government, for which bond index inclusion …
The latest data provide mixed signals on the impact that the Delta variant is having on the economy. The high frequency indicators for high contact services suggest that activity levelled out in August and weakened a little in early September (See Chart …
21st September 2021
Problems at Evergrande in China have dominated the headlines recently, but (sovereign) debt risks are brewing in other EMs too. Concerns about higher government spending and rising public debt levels are building in parts of Latin America . Meanwhile, …
There is no doubt that demand cooled after the stamp duty discount was reduced. But a collapse in new listings has eclipsed the decline in new buyer demand, suggesting that prices will at least hold their ground in Q4 when stamp duty returns to normal. …
The recent rises in 2-year and 10-year gilt yields to their highest levels since the “dash for cash” at the start of the pandemic have entirely been driven by the investors revising up their expectations for inflation. Indeed, 10-year break-even inflation …
There have been growing signs of a slowdown in the pace of the global recovery in recent months. World industrial production fell in July and retail sales declined in almost all major economies, while the business surveys suggest that activity softened …
20th September 2021
The race to become the new LDP leader – and with it PM – formally began on Friday. With Delta cases plunging and the vaccination rate having caught up with many other advanced economies, whoever wins should be able to lift domestic restrictions and ride a …
We don’t expect the recent surge in Japan’s stock market to last, and think it will make much smaller gains over the next couple of years . The remarkable rally in Japan’s stock market over the past couple of weeks, following the resignation of the …
17th September 2021
Three key developments in China over the past month or so are worth highlighting, as they feed into our broader asset allocation forecasts for the next couple of years. First, what started as a regulatory crackdown on a handful of sectors seems to have …
16th September 2021
Mortgage rates have been stable at close to record lows since mid-July, but that hasn’t prevented a decline in housing demand. New home sales are down 28% from their peak last year and while existing home sales surprised on the upside in July, the pending …
9th September 2021
The broadening of the recent product and labour shortages appears to be holding back activity and adding to the upward pressure on inflation. The risk is twofold. First, these shortages may prevent GDP from returning to its pre-pandemic peak until next …
Headline inflation came in higher than our above-consensus forecast in August and, at 3.0%, reached its highest level for a decade. It is likely to rise a bit further in the coming months: producer price inflation has risen recently and the price …
6th September 2021
Overview – After sharp falls in the middle of the month, most commodity prices ended August broadly flat. However, we doubt it will be long before the downward pressure on prices intensifies again. After all, economic growth in most major economies now …
3rd September 2021
Q2 GDP data released over the past month or so did not show a repeat of the across-the-board rises in exports seen in previous quarters, but the external sector still proved an important prop to GDP in many places. Thailand’s economy unexpectedly grew …
31st August 2021
A WeChat post by a prominent blogger voicing support for Xi Jinping’s “ common prosperity ” campaign has been widely re-published by state media, giving it a rare seal of Party approval. The post argues that the recent regulatory crackdown is just the …
We think slower growth in China will continue to weigh on the country’s stock market, as well as those of some other emerging markets (EMs). This month’s activity data out of China emphasised how the country’s economy has continued to slow. The latest …
27th August 2021
We think that the US dollar will continue to trend higher through the end of this year as commodity prices fall further and long-term government bond yields increase by more in the US than elsewhere. Over the past month, the dollar has had the largest …
The evidence from the latest COVID-19 waves sweeping through Sub-Saharan Africa point to a smaller economic blow compared to previous waves. Of course, there is a considerable degree of divergence, especially between countries imposing harsh restrictions …
High levels of vaccine coverage have paved the way for policymakers across the Gulf to lift measures to contain COVID-19 over the past month or so. The UAE remains ahead of the pack in the vaccine race and has started to deliver booster jabs in recent …
26th August 2021
Recoveries across Emerging Europe accelerated in Q2 as the easing of virus restrictions pushed GDP to, or above, pre-pandemic levels in most countries and we think this momentum will continue in Q3. However, the recovery has been accompanied by a marked …
New Zealand has entered a draconian lockdown and new infections continue to rise. The lockdown prompted the RBNZ to refrain from hiking interest rates at its August meeting and financial markets were only pricing in a 50% chance of a rate hike in October …
A year after the Fed announced its new policy framework, we think that bond markets still don’t fully reflect the likelihood of a prolonged period of above-target inflation. While much of investors’ attention at the Fed’s Jackson Hole conference later …
25th August 2021
The housing market cooled in July as the stamp duty holiday began to unwind. Newly agreed sales and buyer enquiries dropped back, annual house price growth began to stabilise, and transactions fell. However, the RICS balances compare activity to the …
Data for Q2 confirm that, as with the economic recovery, the property upturn is more advanced in Scandinavia than in western Europe. Investment activity grew strongly, even when excluding a large one-off deal. (See Chart 1.) Prime all-property capital …
Foreign portfolio outflows from Indian financial markets have been easing this month (see Chart 1), bucking the broader EM trend. This may have been driven in part by the improvement in the virus situation. Looking ahead, the growing likelihood of the US …
GDP is on track to return to its pre-pandemic level this month but, with the number of coronavirus infections now picking up, there is a growing risk that the recoveries in some sectors go into reverse. Admittedly, the progress on vaccinations means that …
24th August 2021
In line with the economic recovery, there were growing signs that property markets have turned a corner in Q2. All-property rents rose on the quarter, while the all-property yield dipped on the back of lower industrial yields. On an annual basis, …
With daily cases surging to unprecedented levels and states of emergency extended to mid-September this week, there may not seem to be much light at the end of the tunnel for Japan’s economy. However, we’re cautiously optimistic that a strong recovery is …
20th August 2021
Inflation is at, or close to, multi-year highs across Latin America which has prompted a slew of interest rate hikes across the region. We think that central banks in Brazil, Mexico, Chile and Peru will continue their tightening cycles over the coming …
19th August 2021
Several EM central banks have continued to tighten monetary policy over the past month or so in response to strong reopening rebounds ( Chile , Czech Republic , Hungary ) and/or rising inflation concerns ( Brazil , Mexico, Peru , Russia ). A few others, …
18th August 2021
After a period of strong economic growth in H1 2021, with high inflation squeezing incomes and the spread of the Delta variant, the outlook for H2 is less positive. That said, we don’t expect this to have a major effect on occupier markets, which will …
The 1.1% m/m fall in retail sales last month illustrates the worsening drag from the sharp slowdown in real income growth, as earlier fiscal support fades and surging prices erode purchasing power. This suggests real consumption growth could be even …
All-property capital values rose for the third consecutive quarter in Q2, leaving them less than 1% below their pre-virus level. The improvement was driven by a decline in all-property yields, though rents also rose slightly on a quarterly basis for the …
The SNB and the Riksbank will leave interest rates on hold throughout 2022 and 2023 and probably beyond, but the start of rate hikes by the Norges Bank is edging ever closer. (See here .) Once the tightening cycle in Norway begins, attention will …
16th August 2021
We expect several of the trends that have tentatively (re-)emerged in financial markets recently to persist. First, developed market (DM) sovereign bonds have come under pressure again, and have underperformed risky assets. We have been arguing that the …
12th August 2021
Slowdowns in China and the US should not be taken as evidence that the global recovery is stalling. Admittedly, it is not just some high-profile data from the US and China that have weakened recently. Recoveries in retail sales, industrial output, and …
The share of households seeing now as a good time to buy a home has fallen to 39-years lows, as booming house prices, tight credit conditions and record low inventory have weighed on sentiment (See Chart 1.) But the share actually planning to buy has not …
11th August 2021
With a whopping 1.0 million people on average having been asked by the NHS App or Test & Trace system to self-isolate in July, the “pingdemic” is likely to have stifled the economic recovery in recent months. (See here .) In July, our Capital Economics …
The surge in spending as coronavirus restrictions have been lifted will bring the euro-zone economy close to its pre-pandemic level in the coming months. After expanding by 2% q/q in Q2, we expect a similar increase in Q3. Both business and consumer …
4th August 2021
With new virus cases hitting fresh highs this week, Sydney’s lockdown has been extended until end-August and looks set to last for months given the high transmissibility of the Delta variant. Melbourne also briefly re-entered lockdown this month, though …
30th July 2021
Questions about the strength of China’s post-lockdown rebound have become louder since the People’s Bank cut the required reserve ratio three weeks ago. But the trigger for this week’s sharp equity market sell-off was instead growing disquiet about the …
The highly contagious Delta variant of COVID-19 seems to be dominant now across much of Sub-Saharan Africa and is driving new waves in many of the large economies. South Africa appears to be over the worst of its latest outbreak, although it now has to …
29th July 2021
The wildfires in British Columbia appear to have been more disruptive than we first thought, but GDP should still rise this month thanks to the easing of the coronavirus restrictions. The volume of rail freight carloads carried across the country …
The end of the impasse within OPEC+ this month will result in higher oil output and boost recoveries in the Gulf over the second half of this year and in 2022 . Output quotas will rise by 400,000bpd each month after the UAE backed down in return for …
28th July 2021
The region’s economies have continued to rebound strongly over the past month as virus outbreaks have largely been contained and restrictions have been lifted. Surveys of sentiment in the services sector have surged and high-frequency mobility data have …
