The government has issued ¥95tn in government securities since the start of the current fiscal year in April, equivalent to a huge 17% of pre-virus GDP. It intends to issue another ¥35tn by March 20201. (See Chart 1.) Most of those funds have been issued …
17th September 2020
The housing market has so far seen a V shaped recovery. House purchase mortgage approvals have already recovered to their pre-virus level, while house prices have reversed the dip recorded earlier in the year. But as pent-up demand is expended and the …
16th September 2020
While we continue to forecast that developed market (DM) “risky” assets will make further ground over the next couple of years, the rapid increase in new coronavirus cases in Europe poses a downside risk to our generally optimistic forecasts. As we set …
Applications for home purchase have levelled off, but at a level 25% higher than a year ago. That is now feeding through to home sales, with the pending home sales index rising to a 15-year high in July. However, a lack of inventory will soon put a brake …
11th September 2020
Given Norway’s decision to re-open its economy comparatively early, its post-lockdown experience has been watched closely for clues as to how other economies could expect to fare. The latest monthly data showed that mainland GDP continued to expand in …
Economic activity rose sharply in most economies as lockdowns eased during May and June. But, outside China, GDP is still some way below pre-COVID levels and there are signs that renewed virus fears are already prompting a slowdown. Gains in industrial …
The two asset classes that we track which have seen by far the most action since the last edition of the Asset Allocation Chart Book on 5 th August are US equities and energy commodities. Not only have they been the best and worst performers respectively …
10th September 2020
Our Capital Economics BICS Indicator suggests that the rapid economic recovery has continued with some chunky gains in GDP in both July and August. (See Chart 1.) If so, then the economy may now be “only” 8% below its pre-crisis level and around 70% of …
8th September 2020
The rebound phase has now come to an end. Retail sales declined in July and both the business surveys and high frequency data suggest that economic activity levelled off in August. Of course, the initial rapid pace of recovery was never going to be …
4th September 2020
Overview – Industrial metals rallied strongly in August on the back of encouraging economic data out of China and some depreciation of the US dollar. By contrast, the price of gold eased back, after hitting an all-time high early in the month. However, …
Overview – Energy prices continued to recover in August, but they are still trailing other commodity asset classes as well as other risky assets, such as US equities. We expect that prices for the most part will hold steady for the rest of this year given …
3rd September 2020
Overview – Ongoing fiscal stimulus in China, coupled with the recent depreciation of the US dollar, is boosting commodity prices. China’s commodity imports are also growing strongly, but we suspect that the pace of purchases may slow soon as higher prices …
2nd September 2020
Local currency government bond markets in Latin America generally came under pressure this month, but we think that most will rally over the rest of the year. In Chile and Peru, while local currency sovereign yields have risen recently in response to the …
27th August 2020
Many African policymakers have further eased coronavirus -related restrictions in recent weeks, but there are signs that economic recoveries have stalled at the start of Q3. High-frequency data from South Africa, where Covid-19 cases surged in July, give …
Political instability in Belarus has prompted speculation about how President Putin will respond to calm the situation. Mr. Putin is working to maintain close ties with Belarus, but the more that the political situation deteriorates, the more likely that …
The consumption share of GDP had edged up in recent years, but that progress has been reversed by the COVID-19 stimulus response, which has focused on boosting investment. (See Chart 1.) The consumption share should start to rebound again soon as the …
Rents and capital values fell at a slower pace in July than was recorded in June. But, while values seem to be approaching a degree of stability, we expect a deterioration in the rental outlook will put renewed upward pressure on yields. Total returns …
In Australia, the lockdown in Melbourne in July was of similar intensity to the initial lockdown in April. Even so, retail sales only fell by 2% m/m in Victoria which still left them around 2% above pre-virus levels. Part of that strength may reflect …
The recovery in oil prices from their nadir in April has not prompted policymakers in the Gulf to row back on their plans to push through fiscal austerity. Saudi Arabia suspended the Cost of Living Allowance in June and also delayed or cancelled capital …
26th August 2020
Having been among the fastest in the world at controlling the initial outbreak, Hong Kong, Vietnam and Korea are all at different stages of a second wave of infections. With new infections in Hong Kong down from three-figures at their recent peak in late …
We think that the recent outperformance in local-currency terms of the MSCI EM Index relative to the MSCI World Index of developed market (DM) equities will continue as the global economy recovers further. (See Chart 1.) Back in April , when stock markets …
25th August 2020
A handful of countries in East Asia and Eastern Europe (notably Korea and Poland) are suffering from rising coronavirus cases again, but the hit to activity there resulting from precautionary consumer behaviour and renewed restrictions is likely to be …
Firms’ selling price expectations rose further in July and are now higher than before the lockdown started in March, which seems to suggest that an average of the Bank of Canada’s three core inflation measures is more likely to rise than fall further, …
Q2 data was a mixed bag as all markets recorded shifts in yields while only a handful of markets saw moves in rents. That said, Scandinavian investment activity took a significant hit in Q2, and despite the pick-up in June and July, transactions look set …
24th August 2020
We forecast that developed market (DM) “risky” assets will make further ground over the next couple of years as the global economy continues to recover from the coronavirus shock and both monetary and fiscal policy remain extremely accommodative. Both the …
21st August 2020
Consistent with the sharp fall in economic activity, occupier demand weakened further in Q2. And with bargaining power shifting to the tenant, rental falls were also evident in many markets, with the sharpest declines recorded in the retail sector. (See …
20th August 2020
Investment and occupier demand plunged further in Q2. As expected, the retail sector bore the brunt of the impact, with capital values falling by almost 9% y/y. This drove down all-property capital value growth to just 3% y/y, the lowest since 2012 Q4. …
19th August 2020
If the monthly activity data are anything to go by, GDP data for Q2 (Q1 of FY20/21) due at the end of the month will show that investment slumped by more than 30% y/y. (See Chart 1.) That will prove the bottom given the lifting of lockdown measures since …
Although core CPI inflation remains muted at 1.6% in July, the surge in prices last month specifically could be the start of a more significant rebound, as the added costs and ongoing supply constraints stemming from the pandemic and physical distancing …
18th August 2020
Occupier demand slowed further in Q2 and although completions were exceptionally weak, vacancy rose in most sectors. As a result, rental values fell in the office, retail and apartments sectors, while industrial rents only nudged higher, with the weakest …
14th August 2020
Compared to many of the larger euro-zone countries, the coronavirus remains relatively well under control in the Nordic countries and Switzerland. With the exception of Denmark, there are at this stage no signs of a second wave. This in turn is helping to …
13th August 2020
GDP data for Q2 revealed sharp declines in activity in all major economies except China, driven primarily by slumps in consumer spending. Retail sales data for May and June pointed to an encouragingly sharp rebound, leaving sales above their pre-virus …
Despite the reintroduction of states of emergency in some prefectures, and renewed calls for jishuku (“self-restraint”) in many others, the steps taken by local authorities to curb the “second wave” of coronavirus cases have so far been tentative and …
Mortgage rates have continued to fall, hitting a record low 3.14% at the end of July. Alongside the reopening of parts of the economy, and pent-up demand from the spring, that has helped home sales bounce back strongly from their COVID-related dip. …
12th August 2020
Despite a rather lacklustre economic recovery, the housing market is already turning the corner. Demand has bounced back, helped by a decline in mortgage interest rates. The stamp duty cut will provide further support to housing transactions over the next …
11th August 2020
The economy is set to rebound strongly in the current quarter after its 12% slump in Q2, even if there is no further increase in GDP in August and September. Indeed, some of the high frequency data suggest that economic activity is almost back to its …
6th August 2020
The broad-based recovery in “risky” assets that got underway on 23 rd March has run out of steam since 8 th June. That is not because policy support has been dialled back. Instead, it appears to reflect renewed concerns about the spread of the coronavirus …
5th August 2020
The large share of consumer-facing services in the UK economy, combined with a deeper and longer lockdown than most other developed economies meant that the UK was always going to be hit harder than some other countries. But the larger fall in GDP in the …
The Gulf economies have been the epicentre of the coronavirus outbreak in the region but almost all countries have managed to put new daily cases on a downwards trend thanks to strict containment measures and aggressive testing. In contrast, new cases are …
31st July 2020
The number of new daily coronavirus cases in the region has continued to rise, with only Chile among the major economies appearing to get its outbreak under control. Restrictions have been lifted much more slowly in the region than elsewhere in the …
Private investment is down 7.3% y/y so far this year, held back by the uncertain economic outlook. State firms have stepped in to fill the gap. Despite a sharp downturn at the time of China’s lockdown in Q1, their capital spending rose 2.1% y/y during the …
The past month has brought further signs that countries across Sub-Saharan Africa are struggling to bring the coronavirus under control. Of course, the true extent of the spread of the virus is muddied by low levels of testing. South Africa has accounted …
Much of Latin America, South Africa, and parts of Asia – notably India and the Philippines – are still struggling to contain their first waves of coronavirus. And while policymakers in these countries have generally eased lockdowns over the past few …
Turkish financial markets have come under renewed pressure this month, underlining the risks posed by the country’s low level of foreign exchange reserves and large external financing needs. The threat of EU sanctions seems to have been the proximate …
30th July 2020
A new outbreak in Victoria has caused daily new cases to surge to a record high in Australia. By contrast, New Zealand has maintained its elimination of the virus with new cases remaining very low and only being detected in quarantine facilities for …
The second quarter GDP figures for the region that have already been published make for grim reading, but there is a big divergence between countries. In aggregate terms we estimate that Emerging Asia (excluding China) contracted by around 10% y/y last …
28th July 2020
Although there were further signs of stabilisation in June, we expect that the slow recovery in the economy will continue to put upward pressure on yields in the coming months. Meanwhile, rents fell by 0.4% m/m in June, the same pace as the previous …
27th July 2020
Operational changes announced by the Bank of Canada this week mean the pace of expansion of its balance sheet is set to slow. The Bank’s assets have surged by $420bn, or 350%, since February, a rise equivalent to 18% of GDP. The pace of expansion picked …
23rd July 2020
The rapid recovery in activity in May and June means that, after contracting by close to 30% annualised in the second quarter, GDP is already on course for a big rebound in the third quarter. But there are signs that the resurgence in coronavirus …
After hitting an all-time low in April, the rupee has strengthened by 3% against the US dollar as risk appetite has returned to global financial markets. (See Chart 1.) But while we think risky assets generally – and most EM currencies – will continue to …
22nd July 2020
