2019 was truly an annus horribilis for India’s economy but there are green shoots of a recovery in the data from the very end of the year. Industrial production growth jumped in November. (See Chart 1.) Meanwhile, growth in new passenger vehicle sales is …
20th January 2020
The Monetary Policy Committee’s decision on whether to cut rates in January rests on a knife edge and could go either way. The MPC must weigh up the weakness of the economy and low inflation in Q4 with the prospect that the election result, a Brexit …
16th January 2020
The fall in long-term bank lending rates in November will reinforce the concerns of some BoJ Board members that ultra-loose monetary policy is harming the profitability of private banks. November’s drop in long-term lending rates was the sharpest since …
The decision by the SNB to scrap its currency ceiling five years ago coincided with it slashing interest rates to a record low to reduce the attractiveness of holding Swiss francs. Alas, this ‘deterrence effect’ is not what it used to be: whereas the gap …
Our estimates of Q4 GDP based on national monthly data and surveys imply that global growth slowed from 3.1% to about 2.6% in quarter-on-quarter annualised terms. But we suspect that this will prove to be the low point before a gradual recovery begins. …
14th January 2020
Summary: The 30-year mortgage rate ended 2019 at close to 4%, and it is set to stay at around that level over the next or so. But tighter credit conditions will offset some of the benefit of lower rates on housing demand, and existing home sales will be …
December was a relatively strong month for both precious and industrial metals, with prices rising almost across the board. A weaker US dollar and safe-haven buying buoyed gold prices, while base metals prices benefitted from signs that industrial …
9th January 2020
Overview – The easing of US-China trade tensions and the escalation of US-Iran geopolitical tensions has caused oil prices to surge in recent weeks. In contrast, the prices of natural gas and coal have slumped owing in part to ample supply of natural gas. …
Hopes that the euro-zone economy will gather pace in the coming months are likely to be dashed. The latest business surveys point to growth stabilising but not recovering in the final quarter of last year. The slowdown over the past two years has been …
Overview – The prospect of a ‘Phase One’ trade deal between the US and China buoyed commodity prices in December. Although we expect trade tensions to remain elevated, we think that most commodity prices will rise in the year ahead as fears of a global …
6th January 2020
November’s 71,000 slump in the Labour Force Survey (LFS) measure of employment almost certainly overstates the weakness of the labour market. While we do not yet have the November data for the more reliable Survey of Employment, Payrolls and Hours (SEPH), …
23rd December 2019
The marginal increase in rental values in November was not enough to prevent capital values from falling on an annual basis. Indeed, the impact of rising yields, particularly in the retail sector, caused all-property capital values to fall by 2.9% y/y. …
20th December 2019
Downward price pressures in London have eased, driven by a slump in homes coming up for sale. But with house prices high and mortgage interest rates close to their floor, that is unlikely to drive a recovery in prices soon. Rather, we expect a 1% fall in …
The last round of economic data released in 2019 pointed to a mixed performance in Latin America. Growth seems to have remained robust in Colombia in Q4 – and to have strengthened in Brazil – but activity faltered elsewhere. For the region as a whole, …
19th December 2019
GDP growth appears to have slowed slightly, to between 1.5% and 2.0% annualised in the fourth quarter, but the more stable global backdrop and the lagged impact of this year’s loosening in financial conditions should drive a gradual recovery from mid-2020 …
Annual GDP growth in Australia has probably bottomed out already but we expect growth to remain below potential in 2020. As such, jobs growth will probably not be strong enough to absorb the expansion in the labour force and we expect Australia’s …
The final round of South African data released this year supported our view that the economy faltered in recent months. Output fell by 0.6% q/q saar in Q3, and the latest figures suggest that the economy may have entered another technical recession in Q4. …
18th December 2019
China’s apparent reluctance to commit to the extra $200bn of US imports relative to 2017 levels that the US is requesting over the next two years as part of the Phase One deal is understandable: achieving the target would require imports from the US to …
The citizen amendment bill – which aims to fast-track citizenship for non-Muslims from neighbouring Muslim-majority countries – has dominated the news over the past couple of weeks. This isn’t primarily an economic or financial issue, but there are …
Political developments across Algeria, Tunisia and Lebanon threaten to exacerbate already-poor balance of payments positions. Presidential elections that took place in Algeria last week don’t appear to have appeased protestors, who are no doubt …
17th December 2019
Policymakers in Russia and Turkey have loosened monetary policy more than elsewhere in the emerging world over the past few months, but we think that easing cycles are nearing an end. Communications from Russia’s central bank suggest that, after one more …
Economic growth across the emerging world has slumped this year but, with the important exception of China, recoveries should take hold in 2020. Recent interest rate cuts will keep financial conditions accommodative. And governments will continue to …
The post-election jump in UK equities could just be the start of a sustained rally. Concerns Brexit and higher taxes under a Labour government mean that UK equity indices have underperformed over the last few years. (See Chart 1.) However, the removal of …
Singapore’s economy appears to be benefitting from tourists and business travellers shunning Hong Kong. Since the Hong Kong protests intensified in July, tourist arrivals to Singapore have picked up. Meanwhile, hotel occupancy rates have jumped and were …
Despite recent optimism about trade and Brexit, we doubt that equities in developed markets (DMs) will fare as well next year as they have in 2019. That said, those in the UK will be an exception in our view. Two key factors have boosted equities across …
What a difference a few months make; from being the worst performing G10 currency by some margin between the start of the year and late October, the Swedish krona has risen by about 3% against the euro since the Riksbank hinted that it would “most …
16th December 2019
Optimism about an imminent resolution to the trade war between the US and China and subsiding protests in Latin America have supported EM currencies over the past month. But, barring a few exceptions, we think that they will weaken against the US dollar …
11th December 2019
The available data on retail sales, household spending as well as the Bank of Japan’s consumption activity index show that consumer spending fell broadly as much in October as in April 2014, when the sales tax was raised from 5% to 8%. Even so, our …
Hopes that the euro-zone is turning a corner look premature. The latest activity data have been disappointing, with retail sales falling in October and national data pointing to another decline in industrial output. Business surveys paint a bleak picture …
10th December 2019
Overview – Warmer-than-expected weather, amid subdued global economic growth, put downward pressure on the prices of coal and LNG since the start of November. In contrast, the price of oil rose on the back of the agreement that OPEC+ will cut output …
9th December 2019
Housing market activity and house price growth showed few signs of improvement at the end of 2019. Indeed, activity has, if anything, been cooling. (See Chart 1.) That partly reflects economic and political uncertainty. But the big picture is that high …
Summary: A narrowing in the spread against the 10-year Treasury yield kept the 30-year mortgage rate close to 4% even as yields reached a three-month high in early November. Mortgage rates are likely to stay close to 4% over the next couple of years. But …
Now that all major economies have released their Q3 national accounts, it is clear that the world economy pulled off a third consecutive quarter of around 3% annualised growth. (See Chart 1.) And over the past six weeks or so, there has been mounting …
6th December 2019
Despite somewhat more encouraging economic data releases, industrial metals prices struggled to find direction in November mainly owing to the ongoing uncertainty surrounding US-China trade negotiations. We think most base metal prices will rise next year …
5th December 2019
The anticipation of next week’s election delivering a substantial majority for the Conservative Party and leading to a Brexit deal has already triggered a turning point in the financial markets, with the pound rising to a seven-month high of $1.31 and a …
Overview – Commodity prices struggled to find direction in November despite the release of somewhat stronger economic data. Meanwhile, developments on the US-China trade front remained a key driver of sentiment. While a “phase one” trade deal seems likely …
3rd December 2019
We estimate that regional GDP growth picked up to about 0.5% q/q in Q3, which would be the fastest pace in 18 months. But that probably marks the peak in the recovery. Argentina and Chile are set to contract in Q4, Mexico’s economy is showing few signs of …
29th November 2019
As things currently stand, the US is due to extend its punitive tariffs to cover nearly all goods imported from China in two weeks’ time. But the Trump administration has appeared keen to avoid that happening almost since the president announced the …
Headline inflation has eased across Central and Eastern Europe (CEE) over the past few months, but that was entirely due to falling food and fuel inflation; core price pressures have continued to build. Indeed, core inflation hit multi-year highs in …
28th November 2019
Figures released over the past month painted a very downbeat picture of economic conditions in Africa’s two largest economies. Growth in Nigeria did, admittedly, pick up a touch in Q3. But activity remained very weak by past standards, with GDP rising by …
Although we think that the Fed is now done cutting rates, we think that more easing is coming outside the US and that major central banks will remain net buyers of bonds. With this in mind, we forecast that government bond yields in most developed …
Looser monetary and fiscal policy should help to drive a modest recovery in Thailand over the coming quarters, and we are revising our GDP growth forecast for next year up slightly. Figures released earlier this month showed Thailand grew by just 2.4% y/y …
26th November 2019
The stagnation of retail sales volumes over the past 12 months shows that all is not well in the consumer sector, but there have been some tentative signs of improvement recently. While retail sales volumes edged down by 0.1% m/m in September, growth over …
25th November 2019
Preparations for the public listing of Saudi state oil company, Aramco, have stepped up a gear this month but the signs are that it is unlikely to be the blockbuster sale that the Kingdom once hoped for. When plans for the listing were first mooted in …
Capital values have been falling since late 2018 (See Chart 1.) This has led by declining retail capital values and slowing growth in office and industrial. We expect that all-property yields will continue to rise next year, driving further declines in …
22nd November 2019
Q3 GDP data due next week are likely to show a further slowdown in India’s economy, with the industrial sector the main source of weakness. However, some comfort can be taken from the fact that the services sector – which accounts for over 50% of the …
We do not expect to see a resumption of the “ reflationary ” pattern that until recently had characterised markets over the past month. This is primarily because we think that the global economy will remain stuck in a low gear for some time to come, and …
21st November 2019
The decline in bond yields in Australia and New Zealand throughout 2019 has paused in recent months following optimism about a potential trade deal between the US and China and hawkish language from the Fed. But we think that bond yields in both countries …
The latest activity data suggest that economic growth will slow to just 1.0% annualised in the fourth quarter, from 1.9% in the third, but there are growing hopes that may prove to be the nadir. Much of that slowdown is being driven by firms running down …
20th November 2019
Ongoing protests in Chile, Hong Kong and Lebanon will weigh on their economies and financial markets, but to different degrees. While the tightening of financial conditions and strikes in Chile will hit activity in Q4, the strength of the government’s …
15th November 2019
