Stage set for a slowdown in house price growth Case-Shiller reported annual house price growth falling for the third consecutive month in November. And with rising mortgage rates set to stretch affordability to its worst since 2008, we expect annual house …
25th January 2022
Economy stabilising The increase in the Ifo Business Climate Index (BCI) in January provides more evidence that, after contracting in late 2021, conditions have stabilised at the start of the year. With disruption from the Omicron wave likely to ease in …
Inflation a headache, but Chancellor still has wiggle room Stronger tax revenues were just enough to offset big rises in debt interest costs in December. But we don’t expect this to last: further rises in inflation will mean borrowing soon overshoots the …
Inflation above target mid-point sets stage for rate hikes this year The strong rise in underlying inflation at the end of last year means the RBA is all but certain to end its asset purchase scheme at its meeting next week. And with underlying inflation …
While Omicron means that the strong GDP growth recorded in Q4 2021 is unlikely to be repeated this quarter, the recovery should be back on track before long. With the economic outlook still upbeat, the Bank of Korea is set to continue tightening over the …
Inflation peaked but will remain stubbornly high The fall in Mexico’s inflation to 7.1% y/y in the first two weeks of the year gave the first sign that inflation has peaked and we think that it will continue to trend lower over the coming months. That …
24th January 2022
Omicron hangover to be short-lived, signs of shortages easing The third consecutive decline in the composite PMI indicates that the Omicron variant weighed further on activity in January. But the recent fall in COVID-19 cases, relaxation of restrictions …
Sluggish January, but outlook improving The small decline in the Composite PMI in January confirms that Omicron has taken a toll on the services sector, though Germany performed surprisingly well. We think governments will ease restrictions sufficiently …
A solid end to 2021 The latest activity data in Poland show that industry expanded strongly in Q4 but that the shine came off the retail sector amid falling consumer sentiment and surging inflation. We think that GDP expanded by around 6.8% y/y (1.1% q/q) …
Manufacturing resilient but services hit by Omicron The January flash PMI suggests that the manufacturing sector continues to expand at a rapid pace, but there are mounting signs that firms are passing on higher input costs to consumers. By contrast, …
Consumer confidence proving to be resilient January’s broadly unchanged reading for consumer confidence suggests that household spending might be holding up fairly well, despite a surge in Covid cases. We expect consumption to recover quickly once the …
21st January 2022
Modest gain flattered by jump in gasoline sales The rise in retail sales in November was not as strong as it looks, and the preliminary estimate suggests that sales fell sharply in December amid the Omicron wave. They are likely to fall further this …
Huge fall points to bigger Omicron hit The fall in retail sales volumes in December was bigger than expected and supports our view that the Omicron outbreak in the run-up to Christmas may have dragged down GDP by 0.5% m/m, if not more. The 3.7% m/m fall …
Inflation will peak around 1% Consumer price inflation reached a two-year high of 0.8% in December, but with energy prices set to fall back, we think that it will peak around 1% by mid-year . The headline rate was a touch below the analyst consensus of …
Home sales dip in December, and are set for further declines in 2022 Despite a 4.6% m/m fall in existing home sales in December, 2021 marked an impressive year for existing home sales, with sales 8% higher compared to 2020. But looking ahead, a backdrop …
20th January 2022
Despite power rationing, aluminium output grows in 2021 Although global aluminium output fell in y/y terms in December, it still grew strongly over 2021. The lifting of power restrictions in China has helped increase global output despite a reduction in …
Core inflation to remain high Euro-zone inflation is likely to have peaked at 5% in December, with energy inflation set to fall sharply this year. But we think that core inflation will settle at around 2%, prompting the ECB to prepare the ground for …
Demand-supply imbalance continues to drive up prices The number of homes being listed for sale dropped again in December while demand continued to climb. As a result, we think house prices will continue to rise at pace in the near term. At -14, the new …
Tight labour market will support RBA to end QE The further decline in the Australian unemployment rate in December supports our forecast that the RBA will end its asset purchases in February. The 64,800 rise in employment in December was slightly above …
Exports to remain strong Exports were broadly stable in December after a sharp rebound in November. We think they’ll continue to recover at a decent pace this year as external demand for capital goods continues to rise and motor vehicle exports resume …
Inflation reaches 30-year high, but details more encouraging Inflation rose to a 30-year high of 4.8% in December but is now close to a peak. We expect it to remain near its current level in the first quarter, before it falls sharply over the remainder of …
19th January 2022
Strong demand keeps housing starts, if not completions, elevated Single-family starts edged back in December, but they saw a 12.1% y/y rise in 2021 overall as strong housing demand and a lack of existing homes for sale supported new home sales. Rising …
Strong November, but headwinds to build in 2022 November’s hard activity data suggest that South Africa’s economy performed strongly in the middle of Q4 and the early evidence is that the latest Omicron-driven virus wave inflicted only minimal economic …
German inflation to remain uncomfortably high Final inflation data for December showed that the decline in Germany’s HICP inflation rate to 5.7% was due to energy and services. We expect both headline and core inflation to fall this year, but only to …
Inflation rises, putting SARB in tight spot South Africa’s inflation rate rose to a stronger-than-expected 5.9% y/y in December, probably tilting the Reserve Bank more in favour of continuing to tighten monetary policy. But with soft core price pressures …
Target-busting inflation heading to 7% After rising from 5.1% in November to 5.4% in December, CPI inflation is now further above the Bank of England’s target than at any point since the UK first adopted an inflation target in October 1992. (See Chart 1.) …
Coping with furlough and Omicron, but real wages will fall further The labour market appears to have tightened after the end of the furlough scheme and at the start of the Omicron wave. So even though real wages are now falling and will decline further, …
18th January 2022
Inflation expectations rise as capacity constraints worsen The Bank of Canada’s latest business and consumer surveys suggest the upside risks to inflation over the next couple of years have increased, and raise the chance that the Bank will hike as soon …
17th January 2022
Manufacturing sales likely to drop back again amid Omicron wave Manufacturing sales rose strongly for the second month running in November, but the disruption to labour supply from the Omicron wave presents a clear downside risk to output in December and …
Net lending ends 2021 on a two-year high Commercial real estate debt ended 2021 with its largest monthly increase since the onset of the pandemic. Against a backdrop of strong investment activity, we expect commercial property lending to have a strong …
Surprise rise in inflation unlikely to prompt rate hike The surprise rise in inflation in Nigeria, to 15.6% y/y in December, will more likely than not prove to be a blip. We don’t think that policymakers will rush to raise interest rates in response. …
Momentum weak heading into 2022 Official GDP growth beat expectations last quarter and in q/q terms was the strongest since late 2020. But we are sceptical that this reflects the reality on the ground – our China Activity Proxy suggests output was largely …
Business investment to continue to rebound strongly The rise in machinery orders in November supports our view that business investment recovered strongly across Q4. And private investment should continue to rebound strongly this year as firms look past a …
Omicron absenteeism weighs on output The 0.3% m/m decline in manufacturing output is probably a sign that Omicron-related employee absenteeism was already weighing on output by the end of last year. We expect an even bigger hit in January but, assuming …
14th January 2022
Collapse in control sales partly reflects seasonal adjustment issue The 1.9% plunge in retail sales in December in part reflects what appears to be a problem with seasonal adjustment process around the holidays. The initial Omicron wave appears to have …
Disappointing recovery Provisional data showing that Germany’s GDP increased by 2.7% last year and news that it shrank in Q4 underlines that its recovery has lagged many of its peers, including the US, France and the UK. We think that German GDP will …
More ammunition for the Riksbank’s hawks The increase in Swedish CPIF inflation in December will embolden the hawks at the Riksbank. While we expect energy effects will drop out this year, continued supply-chain problems and rising inflation expectations …
Omicron may drag GDP back below its pre-pandemic level Although the effects of the Omicron COVID-19 wave will probably mean that the economy falls back below its pre-pandemic peak by January after having surpassed it for the first time in November, that …
Shipping disruptions a near-term risk Exports remained strong last month but may soften in the coming months amid growing disruptions at ports. Meanwhile, imports dropped back sharply, consistent with continued domestic weakness, especially in the …
Credit availability to remain good, but mortgage rates to rise The Q4 credit conditions survey suggests that, while credit conditions will remain loose, scope for lenders to absorb further increases in interest rates into their margins has run out. A …
13th January 2022
Inflation to rise a little further Saudi inflation edged up to 1.2% y/y in December and we think that the headline rate will drift a little higher over the first half of this year before stabilising at around 1.0-1.5% over the rest of 2022 and 2023. Data …
Economy solid in November, but crisis to trigger fresh downturn Turkey’s industrial production and retail sales figures for November suggest that the economy held up relatively well in the middle of Q4. But the effects of the recent currency crisis are …
US oil demand improves, but will remain under pressure Commercial crude stocks slumped last week, reflecting a partial recovery in demand. However, we think demand will remain under pressure as COVID-19 cases rise in the US and as economic growth slows. …
12th January 2022
Inflation stabilises, but rate hike cycle not over yet Russian inflation held steady at 8.4% y/y in December, but we think it will rise a bit further this month and prompt the central bank to deliver a final 75bp rate hike, to 9.25%, at its meeting next …
Inflation hits 40-year high of 7% CPI inflation hit a 40-year high of 7.0% in December and, although the headline rate has probably peaked now, core CPI inflation increased to 5.5% last month and will continue to climb toward 6% over the coming months. …
Inflation likely to breach the RBI’s target in Q1 Indian consumer price inflation took a big step towards the 6% ceiling of the RBI’s target range in December. We think it will breach the ceiling soon and that the RBI will remove some policy support. …
Rise in industrial output won’t prevent a poor Q4 November’s 2.3% monthly increase in euro-zone industrial production followed a big downward revision to October’s figures and was largely due to huge volatility in Ireland. The big picture is that industry …
Rebound in credit growth underway Broad credit growth picked up again in December amid increased policy support. We think lending will continue to rebound in the coming months although officials are likely to prevent a sharp jump. Chinese banks extended a …
Inflation pick-up reversing Chinese inflation dropped back last month, consistent with our view that the acceleration in price gains in earlier months would prove temporary. We think factory-gate inflation will continue to moderate going forward and that …
Industrial woes continue The disappointing 0.1% m/m fall in Mexican industrial production in November raises the chances that the economy slipped into a recession last quarter. And while auto production looks to have rebounded strongly in December, the …
11th January 2022
