The EC’s Economic Sentiment Indicators (ESIs) continued to rebound across Central and Eastern Europe in February, with our regional weighted measure hitting an eight-month high. It is broadly consistent with the region having passed the worst of its …
27th February 2023
New home sales continue to outperform wider market Price reductions and generous incentives offered by homebuilders helped new home sales continue to outperform the wider market in January. But a renewed rise in mortgage rates will weigh on new home …
24th February 2023
Drop in headline rate unlikely to assuage Copom’s concerns The fall in Brazilian inflation to 5.6% y/y in the first half of this month was driven by lower food inflation and won’t ease policymakers’ concerns about the strength of core inflation. We …
Economy much weaker than thought in Q4 The downward revision to German Q4 GDP means the hit to activity at the end of last year was closer to our original expectation. It also suggests a technical recession in Germany during Q4 and Q1 is likely. Today’s …
Inflation will fall below 2% by mid-2023 Inflation hit a four-decade high in January and while we still expect inflation to fall below the Bank of Japan’s 2% target by mid-year thanks largely to the government’s energy subsidies, there are now upside …
Commercial crude oil stocks set to rise even further There was another strong rise in commercial crude stocks last week. With little prospect of any upturn in domestic demand anytime soon, commercial stocks should continue to rebound in the coming months. …
23rd February 2023
Further rise in services inflation will keep Banxico in hawkish mood Mexico’s headline inflation rate edged down to 7.8% y/y in the first half of February but the further pick-up in services inflation will continue to concern policymakers at Banxico. We …
The surprise upward revision to euro-zone core inflation in January, to a new record high, will embolden the majority of ECB policymakers who want to press on with significant further rate hikes. The upward revision to January’s euro-zone headline …
Investment prospects remain weak despite Q4 jump Private investment picked up firmly last quarter and although firms expect capital spending to remain relatively healthy, their projections are consistent with a slowdown in real terms this financial year. …
German inflation mystery continues The final release of German HICP for January confirmed that the headline rate fell but, disappointingly, still didn’t reveal what happened to the core rate. That said, there was some evidence that underlying price …
22nd February 2023
Growth picks up in Q4, but likely to remain weak whoever wins the election Nigeria’s economy recorded a surprisingly large pick-up in GDP growth, to 3.5% y/y, in Q4 but recent disruptions caused by the demonetisation process are likely to have dampened …
Global steel output remained depressed in January and is unlikely to pick up markedly in the coming months. However, a rebound in China’s demand and lower power costs in Europe should prompt some recovery in supply later in the year. The World Steel …
Further improvement, but headwinds still strong The further rise in the Ifo in February confirms that the German economy may have been a bit more resilient than we had expected in Q1. But with the index still in recessionary territory and the drag from …
Wage growth will peak at just below 4% With the risk of a wage-price spiral contained, we expect the RBA to start cutting interest rates by year-end. The 0.8% q/q rise in hourly wages excluding bonuses was below the analyst consensus of 1% and our own …
Sales fall, but at much slower pace The marginal decline in existing home sales in January supports our view that housing market activity is reaching a trough. But growing economic headwinds and stretched affordability mean sales will recover only …
21st February 2023
Core prices rise at slowest pace in two years The much smaller rise in core prices in January suggests that headline inflation will fall faster than the Bank of Canada expects, reinforcing our view that the Bank is unlikely to resume raising interest …
Sentiment continues to improve The ZEW indicators point to a further improvement in sentiment towards Germany and, along with other recent surveys, suggest that the economy is holding up better than we had anticipated. The rise in the ZEW economic …
PMIs suggest activity rebounded in February, but we doubt it will last The sharp rebound in the flash UK composite PMI in February suggests that the economy remained resilient to the dual drags from high inflation and high interest rates at the start of …
Economy growing, price pressures remain strong February’s chunky rise in the euro-zone Composite PMI suggests that the economy will grow in Q1. With the labour market still very tight and price pressures strong, the survey will reinforce ECB …
A weak start to 2023 Poland’s softer-than-expected activity data for January suggest that the economy started 2023 on weak footing and we expect it to struggle for momentum over the first half of the year as high inflation and tight monetary conditions …
Tighter fiscal policy probably still on its way despite borrowing undershoot January’s public finances figures suggest the Chancellor will have scope for some giveaways in his Budget on 15 th March. But with the OBR poised to slash its medium-term GDP …
February readings reinforce dim economic outlook in Q1 February’s flash PMIs are broadly consistent with our downbeat narrative of the economy in 2023. The manufacturing PMI fell further due largely to a plunge in export orders, while a further rise in …
Shallower contraction in GDP as sanctions hit fades The 2.1% contraction in Russian GDP in 2022 was smaller than expected and is consistent with an expansion in Q4, providing further evidence to suggest that the economy stabilised after the initial hit …
20th February 2023
Aluminium production to slowly increase this year Global aluminium production fell slightly in January compared to December, although the bigger picture is one of fairly steady production since the middle of last year. We expect production to respond to …
Yet another increase in core inflation The fall in the Riksbank’s target measure of inflation was largely due to a huge one-off drop in electricity prices but policymakers will focus more on the big increase in core inflation. This vindicates their recent …
Too soon to conclude that retail is coming out of its funk The rebound in retail sales in January was better than expected, had echoes of the leap in US retail sales and suggests that the festive/new year period wasn’t a complete write-off. But while …
17th February 2023
Thailand’s economy contracted sharply in the final quarter of last year, as a strong recovery in the tourism sector was unable to compensate for weakness elsewhere. Looking beyond the weak fourth quarter though, we think the economy is likely to benefit …
Starts fall back in January despite warm weather Single-family housing starts dropped back in January and the permits data add weight to our view that more weakness is to come. We think that starts will edge lower in the coming months, before an increase …
16th February 2023
Economy struggles despite strong GDP print The surprise acceleration in Israel GDP growth in Q4, to 5.8% q/q annualised, is not as good as it seems at first sight. The strength was largely driven by an unexpected surge in expenditure on personal …
Exports downturn well under way The trade deficit was virtually unchanged in January, as volumes and prices of exports and imports fell across the board. With the global downturn weighing on external demand, further export volume contractions are in …
Labour market will continue to slacken The weakness in January’s labour market data shows that rapid rate hikes are starting to cool activity, but with inflation still far too high that won’t prevent the RBA from tightening policy for a while yet. The …
Commercial crude oil stocks looking healthy Commercial crude stocks rose to their highest since June 2021 last week due to lower refinery activity. With crude demand likely to remain sluggish over the coming months, and the US government set to sell …
15th February 2023
Strong 2022 to give way to a disappointing 2023 The stronger-than-expected 0.7% q/q expansion in Colombia’s GDP in Q4 confirms that the economy was a regional outperformer over 2022 as a whole. But the expenditure breakdown suggests that the economy …
Further evidence of rebound The 1.0% m/m rebound in manufacturing output in January provides further evidence that the economy began the year on a strong footing. That said, while the survey evidence also appears to be turning a corner, for now it is …
Surge in sales erases Q1 recession fears The massive 3.0% m/m surge in retail sales in January may have been partly related to the unseasonably mild winter in the Northeast but, alongside the unexpected strength of payroll employment, it nevertheless …
Sales volumes fall again despite resurgent motor vehicle sector Another rise in motor vehicle manufacturing sales failed to offset weakness elsewhere in December, with overall sales volumes edging down. The rebound in the S&P Manufacturing PMI and …
Weakness spreading beyond industry in SA; Nigeria’s surprise rise in inflation December’s hard activity figures out of South Africa point to a mild contraction in GDP in Q4 and indicate that weakness in the economy is spreading beyond industrial sectors. …
Economy struggling at the end of last year The fall in euro-zone industrial production and imports in December further highlights the weakening in the economy at the end of last year. We expect the economy to enter a recession this year as the squeeze on …
Moderating services inflation makes Bank of England’s life easier The fall in CPI inflation from 10.5% in December to 10.1% in January (consensus and CE forecast: 10.2%, BoE forecast: 10.1%), the drop in the core rate from 6.3% to 5.8% and the easing in …
Easing price pressures to make way to final rate hike Inflation in South Africa continued to decline, to 6.9% y/y in January, but we think that the Reserve Bank will err on the side of delivering a final 25bp rate hike to (7.50%) at the next policy …
Resilient economy boosts case for further rate hikes after March Norway’s mainland economy put in a much better performance in Q4 than the central bank expected and ended the year with a healthy expansion in December. Together with the continued …
Pace of disinflation slowing The 0.5% m/m increase in consumer prices in January suggests that the downward trend in inflation is slowing. But we still expect the disinflationary process to re-accelerate soon, as easing shortages push core goods prices …
14th February 2023
Recession looming Confirmation that euro-zone GDP growth slowed to a crawl in Q4 does not alter our view that the region is now falling into recession. That said, we think the labour market will continue to hold up well. The second estimate of Q4 GDP …
Recessions hit in Hungary and Czechia, further weakness ahead The falls in GDP in Central and Eastern Europe shown in the Q4 figures probably mark the worst of the regional downturn, but we still think that activity will (at best) only stagnate over …
Wage growth continues to accelerate despite cooling labour demand December’s labour market data showed that, despite an easing in labour demand, labour market conditions stayed tight and the market continued to support strong wage growth. The Bank of …
Still on track for a recession in the first half Japan’s economy returned to growth in Q4, avoiding a technical recession after the contraction in Q3. With business investment slowing even quicker than we anticipated and a lower savings rate leaving less …
Slowdown in lending activity beginning to show in January The expected slowdown in net lending to real estate began to show in January. This was seen across all sectors and the latest Senior Loan Officer (SLO) survey suggested this will continue, as banks …
13th February 2023
Chances of another rate hike have just risen The unexpectedly large jump in headline consumer price inflation in January to 6.5% y/y is a clear challenge to our view that the hiking cycle is at an end. Further signs of the economy coming off the boil and …
Inflation still likely to fall this year The rise in Swiss headline inflation will be of less concern to SNB policymakers than the increase in the core rate to its highest level on record. However, we do not think these increases are the start of a new …
The economy slowed sharply in Q4 and we expect growth to remain tepid and well below-trend over the coming months as multi-decade high interest rates and weak global demand weigh on prospects. The revised estimate for Q4 GDP, published today, shows that …
