Shadow banking revival nudges up credit growth Broad credit growth hit its highest rate in nearly two and a half years last month as a pick-up in direct financing and shadow credit offset slower issuance of bank loans. The acceleration has further to run. …
11th August 2020
The lull before the storm The cracks evident in the latest batch of labour market data are likely to soon turn into a chasm with the unemployment rate rising from 3.9% to around 7.0% by mid-2021. The 220,000 q/q (0.7%) fall in employment in Q2 (consensus …
Possible signs that recovery in external demand is faltering The unexpected slump in Korean exports in the first 10 days of August could just be volatility in the data, but a reversal in the performance of exports to the US suggests the fall at least …
Rebound already well underway after historic slump Revised GDP figures confirm that Singapore’s economy collapsed in Q2, but the message from the more-timely data is that a strong recovery is already underway. We expect this rebound to continue, …
Krone-driven boost to inflation to fade in early-2021 The lagged impact of exchange rate movements will ensure that inflation remains above the Norges Bank’s target throughout the second half of this year. However, this effect will fade in early-2021 and …
10th August 2020
Inflation drops to eight-month low, easing cycle to resume on Thursday The fall in Egyptian inflation to an eight-month low of 4.2% y/y in July, alongside easing pressure on the pound, means that we think an interest rate cut at Thursday’s MPC meeting is …
Flooding pushes up food prices Consumer price rose last month following floods that disrupted agricultural production. Meanwhile, factory gate deflation continued to ease in July, reflecting the ongoing recovery in economic activity. Consumer price …
Recovery remains intact despite virus resurgence The 1,763,000 increase in non-farm payrolls in July confirms that, despite the resurgence in new coronavirus cases, the recovery remains firmly intact. With new infections now trending lower again and …
7th August 2020
Another reassuring gain but long road ahead The 419,000 rise in employment in July means that 55% of the three million pandemic-related job losses have now been reversed. We expect further gains in August and September to pull the unemployment rate below …
Rising inflation won’t deter dovish central banks The rise in Brazilian inflation to 2.3% y/y in July is unlikely to worry the central bank and, with the economy still very weak, we expect the Selic rate to stay at its current historic low through this …
House prices recover strongly in July According to the Halifax index, house prices rebounded in July. Along with the recent Nationwide data and stronger lending, this is further support for our view that a house price crash is now unlikely. But with …
Still a long way from normal Despite another substantial increase in June, driven by the auto sector, industrial output in Germany remained well below its pre-crisis level. The recovery should continue in the coming months, but will probably lose momentum …
Shipments point to a further recovery in domestic and foreign demand Imports edged up in level terms, consistent with the ongoing recovery in domestic activity. Meanwhile, exports jumped thanks to stronger foreign demand and the ongoing boost from …
Household incomes should continue to rebound Wage growth improved a little in June and household incomes are rebounding now that most furloughed workers are back in work. Meanwhile, the surge “core” household spending in June supports our view that …
Inflation ticks up but further rate cuts on the cards The rise in Russian inflation to 3.4% y/y in July is likely to be followed by a further modest increase over the next few months, but this shouldn’t prevent the central bank from cutting the policy …
6th August 2020
More encouraging signs for construction, but commercial expected to lag The rise in July’s construction PMI is an encouraging sign for activity. Looking ahead, we expect housing construction will lead the upturn in activity, while further falls in values …
Slow and fitful recovery to follow unprecedented slump The Philippines experienced what is likely to be one of the biggest falls in output anywhere in Q2. A failure to contain the virus, continued restrictions to movement and inadequate policy support …
Crude stocks to drop in the coming weeks US commercial crude stocks fell steeply again last week, in part because refinery activity is continuing to revive. We think that stocks will decline further in the coming weeks as product demand bounces back in …
5th August 2020
Rebound in trade lagging the rest of the economy The latest trade figures confirm that both exports and imports finally began to rebound in June, and we could see continued rapid gains over the coming months as trade catches up with the strong initial …
Exports set to lag Imports recovered more strongly than exports in June and we expect this trend to continue in the second half of the year. This implies net trade will hold back GDP growth during the initial stages of the recovery. The strong rebound in …
Home purchase demand eases back despite record low mortgage rates Mortgage applications for home purchase trended down over July, even as the 30-year mortgage rate fell to a record low 3.14%. The working through of pent-up demand from the spring, record …
Rising virus cases pose growing threat to the outlook Euro-zone retail sales reached their pre-crisis level in June and July’s final PMIs confirmed that the broader recovery continued at the start of Q3. But other parts of the economy won’t have rebounded …
Bumpy recovery continues July’s batch of whole economy PMIs from across the Middle East and North Africa all rose compared with surveys from June but, against the backdrop of prolonged weakness in tourism and hospitality sectors and fiscal austerity, the …
Swedish economy not immune, but still well placed The sharp contraction in the Swedish economy in Q2 confirms that it has not been immune to Covid, despite the government’s well-documented light-touch lockdown. Nonetheless, the economic crunch over the …
A slow recovery after historic drop in GDP Economic activity in Indonesia collapsed in the second quarter. A failure to contain the virus effectively and inadequate policy support mean the recovery is likely to be one of the slowest in the region. Figures …
Economic recovery is beginning to stall The July PMI surveys have been a mixed bag but, taken together with evidence elsewhere, they suggest that the post-lockdown economic recovery is stalling. This adds to the case for further monetary easing, and we …
Unemployment rate will rise again in Q3 The fall in the unemployment rate to 4.0% in Q2 shows that the government’s generous wage subsidy protected many jobs but we suspect that as that comes to an end, unemployment may rise somewhat Q3. The 0.4% q/q …
Industry leads the recovery The 8.9% m/m rise in Brazilian industrial production in June and the jump in surveys for July highlight that the sector is recovering surprisingly quickly. But output is still well below its February peak and other parts of the …
4th August 2020
Drop in inflation unlikely to prompt fresh rate cuts Turkish inflation eased by more than expected in July, to 11.8% y/y, but this is unlikely to prompt the central bank to restart its easing cycle. Indeed, with pressure on the lira building, the next …
Lockdown to weigh on recovery Retail sales and external trade both rose in the month of June but may weaken again before long as imports begin to normalise and the renewed lockdown in Victoria weighs on retail sales. The 2.7% m/m rise in retail sales …
Recovery continues despite apparent slowdown in consumption The further rise in the ISM manufacturing index to 54.2 in July, from 52.6, suggests that output continued to rebound last month. Given that the recovery in production has lagged behind the …
3rd August 2020
Manufacturing recovery stutters The drop in South Africa’s manufacturing PMI provided the first strong signal that the sector’s rebound has stalled in recent weeks. With the authorities struggling to bring the virus under control and restrictions being …
Swiss inflation likely to edge higher from here Inflation in Switzerland now appears to have troughed, but it is set to remain frustratingly weak over the coming years and a headache for the SNB. Meanwhile, the manufacturing PMIs from July suggest that …
Central Europe leads the recovery, Russia stuttering The further rise in the manufacturing PMIs across Central Europe in July is an encouraging sign that the economic recovery continued at the start of Q3. But the fall in Russia’s PMI last month adds to …
Manufacturing recovery losing steam The small drop in July’s manufacturing PMI adds to signs elsewhere that the post-lockdown recovery is stalling. Looking ahead, the road back to normality for the manufacturing sector will be slow and fitful. India’s …
Stimulus pushes index to nine-year high The official PMIs released on Friday had already pointed to a robust recovery at the start of Q3. But the Caixin index published today is even more upbeat and suggests that the pace of expansion in industry was the …
House prices will keep falling The further decline in house prices in July is likely to persist in the coming months given the renewed lockdown and disruptions to activity in Melbourne. We ultimately expect house prices to fall by 5-10%. House prices …
More signs of recovery in July PMIs for Emerging Asia and Korean trade data suggest that the recovery in economic activity across the region is picking up some momentum. That said, the data do not point to the kind of strong rebound observed in China, and …
Rise in May to be followed by stronger June The stronger-than-expected 4.5% m/m rise in GDP in May provides further evidence that the initial rebound from the lockdowns was strong. We expect the pace of recovery to slow over the rest of the summer, …
31st July 2020
A difficult road ahead for Indian industry The contraction in India’s core infrastructure industries index eased slightly in June, but the weakness of industry will still have weighed heavily on GDP in Q2. What’s more, there are already signs that the …
Slump just as bad as anticipated; recovery will be painfully slow There are few silver linings in the data published today, which confirmed the massive slump in Q2. Parts of the economy have sprung back to life since April, but the damage already done …
Economy outperforms, raising our 2020 growth forecast The 0.7% y/y drop in GDP last quarter was Taiwan’s worst performance since the Global Financial Crisis, but it still represents an unusually strong performance given what’s happening in the rest of the …
Hit the hardest and slowest to recover The record plunge in Spain’s GDP of 18.5% q/q is likely to have been one of the biggest falls of any euro-zone country in Q2, illustrating the severity of the country’s lockdown and its slow and partial recovery …
Q2 as disastrous as expected, a long recovery awaits While the catastrophic collapse in French Q2 GDP was hardly a shock given the country’s stringent lockdown, it still highlights the sheer extent of the economic damage wrought by the pandemic. High …
Crisis wiped out nearly 30 years of growth The huge drop in Italian GDP in Q2 took the economy back to its size in the early 1990s. (See Chart 1.) While timelier data show that after plummeting in April the economy grew pretty quickly in May and June, we …
House prices stage a comeback in July House prices bounced back in July, unwinding the fall seen in June. Along with the pickup in lending in June, this reinforces our view that a house price crash is now unlikely. Although, with the mortgage holiday and …
Recovery still going strong at the start of Q3 The latest survey data suggest that last quarter’s rapid economic rebound has extended into the second half of the year thanks to recovering foreign demand and strong fiscal support. The official …
Unemployment will rise further The sharp drop in the number of furloughed workers and the rise in industrial production in June bodes well for the recovery in economic activity in the second half of the year. But while the unemployment rate edged down in …
Office and retail sentiment deteriorates, industrial bounces back Commercial property agents reported a worsening in activity and forward-looking sentiment for both the office and retail sectors this quarter. In contrast, there was a sharp improvement in …
30th July 2020
Economic damage will take years to unwind The 32.9% annualised decline in GDP in the second quarter, more than three times larger than the previous record quarterly contraction, underscores the unprecedented hit to the economy from the pandemic. We expect …
