Worst industrial figure on record The 18.8% m/m fall in Brazilian industrial production in April was not as calamitous as we and most others had feared, but it still highlights that GDP will fall dramatically in Q2 – perhaps by 10-12% q/q. It will also …
3rd June 2020
Unemployment set to rise steadily, but not as far as we had feared The remarkably small increase in unemployment in the euro-zone reflects the success of the government job subsidy schemes and an exodus from the labour force in Italy. We suspect that the …
Activity recovery, but still very weak Whole economy PMIs from across the Middle East and North Africa rose compared with last month’s ultra-low levels as lockdown measures began to be eased, but activity remained very weak. And against the backdrop of …
Limping out of lockdown The final Composite PMIs add to the evidence that economic activity picked up in May, but it remains well below normal. They also point to substantial downward pressure on inflation. The euro-zone Composite PMI for May was revised …
Higher inflation unlikely to preclude another rate cut The rise in Turkish inflation in May, to 11.4% y/y, suggests that the effects of the sharp fall in the lira in the early part of the month more than offset the impact of weaker domestic demand on …
A big fall in output, but Switzerland is comparatively well placed The sharp fall in Swiss GDP is Q1 was in line with the general pattern seen in other countries, and Q2 is set to be much worse. However, now that lockdown restrictions have been eased, we …
Services past the worst, but recovery will be lacklustre Interpreting the PMI surveys in the current environment is tricky, but the small rise in May’s services PMI suggests to us that activity has edged up very slightly. Nevertheless, fears over …
GDP to plummet in Q2 GDP was falling before the bulk of the virus restrictions were in place and is set to fall more sharply in Q2 before picking up gradually in the second half of the year. The 0.3% q/q decline in GDP was a touch less than the Bloomberg …
Households deleveraging but businesses continue to load up on debt The record fall in net loans to households and another surge in borrowing by businesses in April is an indication of how the lockdown has affected consumer spending and business revenues. …
2nd June 2020
Net lending expected to decline in the near term As expected, net lending turned negative in April following a sharp rise in March. Given that transaction activity will see a fall in the second quarter of this year, we think that net lending to property …
Lending hit record low during lockdown House purchase mortgage approvals fell by 71.8% m/m in April – broadly in line with our expectations. Looking ahead, with the housing market having reopened in May, that probably marks a low point. Still, given the …
The gradual recovery is underway The partial recoveries in the manufacturing PMIs in May offer encouragement that activity is recovering now that lockdowns have been eased. (See Chart 1.) The small pick-up in the Swiss manufacturing PMI in May, from 40.7 …
Largest monthly house price fall since 2009 House prices slumped in May due to the economic fallout from the coronavirus. Given the magnitude of the economic shock, further price cuts are extremely likely. That said, we think the extensive policy support …
Surveys point to slow recovery post-lockdowns The modest rise in the ISM manufacturing index to 43.1 in May, from 41.5, echoes the message from the other surveys that factory-sector activity is recovering only gradually as lockdowns have started to ease. …
1st June 2020
Manufacturing sector coming back to life The rise in the business activity component of South Africa’s manufacturing PMI shows that conditions in the sector improved in May, having come almost to a standstill in April. With manufacturing allowed to fully …
Manufacturing sectors slowly recovering The manufacturing PMIs repeat the message from the ESIs released last week that activity in the region rebounded in May but remained at subdued levels. As lockdowns continue to be lifted and external demand …
Activity edges up but substantial recovery is a long way off The nature of the PMI surveys makes them tricky to interpret in the current environment, but we think May’s manufacturing reading indicates that activity in the sector edged up slightly last …
Recovery remains steady but slow The PMIs show that the recovery in activity extended into last month and appears to have broadened out into parts of manufacturing that were previously struggling. But there are few signs of a marked pick-up in the overall …
House prices have further to fall We think the small decline in house prices in May marks the start of a larger downturn. We expect house prices to fall by 5-10% in the coming months. House prices across the eight capital cities fell by 0.2%m/m in May, …
Further fall in exports probably marks the bottom Korean export values sank further in May after collapsing in April, and while this is likely to mark the bottom, external demand is only likely to recover very slowly in the coming months. Korean trade …
Recovery in industry set to be slow We suspect that PMI readings do not accurately reflect the change in industry conditions last month, but they are still indicative of the fact that output remains very depressed. PMIs for May were released today for six …
Returns outlook deteriorates The latest IPF Consensus Forecasts were revised down sharply, given the downbeat outlook for the economy and its implications for property. While our views on offices and industrial appear to be broadly in line with the …
29th May 2020
Not quite as bad as expected, but worse to come The 7.2% m/m drop in GDP in March was a bit better than expected but still caused an 8.2% annualised contraction in the first quarter. Moreover, as the restrictions on activity only came into effect in the …
Relative resilience won’t last According to the official GDP data, India’s economy held up rather well in Q1 as a whole given that a stringent lockdown was imposed in the second half of March. But the data are increasingly subject to significant revisions …
Stumbling even in Q1 The 1.5% q/q fall in Brazilian GDP in Q1 highlights that the economy had slipped into a deep downturn by March, even though the country was slow to impose lockdown measures. And more timely figures point to a double-digit fall in GDP …
Disinflationary pressures mount The further fall in euro-zone inflation in May took the headline rate to within a whisker of zero and downward pressure on prices is set to persist while demand remains exceptionally weak and unemployment rises. The …
Growth in Q1 to be followed by collapse in Q2 Turkey’s economy managed to grow in Q1 as a strong January and February more than offset a dire March. But the latest activity figures are ominous and point to a collapse in activity in Q2. The 0.6% q/q rise …
Economy dealt severe blow in April, but road to recovery started in May The huge fall in industrial production and retail sales in April support our below-consensus forecast that the economy will contract by 12% q/q this quarter. The unemployment rate is …
A hefty crude build, but gasoline demand picked up We think that the market is right to dismiss the latest chunky build in US crude stocks as it was largely driven by a rise in imports, which is likely to prove a one-off. Instead, a further fall in US …
28th May 2020
Investment holding up much better than consumption The big drop in durable goods orders last month was once again driven mainly by plunging transport orders with underlying capital goods orders falling more modestly. Together with the drop in continuing …
Weak animal spirits may hold back the recovery While the slight easing in social distancing rules in May helped industrial confidence to recover a little, the headline UK Economic Sentiment Indicator (ESI) fell further in May as services and retail firms …
Business confidence remains extremely low The very small increase in the euro-zone Economic Sentiment Indicator in May adds to the evidence that the euro-zone economy bottomed out in April, but that activity is recovering only very slowly. While the …
Recovery slow going, for now May’s Economic Sentiment indicators suggest that the easing of lockdowns only provided a limited boost to the Central and Eastern Europe economies. The surveys are still consistent with a fall in GDP of around 6% y/y in Q2. …
Capital investment to plunge over the coming year We estimate that private investment was broadly flat in Q1, but firms’ expectations of future capital expenditure point to a sharp downturn in investment in the coming months. Today’s private capital …
New home sales show surprise increase in April New home sales edged higher in April, after recording their largest month-on-month slump in over six years during March. The latest rise was in line with recent improvements in mortgage applications, but …
26th May 2020
Lowest inflation since 1999 The fall in Brazilian inflation to just 2.0% y/y in the first half of this month provides plenty of space for Copom to follow up this month’s 75bp interest rate cut with more easing. For now, we have pencilled in one final 50bp …
Imports likely to have troughed in April, but any improvement to be gradual The latest data couldn’t be clearer: gold demand in the top two importing nations all but vanished in April. Imports should rise in the months ahead but will remain low by past …
Pharma won’t save economy in Q2 A very strong performance from the biomedical manufacturing sector meant that Singapore’s economy contracted much less in Q1 than previously thought. But with a stringent lockdown in place at home and demand cratering …
China’s dominance over global steel supply to grow The latest data add to the evidence of a growing divergence in the trend in steel output between China and the rest of the world. And as infrastructure spending in China is stepped up over the coming …
22nd May 2020
Sales slumped again in April, but should rise in May The 10% m/m slump in March retail sales appears to have been followed by a fall of 15% in April, taking the total drop since February to 24%. The better news is that sales seem to be rebounding in May. …
Jump in inflation will spook Banxico The larger-than-expected rise in Mexican inflation in the first half of May, to 2.8% (from 2.1% in April), may prompt the central bank to slow the pace of easing (or even pause its cycle) at next month’s meeting. …
Output plummets at the start of Q2 The collapse in the Polish industrial production and retail sales data for April were partially offset by higher public spending on large infrastructure projects in the construction sector . This provides some …
April marks the low point for sales The 18.1% m/m fall (consensus forecast -16.0%) in retail sales volumes in April was easily the largest on record. The good news is that April should be the low point. But the bad news is that May is unlikely to be a …
Government borrowing skyrockets The double whammy of the precipitous fall in economic activity and the government’s measures to combat the crisis has already pushed borrowing to alarmingly high levels. While the small easing of the lockdown on 13 th May …
Inflation drops sharply and will turn deeply negative Headline inflation turned negative in April for the first time since 2016 adjusting for the impact of October’s sales tax hike. We expect it to weaken further over the coming months as services and …
Existing home sales drop to nine-year low Existing home sales saw another sharp drop in April, as the shutdown of large parts of the country disrupted housing market activity. Despite a strong recovery in mortgage applications for home purchase, we doubt …
21st May 2020
Activity still well below normal The nature of the PMIs makes them tricky to interpret, but the rise in the composite PMI from 13.8 in April to 28.9 in May probably shows that April was the low point for activity, and that the slight easing in the …
Activity still well below virus levels The partial rebound in the euro-zone Composite PMI in May suggests that the economy is now on a slow road to recovery. But even as lockdown measures are gradually lifted, the level of activity is likely to be well …
Slump starting to abate, but rebound will be slow going The small pick-up in the composite PMI in May suggests that activity is no longer collapsing as dramatically as it was in April, but the survey doesn’t point to a rebound in output yet. According to …
Exports were plummeting already in April Exports plunged in April and are set to continue falling sharply for a while yet with economic activity in Japan’s main trading partners remaining extremely depressed. The 21.9% annual fall in export values in …
