Remittances are often an underappreciated source of foreign currency for India. While growth in remittances will slow in the next few years, they should remain an important source of external funding for the economy and help to keep the current account …
7th February 2024
Chile is frequently identified as one of the main beneficiaries of global efforts to put economies on a greener footing, but we doubt that the country will reap the full benefits of this trend. Chile is likely to struggle to substantially raise copper and …
6th February 2024
After years of fiscal largesse, austerity is back. We suspect that budget cuts will reduce euro-zone GDP growth by only around 0.1 or 0.2 percentage points per year over the next five years. But the EU’s budget rules will require some countries to tighten …
1st February 2024
The recent acceleration in the Labour Force Survey measure of wage growth seems to be overstating wage pressures. The other wage indicators, which are normally more reliable, show far lower rates of growth. With labour market slack increasing, it is …
The priority for whoever wins Pakistan’s general election on 8 th February will be to agree a new deal with the IMF, which should help put the struggling economy on a more stable footing. But thereafter the country’s dysfunctional political system will …
If he wins this year’s presidential election, Donald Trump’s plans for a universal 10% tariff on all imports and tariffs of up to 60% on imports from China specifically would subtract up to 1.5% from US GDP and trigger a rebound in inflation that could …
31st January 2024
We forecast that global lithium demand will roughly double by 2025 (from 2022). But supply will increase at a slower pace, which is why we forecast that prices will rise. Demand for lithium has surged in recent years, from 50,000 tonnes per year in …
The drop in inflation across advanced economies has caused real interest rates to rise by even more than nominal rates. While there are various ways to measure real interest rates, they all confirm that policy is now in very restrictive territory, …
Inflation: Mission accomplished? We maintain a high conviction that core PCE inflation will be back to the 2% target by mid-2024. Despite claims that “the last mile will be the hardest”, core PCE prices have already been running at a 2% annualised pace or …
29th January 2024
We think the current backdrop is not as favourable for the greenback as the one that prevailed during the dot com era, so we doubt the bubble in US equities we expect would be accompanied by renewed strength in the dollar over the next couple of years. …
25th January 2024
Turkey’s policy U-turn underway since the election last year has been relatively encouraging so far and policymakers’ commitment to orthodoxy has given us reason for optimism. While the scale of the challenge of achieving macroeconomic stability is …
Brazil’s economy and financial markets have provided a positive surprise over the past 12-18 months. This Focus answers five key questions that will determine whether 2024 will be chalked up as a success too. The short point is that we think sentiment now …
24th January 2024
India is certain to become the world’s third-largest economy within the next decade, but the emergence of generative artificial intelligence (AI) will hamper rather than help its rise. This is in large part because of the detrimental impact it could have …
23rd January 2024
Despite repeated talk about the need to rebalance China’s economy over the past decade and a half, there has so far been little meaningful reduction in its dependence on investment and on exports. In fact, repeated efforts to shore up short-run growth …
22nd January 2024
This Global Markets Focus explains why we expect the S&P 500 to soar in 2024, in contrast to those who anticipate a much tougher year for the index after a banner 2023. Section 1 sets the scene with a brief overview of the change in the index since the …
17th January 2024
In recent months, there have been growing concerns that the rapid rise in rental inflation will force the Reserve Bank of Australia to keep rates higher for longer. To be sure, leading indicators suggest that rental inflation will continue to accelerate …
While most of the recent pick-up in services inflation has been driven by just a handful of components, there’s been an upward shift in the distribution of price changes across the CPI basket. However, even if wage growth settles at higher levels than …
15th January 2024
Household consumption in the euro-zone looks set for another bad year. We think that it will be broadly flat in the first half of 2024, keeping overall GDP growth close to zero for the next few quarters. It might start to pick up in Q3 and beyond, but a …
12th January 2024
The surge in US exports of energy over the coming five years will ensure that the US remains a major supplier of fossil fuels to the rest of the world. A large proportion of these exports will be LNG, as new export terminals come online. But exports of …
10th January 2024
The optimism about Mexico’s economic prospects from the “nearshoring” of supply chains looks overdone in our view. Sectors where Mexico is already well established, such as autos and some electronics products, stand to benefit. But without major reforms …
8th January 2024
The recent sharp fall in Japan’s ratio of public debt to GDP reflects one-off factors that won’t be sustained. While the influence of rising bond yields on the trajectory of the public finances will largely be offset by higher inflation and nominal GDP …
The goal of keeping government debt ratios stable or falling means that many euro-zone countries will need to tighten fiscal policy substantially and some will need to run primary budget surpluses for a long time to come. Italy has the most challenging …
19th December 2023
The US dollar and the prices of major commodities, in aggregate, have often risen and fallen in tandem since 2021, in contrast to their strong inverse relationship for much of the past two decades. While we wouldn’t go as far as classifying the greenback …
12th December 2023
The resurgence in the labour force over the past year mainly reflects the ongoing boost to participation from increasing opportunities for women to combine parenthood with work, more young people choosing jobs over college, and a continued decline in …
11th December 2023
The economic influence of elections is often overstated. They have only tended to have significant effects if governments have embarked on big structural reforms, interfered with monetary policy or changed their geopolitical stance. Even then, the …
7th December 2023
With the budget deficit rebounding over the last year and Congress characterised by partisan dysfunction, the odds of a full-blown fiscal crisis developing over the next decade are rising. The US faced a similarly bleak fiscal outlook in the early 1990s …
4th December 2023
The key indicators that have usually convinced the Bank of England to cut interest rates suggest the first cut could come in Q1 2024. That said, rates have risen to a lower peak than most models suggest, which implies they need to stay higher for longer …
30th November 2023
The recent period of high inflation in Japan has kick-started a virtuous cycle between wages and prices. If inflation expectations remain elevated and structural forces push up the neutral rate of interest over the coming years, monetary policy will …
27th November 2023
The net giveaway the Chancellor announced in the Autumn Statement is designed to curry favour ahead of an election late in 2024. However, fiscal policy is still being tightened in 2024/25 and it looks as though whoever wins the election will have to …
22nd November 2023
Fiscal risks in Latin America have largely been out of the spotlight over the past year, but we think that public debt concerns will build over the coming years. Sovereign defaults seem more likely than not over the next few years in a handful of …
Shifts in the long-term outlook for interest rates relative to GDP growth have left the fiscal position in most developed economies looking more precarious. Unless governments manage to reduce their sizeable primary deficits, market concerns about public …
21st November 2023
During the past decade, the global economy has transitioned out of an era in which globalisation was the key driver of economic and financial relationships into one shaped by geopolitics. Previously, most governments had believed that closer economic …
16th November 2023
Surging interest rates have not been kind to commercial property investment activity, which recently slumped to a 10-year low. But there are some reasons to think transactions will see a decent, if not spectacular, recovery in 2024. Falling interest rates …
With the government still languishing far behind in the opinion polls and an election required before the end of January 2025, the Chancellor, Jeremy Hunt, is under more pressure than ever to pull something out of the bag at the Autumn Statement on …
15th November 2023
A lack of appropriate regulation may be one reason why ESG bond issuance has slowed over recent years, and why the premium that investors are willing to pay for ESG bonds over conventional bonds has all but evaporated. We think that improved regulations, …
14th November 2023
The past few years have seen Saudi Arabia continue to move away from the US orbit and, as part of our work on global fracturing, we no longer consider Saudi to be unaligned between the US and China. Instead, we now think that it leans more towards …
7th November 2023
The Riksbank’s request for a capital injection from the government is not a good look for an independent central bank. But its QE-related losses will be smaller than those of many other central banks: the “bailout” is required because of its accounting …
3rd November 2023
The AI revolution will make EM income convergence – or “catch-up growth” – harder as richer economies are better equipped to deploy the technology on a wide scale. It poses a particular headwind to the services-driven economic development path pursued by …
2nd November 2023
Although Treasury yields have fallen back in recent days, the big picture is that they are still much higher than they were when headline and core inflation peaked more than a year ago in the US. In this Focus , we examine the role of inflation in the …
The prospect of a long period of high bond yields and some signs of fiscal slippage by Prime Minister Meloni’s government have worsened the outlook for public finances in Italy. We now think the debt ratio is likely to increase rather than to fall in the …
1st November 2023
With wage growth set to strengthen further over the coming year, we think the Bank of Japan will soon have sufficient confidence in the sustainability of higher inflation to end negative interest rates . The Bank of Japan has been arguing that wage growth …
The war between Hamas and Israel – and the potential for escalation to the wider region – has increased the uncertainty around the economic and financial market outlook, but in most scenarios is unlikely to generate a sustained hit to major asset markets. …
26th October 2023
The full report is available to download from the button at the top right to Global Economics, Global Markets, Asset Allocation and The Long Run subscribers, as well as to CE Advance clients. If this is outside of your current subscription and you would …
17th October 2023
Chapter 4: Financial market implications …
Chapter 3: Where will inflation (and nominal rates) settle? …
Chapter 2: How will the savings/investment balance affect r*? …
Chapter 1: Will stronger potential growth boost r*? …
Introduction and framework …
r* and the end of the ultra-low rates era: executive summary …
In contrast to the past few years, when the risks to the euro-zone inflation outlook have been consistently skewed to the upside, those risks now look more balanced. So in this Focus , we explore the downside risks and how the ECB might respond to them. …
12th October 2023
