This week brought more data showing that real economic activity is holding up surprisingly well given surging interest rates but, in part due to the easing in labour market conditions, price pressures are nevertheless fading. US consumer remains the …
1st September 2023
Coup contagion? The military coup in Gabon this week, coming so shortly after a coup in Niger, has raised further concerns about political instability and institutional frailty in the region. Soldiers removed Gabon’s president, Ali Bongo, from power on …
This week the Bank of England’s Chief Economist, Huw Pill, indicated that while the Bank still had to “see the job through” and remain vigilant with “stubbornly high inflation”, he didn’t think interest rates need to rise much further from 5.25% now. But …
Core inflation heading down August’s inflation data, published this week, increase our confidence that the core rate has passed its peak. Core goods inflation is clearly on a downward trend and has much further to fall as lower energy prices and improved …
A poor start to Q3 This week’s data dump from Korea suggests the economy weakened at the start of Q3, increasing the chances that the BoK will cut interest rates soon. Figures published yesterday showed that industrial production in July fell by 2.0% in …
Vegetable price inflation still elevated The surge in tomato prices since early July has gone into reverse over the past couple of weeks and prices are now close to their levels from June. (See Chart 1.) This has been mostly due to improvements in supply …
Stimulus efforts are finally gaining momentum. Yesterday, regulators announced measures to support households and shore up the property sector, including looser downpayment requirements and reductions to existing mortgage rates. And today, the state banks …
What’s driving the slide in SAMA’s assets? The drop in the Saudi Central Bank’s (SAMA) foreign assets to a 14-year low in July caused some concern this week, but we suspect this reflects funds being recycled to the Public Investment Fund. Figures …
31st August 2023
While the Women’s World Cup ultimately ended in disappointment for English supporters, it’s somewhat fitting that climate policy is increasingly being made into a political football. The failure in the UK and elsewhere to address climate policy’s inherent …
Australia’s energy-sector woes On Monday, union representatives at Chevron’s Gorgon and Wheatstone LNG plants announced their intention to take industrial action starting September 7 th . A union document suggests that members will engage in rolling work …
Government extending gasoline subsidies Japan’s government this week confirmed that the gasoline subsidies that were scheduled to expire in September will be extended until year-end, though gasoline prices will now be capped at 180 yen/litre instead of …
PMI and other data released this week have added to evidence of the relative strength of the US economy amid a weakening global backdrop, shifting yield gaps in favour of the greenback and pushing it higher against most major currencies yet again. (See …
25th August 2023
After a relatively cautious speech at Jackson Hole from Fed Chair Jerome Powell and data this week which cast doubt on the idea of an economic resurgence, we still aren’t convinced that the rise in market interest rate expectations for the next few years …
South Africa fiscal concerns build Growing concerns about the direction of South Africa’s public finances have caused the yield curve to steepen as risk premia have risen, a trend that may continue as next year’s election approaches. Short-dated local …
The worst Canadian wildfires on record appear to be behind much of the recent weakness in GDP and, with more areas now under evacuation orders, the data are likely to remain weak in the coming months. Broader negative impact than 2016 wildfires Worst “on …
Drought takes its toll on the Panama Canal Panama is the latest victim of climate change in the region. The country is reeling from a drought with “no historical precedence” according to Panamanian authorities, which has seen water levels at the Gatun …
CBRT policy shift now firmly back on track There’s a lot of confusion about what drove Turkey’s central bank to deliver an unexpected 750bp rate hike this week and doubts remain about the policy U-turn. But at this point we’re minded to focus on the …
BRICS expansion unlikely to challenge G7 India made history this week after its Chandrayaan-3 mission became the first to touch down on the south pole of the moon. Remaining column inches in the local press have been given to the BRICS summit in …
Worries that Germany is becoming the “sick man of Europe” again have resurfaced over the past few weeks. The term was first used in relation to Germany in 1999, at a time when it had been growing much more slowly than countries such as France and Spain …
This week’s bigger fall in UK rate expectations, bond yields and the exchange rate compared to elsewhere is largely due to the markets deciding that a weaker economy will trim inflation, meaning the Bank of England has less work to do. Market pricing is …
Note: We’ll be discussing the China growth/stimulus question, the BOJ’s policy outlook, Indian food price inflation and more in our monthly Asia Drop-In on Thursday, 31 st August . Register here to join the online briefing. Have the leadership given up on …
Bloated inventories set to weigh on GDP Recent data from Taiwan have been mixed, with exports showing signs of life but consumer demand softening. We think the economy will weaken in the near-term as any further support from export demand is likely to be …
Momentum behind price rises starting to slow The economic data released this week suggest that the case for policy rate hikes in response to above-target inflation is still not compelling. For a start, the Tokyo CPI showed that inflation excluding fresh …
New Zealand activity in free fall Data published by StatsNZ on Wednesday showed that retail sales volumes fell by 1% q/q last quarter, a much weaker result than the 0.4% contraction anticipated by the analyst consensus. The weakness in retail sales was …
Time for a new acronym Earlier today it was confirmed that Saudi Arabia, the UAE, Egypt, Iran, Argentina, and Ethiopia were all being invited to join the BRICS bloc and, while this is unlikely to have major economic effects in the near term, the possible …
24th August 2023
The US dollar has continued to grind higher, with the DXY index on track for a fifth consecutive weekly gain on the back of more bad news out of China , continued pressure on risk sentiment, and a new cycle high in long-term US Treasury yields. In light …
18th August 2023
While the renewed rise in headline inflation in July seems concerning, a closer look shows disinflationary pressures are still building in key areas. Together with easing demand, that should give the Bank of Canada enough reason to leave rates on hold in …
Nigeria resorts to sticking plasters Continued naira weakness and fuel price concerns have prompted Nigeria’s government to undertake some short-term fixes that threaten to result in renewed vulnerabilities further down the line. This week, Nigeria’s …
The Bank of England has more work to do The Fed’s work may be done, but as this week’s UK inflation and labour market releases made clear, this doesn’t mean the Bank of England can relax. First came figures released on Tuesday showing that the 3myy rate …
Argentina: PASO vote triggers more chaos Last Sunday’s presidential primary election in Argentina (known as the PASO) sent the economy deeper into crisis. Although the results probably portend a shift to the right (and more investor-friendly …
The continued surge in long-term Treasury yields to their highest level since before the financial crisis, as expectations of an economic re-acceleration have mounted, sets a fraught backdrop ahead of Fed Chair Jerome Powell’s speech at Jackson Hole next …
Long road ahead for Spanish politics Yesterday’s election of the Socialist (PSOE) candidate as President of the Congress of Deputies suggests that the PSOE has the momentum as Spain’s politicians try to form a new government. But it remains unclear …
Russia’s macro foundations now being shaken Macroeconomic stability risks started to crystallise in Russia this week. The ruble slumped and the central bank intervened with an emergency interest rate hike. Policymakers are clearly considering further …
RBI has ample FX reserves in its locker The rupee has this week continued to slide against the US dollar amid broad strength in the greenback, dropping to a record low of 83.1/$ on Thursday. The rupee’s depreciation may have been larger had the RBI not …
But they aren’t as big a systemic threat as some fear In addition to troubles at Country Garden , the big story in China’s credit markets this week was the turmoil at Zhongzhi. Yesterday, the asset manager cum shadow bank acknowledged that it was in a …
Weak growth and falling inflation The Bank of Korea (BoK) has left interest rates on hold since January and looks almost certain to leave monetary policy settings unchanged at its meeting on Thursday. But with inflation falling back sharply and the …
Economy starting to run hot Given that our GDP tracker pointed to a much smaller rise, it’s possible that the blistering 1.5% q/q rise in Q2 GDP will be revised down. But that strength is consistent with the composite PMI, which hit a decade-high in May. …
New Zealand’s recession to deepen On Wednesday, the RBNZ left its official cash rate unchanged at 5.50%. Surprisingly, however, the Bank lifted its OCR track higher amid concerns about upside risks to the inflation outlook. In fact, the Bank predicts it …
Egypt: debt jumps, but primary surplus widens Data released this week showed that Egypt’s public debt ratio jumped in the last fiscal year, but a further improvement in the primary budget position reinforces our view that the government will be able to …
17th August 2023
In spite of last week’s weak US payrolls report and this week’s soft CPI data, the dollar has, on net, risen against all other major currencies this week. This may be partly a result of hawkish comments from Fed officials in the aftermath of the CPI …
11th August 2023
Nigeria’s naira gap evidence of Buharinomics Two months on from the naira’s devaluation, the gap between Nigeria’s official and black market exchange rates is widening again. This suggests that the CBN is, once again, propping up the naira and adds to the …
A fork in the road for Argentina Sunday’s open, simultaneous and compulsory primary elections (PASO) should give a first sign of whether Argentina will buck the regional political trend and shift to the right at the presidential election in October. All …
Inflation and activity data at odds Core price pressures collapsing It might seem a little premature to be celebrating when annual core CPI inflation was still as high as 4.7% in July, down only trivially from 4.8%, but don’t be fooled by the strong …
Although export volumes fell for the second month running in June, the strength of imports suggests that domestic demand is holding up and the Bank of Canada will be pleased to see that import prices continue to fall. Export volumes weak, but imports …
Exports may be weaker than they appear China’s exports fell 14.5% y/y in July, undershooting the analyst consensus. But given the sharp fall in export prices recently, what’s more surprising to us is that export values haven’t fallen even more. On paper, …
Where the US leads, the UK often follows. So the evidence of broad-based, rapid disinflation in the US offers some hope for the UK. Indeed, at 7.9%, the UK is still lumbered with a CPI inflation more than twice the US rate (3.2%). At least July’s UK CPI …
Further CEE disinflation keeps rate cuts on track The July inflation data out of Central and Eastern Europe (CEE) this week suggests that our forecasts for interest rate cuts to arrive across the region over the rest of this year, and in early 2024, …
It is not surprising that Italian bank shares slumped this week after the government announced that it is imposing a windfall tax on the banks. The decision seemed to come out of the blue and to have been cobbled together at the last minute with several …
Unemployment rises, real wages fall While Korea’s labour market remains very tight, figures from earlier this week show it is starting to loosen as the downturn in the economy feeds through in to higher unemployment and weaker wage growth. The …
Upside risks to inflation still remain The RBI kept the repo rate on hold at 6.50% as expected this week and maintained a hawkish tone amid the recent surge in food prices. The Bank revised up its inflation forecast for Q3 significantly (from 5.2% to …
