The increase in Switzerland’s core inflation rate in January is likely to provoke a strong response from the SNB at its next meeting in March. We now forecast it to raise the policy rate from 1.0% to 1.5% at that meeting, followed by an additional 25bp …
17th February 2023
What does South Africa’s budget hold in store? South Africa’s mounting economic and political challenges, including the deepening energy crisis, set the stage for the fiscal scales to tip towards providing more support and away from fiscal consolidation …
Food price inflation may be overstated The consumer price data for January released this week proved something of a nasty surprise , with the headline rate jumping unexpectedly sharply to 6.5% y/y, pushing it above the ceiling of the RBI’s 2-6% target …
Buyer sentiment seems to be improving New home sales have taken a beating since their peak in early 2021. But there are some green shoots in the recent data which show sales in large cities rising at the start of this year. (See Chart 1.) We think this …
Asia to dominate by 2050 We published our latest Long Run Outlook this week with detailed forecasts out to 2050 for 60 economies. They suggest that Emerging Asia will dominate the global economy in 2050. The region’s share of global GDP (measured at …
The 11,500 drop in employment in January marked the second consecutive fall and we think it marks the beginning of a sustained period of labour market slackening. In annual terms, employment will still be up around 2.5% this quarter, but if our downbeat …
Export volumes fell again in January The 0.2% q/q rise in Q4 GDP was weaker than most had anticipated and is consistent with our view that the economy will do much worse this year than anyone expects. Indeed, the early indications are that economic …
Dubai’s GREs well positioned to meet debts for now The pick-up in Dubai’s economy over the past year or so has provided a better environment for government-related entities (GREs) to service large debts. But while repayments shouldn’t be much of an issue …
16th February 2023
South Africa: SONA or SO-NO? The declaration of a state of disaster in South Africa’s State of the Nation Address (SONA) over the deepening energy crisis has grabbed the headlines. Yet, in the small print, there were signs of a meaningful shift away …
10th February 2023
The surge in employment and rise in hours worked in January suggest that economic activity continued to expand at the start of 2023 and present clear upside risks to our forecasts for GDP growth. Nevertheless, we disagree with the market-implied view …
Core inflation worries prompt hawkish response This week’s central bank communications suggest that worries about strong underlying price pressures are putting policymakers in a more hawkish mood than we had anticipated. Admittedly, Peru is something of …
Markets have continued to swing round to the Fed’s view that rate cuts are unlikely this year. We still believe that those cuts are coming, however, as economic growth disappoints and core inflation falls more rapidly than the Fed is expecting. Markets …
Worse still to come for exporters China’s exports boomed throughout much of the pandemic with global consumers, stuck at home and flush with cash from fiscal transfers, spending more on Chinese-made goods. But the unwinding of those pandemic …
Philippines is the outlier In most of the region inflationary pressures are continuing to ease and central banks are preparing to bring tightening cycles to an end. (See here .) A key exception is the Philippines, where a jump in headline inflation to a …
Further thoughts on Turkey’s earthquake disaster The earthquake that hit Turkey and Syria this week, killing more than 21,000 people, is a human tragedy and our thoughts are with everyone affected. It’s still too early to fully assess the macroeconomic …
It doesn’t really matter if the economy was in recession last year or not (although according to the technical definition it was not). (See here .) Two other factors are more important. First, recession or no recession, the economy is weak. Real GDP …
First impressions are important because of the primacy effect which means they are, apparently, stored more easily in the long-term memory. That may be why Erik Thedéen used his first meeting as Riksbank Governor to spring a hawkish surprise this week, …
Hawks singing the same tune At February’s ECB meeting, policymakers were unwilling to commit to raising interest rates further beyond the promised 50bp hike in March. But their comments this week show a clear intention to do so. Table 1 summarises some …
The main development of the week happened in the past few hours: the reported nomination of Kazuo Ueda as the next BoJ Governor. Our initial response is here . While analysts and investors are looking for clarity on Mr Ueda’s views, there is little to …
RBI still cautious on inflation Though the RBI slowed the pace of tightening with a 25bp hike to the repo rate (to 6.50%) this week, the tone of the communications was more hawkish than we had anticipated. The slight rise in the 10-year bond yield …
With trimmed mean inflation surpassing the Bank’s November forecast in Q4, the RBA turned more hawkish when it lifted the cash rate by 25bp on Tuesday. Today’s Statement on Monetary Policy shows that the Bank expects inflation to only touch the top end of …
PIF increasingly leaned on to drive Saudi investment Saudi Arabia’s Q3 balance of payments data showed that the Kingdom’s current account surplus boomed on the back of stronger oil receipts. Most of that surplus is still being recycled by the Public …
9th February 2023
South Africa’s upcoming State of the Nation Address will undoubtedly focus on addressing the energy crisis. But there’s little that the government can do to ease power cuts in the near-term before measures to improve electricity availability kick in down …
3rd February 2023
Pavel’s election victory & the Czech-China spat The victory for former NATO general Petr Pavel in the second round of the Czech presidential election last weekend ought to have limited immediate implications for the Czech economy, as the President has …
The strength of the early January data appears to rule out the possibility of an imminent recession, but that won’t prevent inflation from continuing to fall sharply from here. Jobs report appears to justify Fed’s caution Fed officials seem to agree …
There were more mixed signals this week on how the economy is coping with higher interest rates. The GDP data suggest fourth-quarter growth was stronger than initially expected and the manufacturing PMI unexpectedly rose back into expansionary territory …
Survey data point to weak start to 2023 Data published this week provided the first signs of how the region’s economies fared at the start of this year. And it’s not good news. In Brazil, the FGV confidence indicators all dropped back in January, with …
While the Bank of England raised interest rates by a further 50 basis points (bps) yesterday, from 3.50% to 4.00%, it hinted that if Bank Rate is not already at a peak, it is very close to one. As we unpacked in our “Drop-In” webinar on this week’s policy …
Weak start to the year in Korea Recent economic data from Korea paint a depressing picture. GDP figures published late last month showed the economy contracted by 0.4% q/q at the end of 2022 – the third worst quarterly performance since the Asian …
With the dust now settled after yesterday’s ECB meeting, it is clear investors have stuck with their dovish interpretation of the decision. They now expect the deposit rate to peak at around 3.4%, rather than 3.6%. (See Chart 1.) Meanwhile, 10-year …
Australia’s house prices are still falling rapidly and there is no bottom in sight. According to CoreLogic, prices in the eight capital cities fell another 1.1% m/m in January – the same pace of decline as in each of the three months before. That took the …
As we argued in our latest Riksbank Watch , the fact that Sweden’s inflation rate rose more than expected in November and December is a key reason why we expect policymakers to raise rates by 50bp next week. But looking further ahead, we are …
2023 fiscal boost still on its way December’s Central Economic Work Conference called for stepped-up fiscal support this year. On-budget borrowing, a timely proxy for fiscal policy, has since picked up slightly. But officials still have work to do. Net …
In the latest of our Election Watch series ahead of Nigeria’s polls, we dissect the near-term economic challenges facing the next administration. Boosting oil production, overhauling the foreign exchange regime and placing the public finances on a more …
Spill-overs from the Adani crisis limited, for now Though the FY23/24 Union Budget provided some respite, the short-seller attack on the Adani Group following the publication of a report by US-based Hindenburg Research alleging “brazen stock manipulation …
Regional utilities seek electricity rate hike Seven regional utility companies (of 10 in total) that together serve around 60% of Japan’s population have now applied to the government to raise the rates on their regulated electricity contracts with …
Proof will be in the pudding for Egypt’s privatisation Egypt’s Prime Minister Mostafa Madbouly revealed this week that twenty state-owned companies would be sold over the course of this year which adds to the positive momentum on reforms. It remains to be …
2nd February 2023
South Africa’s manufacturing PMI remained essentially unchanged, at 53.0, in January, but while the breakdown provided mixed messages, we think that the underlying picture for the manufacturing sector and the broader economy remains very downbeat. …
1st February 2023
Common currency talk highlights dollar concerns The week kicked off with the surprise news that Argentina and Brazil are looking at establishing a common currency to facilitate trade between the two countries. Further reports have clarified that, rather …
27th January 2023
Recession denial in full effect The commentary this week dismissing the validity of the Conference Board’s leading indicator (see here ), which is currently giving an unambiguous recession warning, reminds us of the old quote from JK Galbraith that “faced …
This week’s Australian CPI data delivered an unwelcome surprise for the RBA. The headline rate rose from 7.3% to 7.8% in Q4, compared with an analyst consensus of 7.5%. While that was lower than the RBA had been expecting back in November (8.0%), the …
Governor Tiff Macklem stressed on Wednesday that the pause in the Bank of Canada’s tightening cycle is conditional on looser conditions in the labour market and a fall in inflation expectations. The CFIB Business Barometer showed evidence of both a day …
Turkish policymakers deepen de-dollarisation Turkish policymakers deepened their “lira-isation” drive this week by increasing the incentive for firms to convert their FX into lira, but we’re not convinced that the policy changes will be successful and …
More encouraging than it looks This week’s headlines suggest that Pakistan is in the midst of a full-blown crisis. On Monday the central bank hiked its main policy rate by a further 100bps. Two days later the cap limiting daily moves in the rupee was …
China under fire for delays to Zambia’s debt deal Delays to Zambia’s debt restructuring threaten to hold up the country’s IMF deal and add to the signs that the Common Framework isn’t fit for purpose. Officials in Zambia had hoped that a sovereign debt …
Outlook better, but still bad There has been a marked improvement in sentiment towards the euro-zone recently as activity indicators have come in stronger than expected. Euro-zone GDP now looks likely to have flat-lined in the fourth quarter and January’s …
Whither the Norwegian krone? Norway’s position as a major oil and gas exporter means that movements in its currency are typically correlated with moves in energy prices. But since the start of 2021, the krone has failed to keep pace with the rise in oil …
The recent persistence of inflation leads us to think that the Bank of England will proceed with another 50 basis point (bps) rise in Bank Rate, from 3.50% now to 4.00% next Thursday. (See here .) We will be discussing the policy outlooks for the BoE, the …
PM Kishida, demographic doomsayer In his speech on Monday kicking off the first Diet session of the year, PM Kishida proclaimed that it is “now or never” when it comes to addressing Japan’s demographic decline. To that end, he pledged to double spending …
For watchers of India’s economy, next week is one of the most significant of the year as Finance Minister Nirmala Sitharaman delivers the Union Budget for FY23/24 on Wednesday. Ahead of the announcement, the fiscal position looks pretty healthy. The …
