Policy shifts pave the way for a cyclical recovery New home sales ended 2022 46% below their spring 2021 peak. But this could mark the bottom for China’s housing market. Daily data suggest that sales have rebounded strongly in recent weeks – they are …
27th January 2023
OPEC+ cuts to dampen Gulf growth in early 2023 OPEC+ is widely expected to agree to continue with its existing oil output quotas next week, although this means that oil sectors will act as a drag on the Gulf economies over the early part of this year. …
26th January 2023
Central bankers let their hair down Climate change was front and centre of the discussions earlier this month when a host of heavy-hitters from the world of central banking descended on Stockholm for an International Symposium on Central Bank …
Nigeria’s loan-to-bond swap up in the air Plans by the government of Nigeria to swap central bank loans to bonds have hit a sticky patch, making it unclear whether the country can reap the associated economic gains. Parliamentarians in Nigeria have …
20th January 2023
The CPI-trim and CPI-median measures of core inflation will be revised up next month but that does not change our view that they will fall sharply over the first half of this year. We think the 25 bp hike from the Bank of Canada next week will mark the …
Brazil: watch the labour market Lula has continued to spook investors in Brazil. This week he once again disparaged the focus on fiscal responsibility and also questioned the benefits of central bank independence. And more market-friendly words from his …
Russia’s current account surplus now shifting fast The focus in media reports on Russia’s record current account surplus in 2022 misses the huge deterioration at the end of the year. We think the balance of payments will be squeezed further, raising the …
Rebounding won An easing of inflation pressures in the US along with China’s reopening have provided a boost to Asian currencies over the past couple of months. The biggest rebound has been in the Korean won, which has now appreciated by 17% against the …
The weakness of retail sales and manufacturing output over the final two months of 2022 has reignited market fears of a hard landing this week, with the Fed’s latest Beige Book acknowledging that activity appears to have ground to a halt. Admittedly, …
CPI inflation is falling and the Bank of England Governor, Andrew Bailey, sounded optimistic this week when he said that “a corner had been turned on inflation”. But he and most other Monetary Policy Committee (MPC) members will probably still be …
The Swiss franc is not immune to the shifting global landscape and we now suspect that it will be broadly stable against the euro in the coming months rather than appreciating. Looking back, the franc has been through three distinct phases since the …
The improvement in recent data and brightening outlook continues to be the key talking point for euro-zone-watchers. In brief, it looks as if euro-zone GDP may not have contracted in Q4 2022 after all, and the prospects for this year have brightened …
A partial recovery in Lunar New Year travel The world’s largest annual migration of people is well underway, with millions of Chinese returning to their hometowns to spend the upcoming Lunar New Year holiday with their families. This migration, which …
More signs of a growing electronics ecosystem We argued at the end of 2022 that one of the key developments for investors to look out for this year was signs of a growing electronics ecosystem in India. We are only three weeks into the new year but there …
10-year JGB yield retreats from ceiling Following the Bank of Japan’s decision on Wednesday to keep its short-term policy rate and Yield Curve Control (YCC) settings unchanged, 10-year Japanese Government Bond (JGB) yields fell to as low as 0.37% that …
Real incomes rising despite soaring inflation The biggest news coming out of New Zealand this week was the resignation of Labour Party PM Jacinda Ardern. The conservative National Party is leading the polls ahead of the next election in October and has …
Petroyuan” talk further sign of frayed Saudi-US ties Comments by Saudi Arabia’s finance minister that the Kingdom could conduct trade in currencies other than the dollar will add fuel to the debate about the rise of a “petroyuan”. There are hurdles to the …
19th January 2023
The December CPI data and the Bank of Canada’s quarterly business and consumer surveys, released next week, could have a big bearing on the policy outlook. For the Bank to pause after one final 25 bp hike this month, as we assume, it will need to see …
13th January 2023
Tuesday’s retail sales data are likely to show that spending plunged as COVID crashed through China last month. But December was an age ago. It can’t tell us much about what will happen now. We’d caution against some of the bullish takes doing the rounds. …
Brazil riots: reflecting on the fallout The riots in Brasília last Sunday thankfully ended quickly. And the country’s financial markets, after losing ground on Monday, have rebounded over the course of this week. Investors have been buoyed by the fact …
At a key policy conference, South Africa’s ruling party officials offered little by way of new ideas to address the country’s mounting economic challenges. And some fresh proposals risk making matters worse. The ruling African National Congress (ANC) …
Implications of a stronger recovery in China COVID-19 has spread through China much faster than we had expected, with one province reporting that 89% of the population has been infected with the virus. This is paving the way to a much earlier economic …
Early signs that the inflation tide is turning This week brought the clearest evidence yet that the disinflation process in Central Europe is underway as most economies experienced a marked and broad-based easing of price pressures in December. This is …
Core CPI continues to moderate The 0.1% m/m decline in headline CPI in December was principally due to a 9.4% m/m drop in gasoline prices, but core consumer prices also increased by a more modest 0.3% m/m, extending the run of weaker monthly gains to …
It’s remarkable that the economy appears to have avoided a recession (defined as two consecutive quarters of falling real GDP) in 2022. Most economists thought that the recession began in Q2 2022 as back in August the ONS estimated that real GDP fell by …
After months of gloom, there seems to be some newfound optimism about the euro-zone’s economic prospects. Commentary about the euro-zone economy has turned more positive. And this year’s rally in euro-zone financial markets probably at least partly …
Higher Swedish GDP forecast We learnt this week that Sweden’s monthly GDP Indicator declined by 0.5% m/m in November as a result of a fall in manufacturing output and “several service producing industries”, suggesting that policy tightening was …
Rupee settlement mechanism to see limited use It has been a relatively quiet start to the year on the economic front in India but a speech over the weekend from RBI Governor Shaktikanta Das has garnered attention. Among the highlights, Governor Das struck …
Services inflation on the rise The timely Tokyo CPI showed that inflation jumped from 3.7% to 4.0% in December, twice the BoJ’s 2% target. Our measure of “core” goods inflation accelerated further, but below the surface there are clear signs of a …
Inflation strong, consumption resilient On balance, the economic data released this week are consistent with our view that the RBA has more work to do. For a start, inflation rose back up from 6.9% to 7.3% in November, with trimmed mean inflation reaching …
Has the EGP gone too far once again? The Egyptian pound has pared back its losses after sharp falls against the dollar on Wednesday in a sign that, just like 2016, the currency may have overshot. The authorities may keep the pound weak in a bid to rebuild …
12th January 2023
The resilience of the labour market is a risk to our view that the Bank of Canada will pause its tightening cycle after a final 25 bp hike this month, even as the slump in natural gas prices raises the chance that CPI inflation will fall faster than the …
6th January 2023
Sub-Saharan Africa’s grim year ahead Last year ended with the bang of Ghana’s sovereign default , and 2023 has started with economies bracing for disruptions due to the end of zero-COVID in China and a looming global recession. While these are likely to …
The data this week suggested that the weak global backdrop is being compounded by a deterioration in domestic activity, although the labour market still appears to be in good health. Domestic weakness adding to external headwinds The November trade data …
The past few weeks have brought the news that the UK economy is lagging even further behind its G7 counterparts. (See here .) One reason for this relative underperformance is real business investment, which accounts for 9.5% of real GDP and in Q3 was …
A worrying first week of Lula’s presidency The biggest event in the region this week was the inauguration of Brazil’s president Lula on 1 st January. And his first actions (and those of some of his cabinet) provide reasons for investors to be concerned …
The narrative surrounding Europe’s energy crisis has completely shifted in recent weeks as warmer-than-normal winter temperatures have reduced heating demand and pushed gas prices down sharply. This will help to improve external positions and lower …
Swiss manufacturing cruising, services snoozing The latest batch of surveys suggest that, in common with the euro-zone, prospects for the Swiss economy improved marginally at the end of last year. For a start, the KOF economic barometer for December …
Inflation is on its way down Headline inflation in the euro-zone has probably passed its peak. (See here .) Admittedly, core inflation rose to a new record high in December, with both services and core goods inflation increasing in y/y terms. Core goods …
Forecast change on China border reopening Tourism across Asia has rebounded strongly in recent months, with arrivals in most places now at around 45% of pre-crisis levels. (See Chart 1.) Chart 1: Tourist Arrivals (% of 2019 level) Sources: Refinitiv, …
PMIs increasingly at odds with hard data The PMI surveys for December released this week suggest that India’s economy was firing on all cylinders at the end of 2022. Both the manufacturing and services measures hit multi-month highs (see Chart 1), while …
COVID-19 has torn through China’s population with remarkable speed. Medical experts estimate that over 70% of the population in major cities such as Shanghai have been infected since mid-November. Anecdotal evidence suggests that the human cost among the …
Q4 industry slump won’t prevent GDP rebound We warned in December that the surge in manufacturing inventories in the Tankan signals a sharp downturn in industrial activity. As it happens, industrial production only fell marginally in November. But that …
End of China’s zero-Covid to boost travel exports Media reports suggest that China will start to import Australian coal from April. We explained here why the impact on the economy should be modest. A more important development is the end of zero-Covid in …
The latest fall in the Egyptian pound sends a strong signal that the authorities are committed to the shift to a more flexible exchange rate. And while the weaker currency poses a threat to the country’s fragile public debt dynamics, investors seem to …
5th January 2023
This week brought further signs of slowing activity growth and falling inflation, trends we expect to intensify next year. Meanwhile, Congress has averted a government shutdown, but there appears to be a growing risk of another damaging stand-off over the …
23rd December 2022
The November CPI data were a mixed bag, with deflationary pressure on goods starting to feed through but strong price rises for several key services. The 3-month annualised measures of core inflation that the Bank of Canada follows will probably drop back …
A year to write home about 2022 was in many ways a memorable year for Latin America. With Argentina’s World Cup victory the trophy returned to Latin America for the first time in 20 years. And it’s been a good year off the pitch too. GDP growth has …
Energy sanctions starting to take effect in Russia This week brought signs that newly imposed Western sanctions and recent falls in global energy prices are putting renewed pressure on Russia’s economy. It’s still too early to fully assess the impact of …
This week we learned that the economy contracted by more than we previously thought in Q3. The 0.2% q/q fall in real GDP in Q3 was revised down to a 0.3% q/q decline. More striking is that real GDP was a huge 6% below our pre-pandemic forecast in Q3. …
