China’s EV push a major threat The 2.6% m/m drop in industrial production in October was the second consecutive fall. And while motor vehicle output rebounded from the plunge in September, it was still 16% below its 2019 level. Firms are still pinning …
2nd December 2022
OPEC+ keeping the world on its toes Eyes will turn to OPEC+ on Sunday and, while there have been contrasting reports that oil output could be raised or cut further, it looks increasingly likely that October’s agreement will be rolled over. But we don’t …
1st December 2022
Untangling Ghana’s fiscal mess? Official statements this week by the authorities in Ghana signalled commitment to restoring fiscal and debt sustainability, and left little doubt that this will include a sovereign debt restructuring. Finance Minister Ken …
25th November 2022
G7 oil price cap losing some of its bite Details about a potential price cap on Russian oil this week of $65-70pb are bringing us to the view that it won’t have much of an immediate impact on Russia. We think the combination of the EU oil embargo and the …
ECB officials were out in force again this week, disseminating clues about the size of the next rate hike and their plans on quantitative tightening (QT). Their comments suggest that a slowdown in the pace of tightening, from a 75bp to a 50bp hike, …
Research from the Bank of Canada suggests that half of all variable-rate, fixed-payment mortgage holders have now hit their so-called trigger rates, which means their payments will rise. This is one factor weighing on spending, with retail sales volumes …
Warmer words in US-China relations There has been a palpable easing of strains between China and the West since the cordial meeting last week between Xi and Biden . Xi agreed to restart the high-level talks that China halted when Nancy Pelosi visited …
Strike highlights need for labour market reform The costs of a strike by Korean truck drivers – the second this year – are starting to mount, with steel and cement producers reporting disruption. The Korean government estimated that the economic losses …
Foreign visitor numbers jump but services struggle Japan received 461,000 foreign visitors in October (seasonally adjusted), almost double the September figure. This is helping businesses in accommodation and transport, which media reports say are …
The most eye-catching statistic published this week was the net migration into the UK of 504,000 people in the year to June 2022. That’s a record high. It continued the recent trend of net inflows from the non-EU and net outflows to the EU. And it …
Riksbank has further to go This week’s 75bp hike by the Riksbank was in line with expectations, and the Bank’s new projections took its policy rate forecast closer to ours. (See here .) The higher interest rate path – despite Stefan Ingves’s suggestion …
RBNZ willing to send New Zealand into recession While the analyst consensus is that New Zealand will generate decent GDP growth of just under 2% next year, we already predicted last month that the economy will enter recession. And with the RBNZ this week …
Manufacturing powerhouse takes to the polls We’ve previously written at length about why state elections in India matter for economic policy . The upcoming vote in Gujarat – due to take place between 1 st and 5 th December with results expected on the 8 …
OPEC+ schisms growing as Saudi doubles down The volatility of oil prices has highlighted the uncertainty over the current OPEC+ oil output agreement and adds to our view that we do not think it will make it to its end-2023 expiry date. The price of Brent …
24th November 2022
Despite the resilience evident in the latest round of hard data, our recession tracker models suggest the odds of a downturn next year are still rising. Odds of recession rising Our recession tracker indicators all but guarantee the economy will contract …
23rd November 2022
This week Fed officials pushed back against the market rally in the wake of October’s unexpectedly weak CPI report, but with only limited success. Despite officials reaffirming that they still had “a ways to go” in tightening policy and that they …
18th November 2022
Poland’s blast underscores military escalation threat A missile strike that killed two people in Poland on Tuesday raised concern about a further military escalation in the region this week. Central and Eastern European (CEE) financial markets initially …
As the dust settles on this week’s Autumn Statement, we take a step back and answer three key questions. (Clients can catch up on our detailed analysis and our Drop In webinar following Thursday’s fiscal event here and here .) With the economy entering …
Lula’s spending cap exemption plans spook markets Brazil’s financial markets remained on the backfoot this week as the Lula team stepped up its fight against the spending cap. And, while officials have since tried to reassure investors, the developments …
Although the data this week showed renewed rises in the annual rates of CPI-trim and CPI-median inflation in October, our calculations show that the timelier 3-month annualised measures both declined. That could persuade the Bank of Canada to drop down …
In next week’s MPC meetings in South Africa and Nigeria, inflation concerns are likely to hold sway over economic woes, and we expect both central banks to keep raising interest rates. South Africa’s tightening cycle is likely to continue for some time, …
Rebound in Asian currencies unlikely to last The rebound in Asian currencies triggered by the weaker-than-expected US CPI data for October already appears to be running out of steam. A number of currencies, including the won and the rupiah, have dropped …
Norway one of Europe’s stronger performers Norway’s Q3 GDP data, published on Friday, were much stronger than expected, consistent with our view that it will be one of Europe’s best performers in the coming quarters. The 0.8% q/q increase in mainland …
Official data to fall into line with surveys We doubt that the recent strength in some of the official euro-zone activity data will last. GDP posted a small expansion in Q3, whereas both we and the consensus had expected zero growth. (See here .) And …
Virus disruption has continued to intensify over the past week even after measures to optimise the COVID response were released. Implementation has been haphazard so far. Local officials have struggled to strike a balance between minimising disruption and …
Media blaming weak yen and virus for Q3 GDP fall The economy shrank by 0.3% q/q in Q3 due to a surge in real imports, as well as disappointing private consumption and investment growth. Some media outlets have blamed the weak yen and COVID for the …
Domestic demand coming off the boil Recent data paint a mixed picture of the state of domestic demand. On the one hand, survey evidence remains relatively upbeat. The PMI readings for India have recently held up much better than in most other EMs and …
Even though wage growth surpassed 3% for the first time since 2012 last quarter, and unemployment is back at a record low , the tight labour market has not been a major driver of the recent surge in inflation. In contrast to the US or New Zealand, wage …
Egypt’s privatisation drive stepping up a gear? Egypt’s state ownership policy document finalised could come into effect before the end of 2022, but it remains to be seen whether the latest privatisation drive will better the fortunes of ones before. The …
17th November 2022
Sovereigns tap the dollar bond market Governments in Turkey and Poland made a splash this week as they announced rare dollar bond issues. Turkey appears to be taking advantage of low credit spreads but the decision in Poland follows recent concern among …
11th November 2022
Lula starting to show his true colours? Developments this week poured cold water on the rally in Brazil’s financial markets that followed Lula’s election victory. Comments from Lula himself yesterday suggesting that higher spending should be prioritised …
SA may have just avoided a technical recession The surprising strength of South Africa’s manufacturing data for September released this week has lengthened the odds that the economy was in a technical recession over Q2 and Q3. Figures released earlier …
Below consensus growth for Taiwan in 2023 Surging demand for electronics products helped Taiwan’s economy sail through the pandemic. But with this tailwind now turning into a headwind, growth looks set to slow sharply. Export volumes have fallen back …
Bank of Canada Governor Tiff Macklem said this week that the unemployment rate will need to rise to help restore price stability, but he also played down the significance of the strong gains in employment and average earnings in October. That suggests …
The big fiscal tightening set to be unveiled at the Autumn Statement on 17 th November is coming at a time when the economy is probably already in recession. And the fiscal consolidation, rumoured to be worth a total of £54bn (1.9% of GDP), could risk …
US CPI number triggers euro-zone rally Euro-zone financial markets rallied yesterday after US inflation data for October came in lower than expected. Immediately after the data release, Bund yields fell by around 15bp and the euro and DAX rose by 2-3%. …
While the outcome of the midterms remains unclear, far more important for the economy was October’s softer-than-expected core CPI data, which support our view that the Fed won’t need to raise interest rates as far as markets had feared. Softer core CPI …
House prices falling in Sweden and Norway Sweden’s housing market has cooled significantly this year and prices are likely to fall outright soon. SEB’s monthly survey showed that in October, 22% of households expected house prices to rise whereas a much …
Virus disruption has intensified recently, with COVID infections hitting a six-month high. The Politburo Standing Committee (PBSC, China’s highest leadership body), met yesterday to discuss the situation. According to the meeting readout, they agreed to …
Power sector appears to be managing coal better Power shortages just over a year ago prompted a push by the government to shore up coal supply. Among the changes was a revamp of benchmarks for the stocks of coal that power stations should hold. …
Consumption resilient against Q3 virus wave The seventh COVID wave in Q3 has been the worst on record so far in terms of daily infections. Yet the Cabinet Office’s monthly estimate of private consumption for July and August was 0.6% above the Q2 average …
Savings rate fell below pre-virus level in Q3 Comments by RBA Deputy Governor Bullock suggest that the risks to our above-consensus policy rate forecasts are shifting to the downside. Bullock noted today that the Bank is getting closer to the point where …
Egypt steps up renewables push at COP27 With the COP27 climate summit underway in Sharm El-Sheikh, Egypt announced it will build one of the world’s largest onshore wind farms with financing from the UAE as it steps up its green energy shift. The farm will …
10th November 2022
Lula’s early moves: tacking to the centre? Lula emerged victorious in Brazil’s presidential election last Sunday and political developments since then will have reassured investors. While President Bolsonaro didn’t concede defeat, he has accepted the …
4th November 2022
NBP divided on the length of its tightening cycle The divergent views among policymakers at the National Bank of Poland (NBP) make it increasingly difficult to tell whether the central bank’s tightening cycle is coming to an end. We expect the NBP to …
The modest fiscal loosening unveiled in the Fall Economic Statement this week is unlikely to move the needle much for monetary policy, but the surge in employment in October and the acceleration in wage growth nevertheless leave the Bank of Canada’s …
Risks have been building for a while Commercial interest rates in Korea have continued to rise over the past week despite aggressive intervention by the authorities as they struggle to calm the markets. (See Chart 1.) While the recent jump in borrowing …
This week’s FOMC meeting may have dashed hopes that the Fed will follow the recent dovish tilts of some other central banks. But we still think Fed officials are underestimating the degree to which their aggressive rate hikes will put downward pressure on …
ECB Governing Council members had a busy week, with just under half of them giving speeches or interviews on the outlook for monetary policy. There are four key takeaways from their comments. First, rates will rise further. All policymakers who spoke …
Falling inflation may keep SNB in check The reductions in headline and core inflation in Switzerland in October confirm that inflation has now passed its peak, and both measures look set to continue on a downward path next year. (See here . ) We don’t …
