This week the Bank of England displayed the most extreme example of a “dovish hike” that we can recall. The hike bit; the 75 basis point rise in interest rates was the largest rise since 1992; it meant that rates have risen in each of the past eight …
4th November 2022
South Africa: strikes loom as wage talks collapse South Africa is on the cusp of large public sector strikes which will deal another blow to the recovery and raise the risk of fiscal slippage a week after the Medium Term Budget Policy Statement (MTBPS). …
Recent data tell a conflicting story about the health of India’s export sector. The new export orders component of the manufacturing PMI released this week rose to 56.6. It has only been higher on one occasion since the start of 2015 . By contrast, the …
Chinese equities turned a corner earlier in the week on the back of rumours of plans to shift away from the zero-COVID policy by next March. Remarks reportedly made at a conference by Zeng Guang, the former chief scientist at China’s CDC, added fuel to …
Business investment strong in Q3 Data released on Monday showed that capital goods shipments fell by 4.1% m/m in September. But across Q3, capital goods shipments rose 11.4% q/q to the strongest they have been since Q4 2018. Meanwhile, the Bank of Japan’s …
RBA increasingly worried about wage-price spiral The Reserve Bank of Australia lifted the cash rate by 25bp on Tuesday as we and most other analysts had anticipated and the marked upward revision to its inflation forecasts support our view that the Bank …
Saudi liquidity fears solidifying Saudi interbank rates (SAIBOR) have surged recently as liquidity conditions in the banking sector have tightened again. With no sign yet that the central bank (SAMA) is about set to step in, credit growth could slow and …
3rd November 2022
The second-round of Brazil’s presidential election on Sunday is going down to the wire. While Lula came top in the first-round vote earlier this month, the key story was that incumbent president Jair Bolsonaro received more support than had been expected. …
28th October 2022
Fatigue sets in as Israelis head to the polls Israelis vote in elections next week and while polls point to a possible return for Benjamin Netanyahu, another inconclusive result remains highly likely. The election has limited near-term implications for …
The Bank of Canada now judges that there is a 50/50 chance of GDP growth turning negative, which caused it to slow the pace of its tightening to a 50 bp hike this week and to hint that it will drop to a 25 bp at the final meeting of the year. We assume …
The reports that the Chancellor, Jeremy Hunt, will unveil in his Autumn Statement on 17 th November a fiscal tightening of up to £50bn by 2026/27 (1.7% of GDP) suggest that after a period in which fiscal policy has provided the economy with support, it is …
The 2.6% annualised rise in third quarter GDP was a lot worse than it looked, with growth in underlying demand grinding to a near-halt. At the same time, there are mounting signs that economic weakness will soon feed through to disinflation in core …
In general we think the data released this week are consistent with our three key calls on the euro-zone. The first is that the region is heading for a deeper recession than most anticipate. Our forecast is for a 1.8% decline in GDP in 2023 is below both …
South Africa’s Medium Term Budget Policy Statement (MTBPS) on Wednesday provided further good news on the state of the public finances, but pressure for public sector wage increases is just one of a number of reasons to think that slippage on the latest …
What to expect in 2023 We published our latest Emerging Asia Economic Outlook this week, which contains our detailed forecasts. Here are three key calls from the report. Sharp slowdown ahead Growth across Emerging Asia looks set to slow sharply over the …
We published our Q4 Nordic & Swiss Economic Outlook this week. The key points are that we expect Switzerland, Sweden and Denmark to suffer recessions, while Norway might escape with only a sharp slowdown. But inflation will remain high in the Nordics and …
The Q3 GDP figures published earlier this week came in slightly stronger than expected. We don’t think the data should be taken completely at face value – our in-house alternative, the China Activity Proxy, paints a more downbeat picture . But the …
MoF likely intervened again We revised up our inflation forecasts last week to reflect the further weakening of the yen to 150 against the dollar last week. As it happens, the yen jumped from a low-point of 152 against the dollar to 146 late on Friday, …
The RBI announced this week that it will hold an “additional” MPC meeting on Thursday 3 rd November. It’s not unusual for the committee to convene between scheduled meetings (the next meeting was due to take place in early December). Indeed, “emergency” …
Bank won’t make an about-face The stronger than expected Q3 inflation print has prompted some commentators to forecast a larger 50bp rate hike at next week’s RBA meeting following the step down from the four 50bp hikes in recent months to a smaller 25bp …
This week ended with a bang as Egypt finally shifted to a more flexible exchange rate and secured an IMF deal. Some short-term economic pain is on the cards, but the move will help to restore macro stability and brighten long-term prospects. Early this …
27th October 2022
The data released this week showed that higher interest rates are yet to have much of a negative impact on construction or consumption and that core inflation is proving stickier than anticipated. This has prompted us to upgrade our forecast for the …
21st October 2022
South Africa’s Medium Term Budget Policy Statement (MTBPS), scheduled for Wednesday, is unlikely to provide the drama that the UK’s “mini-Budget” did, but we suspect that the government will tilt fiscal policy in a looser direction even as officials …
The Party Congress has slowed the leadership’s response to the semiconductor export controls introduced by the Biden administration two weeks ago. But the Ministry of Industry and Information Technology has, according to Bloomberg, been conducting …
We do not yet know which of the three PM hopefuls (Boris Johnson, Rishi Sunak, Penny Mordaunt who have attracted early backing from Conservative MPs) will replace Liz Truss. The candidates that gain more than 100 nominations from MPs will be whittled …
Chile three years after the social uprising This week marked the third anniversary of a large wave of protests in Chile which, while ostensibly triggered by a rise in metro ticket prices, marked a watershed moment in Chile’s modern history and left …
Decent Q3 growth Korean GDP figures due on Thursday are likely to show that the economy held up reasonably well in the third quarter of the year. We have pencilled in growth of 0.4% q/q. While this would represent a slowdown compared with the 0.7% …
The continued decline in European natural gas prices this week is a positive development for economies in Central and Eastern Europe (CEE), but the energy crisis will not go away anytime soon and we still expect the region to enter recession this winter. …
This week’s data releases painted a mixed picture of activity: from the good, to the bad, and the just plain ugly. Manufacturing sector holding up well First the good; manufacturing output increased by 0.4% m/m in September, following decent monthly gains …
Unemployment still low in September Data for Sweden in September show the labour market remained tight. Admittedly, employment fell on the month and the unemployment rate edged up from 6.9% in August to 7.0%. (See Chart 1.) But the monthly numbers are …
The main message from our latest quarterly Euro-zone Economic Outlook , which we published this week, is that we now expect the euro-zone to experience an even more extreme case of stagflation. We now forecast both headline and core inflation to average …
German economy overtakes Japan’s With the yen weakening to 150 against the dollar this week, we estimate that Germany has overtaken Japan as the world’s third largest economy in dollar terms. (See Chart 1.) Chart 1: Nominal GDP (US$bn, 4Q Sum) Sources: …
Limited macro fallout from sliding rupee The rupee has this week continued its slide against the US dollar, dropping to a record low of 83/$ on Thursday. As has been the case over the past few months, this has been the trigger for a series of alarmist …
Minutes signal RBA not done yet The RBA this week signalled that even though it slowed the pace of tightening at its last meeting, it is not done yet. In a speech on Wednesday, Deputy Governor Bullock showed that the higher frequency of the RBA’s policy …
Tunisia still has work to do for IMF deal approval The IMF stated last weekend that Tunisia reached a staff-level agreement for a new deal, which (if approved) will reduce concerns that Tunisia might follow in Sri Lanka ’s footsteps towards a messy …
20th October 2022
“Dear, oh dear”. King Charles neatly summed up the thoughts of the nation with those three words when he greeted the Prime Minister, Liz Truss, on Wednesday for their weekly meeting. The big question is who will the King be greeting next week? Will it be …
14th October 2022
Nigeria: Buhari administration’s farewell budget The shelf life of Nigeria’s recently presented budget plans is likely to be short with elections due in early-2023 and no guarantee about policy continuity. In a budget speech late last week, …
Central banks bringing things to a close This week, Chile ’s central bank became the latest in the region to end its rate hiking cycle. The statement accompanying its 50bp policy rate hike, to 11.25%, on Wednesday mentioned that the policy rate “has …
Canada is unlikely to succumb to the same crisis currently afflicting UK markets, but those problems are a reminder that rapidly rising interest rates have a habit of breaking things. In Canada’s case, the biggest vulnerabilities are housing and household …
We still think it’s only a matter of time before the easing of inflationary pressure evident in the surveys and other private-sector data shows up in the official figures. But the September CPI report points to the Fed hiking by another 75bp not just in …
Governing Council members were out in force this week giving their euro cent’s worth on the monetary policy outlook. Sifting through the various comments, there are three main takeaways. First, even the most hawkish are not prepared, in public at least, …
Sweden: consumer prices vs house prices September’s consumer price data were very strong. But there has been a sharp slowdown in the housing market which could mean that the Riksbank’s tightening cycle comes to an end soon. The increase in headline …
Yen tumbles again after strong US inflation data Following another strong inflation reading from the US, the yen today weakened slightly past the 147.6 trough it hit in 1998, reaching its weakest against the dollar since 1990. It then rebounded, sparking …
The Party Congress begins on Sunday. We covered much of the agenda and economic implications in a Focus piece and at a Drop-In event (recording here ) this week. One element of both was a discussion of who might replace Li Keqiang as premier. But Li …
Zero-COVID to hold back tourism recovery China’s 20 th Party Congress gets underway on 16 th October. With General Secretary Xi’s continued dominance in little doubt, it is unlikely to result in any substantial change in policy direction. This …
Inflation & external pressures force the MNB’s hand The surprise decision by Hungary’s central bank (MNB) to tighten monetary policy further today underscores that the economy is facing much stronger inflation and external pressures than its regional …
Apple production shift boosts local manufacturing Regular readers of our India research will be (perhaps all-too-) familiar with our view that the key to India sustaining rapid economic growth over coming decades is the development of its manufacturing …
RBA flags higher neutral interest rate (sort of) This week’s speech by Reserve Bank of Australia Assistant Governor Luci Ellis on the neutral interest rate was an odd affair. The last time the Bank published an estimate of the neutral rate was in 2017, …
US-Saudi relationship dials back Developments since last week’s OPEC+ decision provide further evidence that the relationship between Saudi Arabia and the US has soured. (See our immediate take on it here .) Chair of the US Senate Foreign Relations …
13th October 2022
The bi-annual Monetary Policy Review (MPR) released this week by the South African Reserve Bank (SARB) bolsters our view that the monetary tightening cycle will continue to take on a distinct path to most other EM central banks. In many ways, the SARB has …
7th October 2022
