Turkey doubles down on unorthodoxy The surprise interest rate cut by Turkey’s central bank this week, despite inflation reaching close to 80% y/y in July, threatens to sow the seeds of the next currency crisis. After all, Turkey’s external position is …
19th August 2022
With the rebound in activity growth in July coming against a backdrop of easing inflation, we still think the Fed will hike rates by a smaller 50bp next month. July data should ease …
Core inflation to offset falls in food & energy CPI data for July released last Friday indicated that the upside risks to food inflation we flagged earlier this year have not materialised. As we noted, food prices fell by 0.7% m/m in seasonally-adjusted …
Our existing forecast envisages 25 basis point (bps) hikes at the Bank of England’s September and November policy meetings. But given the data released over the past week, we now would not be at all surprised if the Bank were to deliver a second 50bps …
Norway's GDP back to pre-crisis trend Having had a relatively good pandemic, Norway is now one of the few European countries to benefit from the energy crisis. We learnt this week that mainland GDP increased by 0.3% in June. Although this was a little …
Recession just round the corner The second estimate of euro-zone GDP in Q2, published this week, confirmed that the economy grew at a decent pace in the first half of the year. (See here .) However, this is unlikely to last. The construction sector is …
Hit to hydro putting pressure on coal supplies Southwest China is currently experiencing power shortages due to a severe drought and heatwave. Officials in Sichuan province and Chongqing municipality have responded by ordering week-long halts to factory …
A hike on Thursday due to inflation worries With inflation at a 24-year high, the Bank of Korea (BoK) looks certain to raise interest rates again at its meeting on Thursday. We have pencilled in another 25bp hike, which would take the policy rate to …
Productivity growth slowing further The 0.5% q/q rise in Japan’s Q2 GDP brought output closer to its pre-virus peak, with productivity up by 0.4% y/y. However, the bigger picture is that the pandemic has further slowed the sluggish productivity gains …
Inflation hits 7% in June The Australian Bureau of Statistics published a preliminary estimate of its new monthly CPI indicator this week. There are two key points. First, monthly inflation was nearly 7% in June, much higher than the Q2 figure of 6.1%. …
Amer departs… The resignation of Central Bank of Egypt (CBE) Governor Tarek Amer yesterday has further increased scrutiny of the country’s exchange rate policy. A weaker pound is clearly needed, preferably under an IMF deal, but there is a clear risk that …
18th August 2022
Political risks around Kenya’s elections still high The fact that Kenya’s elections have, so far, proceeded peacefully have supported a rally in the country’s bond market. But with no official results available yet and reports pointing to a tight race, …
12th August 2022
Colombia’s tax reform Colombia’s President Gustavo Petro was inaugurated last weekend and his economic team was quick to make their mark, presenting a new tax bill to congress. The bill seeks to add COP25trn (1.7% of GDP) to government coffers this year, …
Hungary’s fiscal adjustment in full swing Hungary’s government has tightened the fiscal purse strings much more quickly than had looked likely since April’s election. This is positive as far as Hungary’s macro imbalances are concerned. But it is bad for …
Yield curve inversions have a patchy record of predicting recessions in Canada, but they almost always precede a sharp economic slowdown and the unusually deep nature of the current inversion makes it especially hard to be optimistic this time. Yield …
Recent trends suggest that where US inflation goes, UK inflation follows. (See Chart 1.) So this week’s US inflation figures, which suggested that headline inflation in the US may have peaked, appears to offer some hope for the UK. Chart 1: CPI Inflation …
The drop back in CPI inflation in July wasn’t enough alone to convince Fed officials to change their plans for interest rate hikes. But we expect the better news on inflation to continue over the coming months, which will eventually persuade the Fed to …
PBOC inflation concerns add to policy constraints The People’s Bank (PBOC) published its quarterly monetary policy report on Wednesday. It struck a less relaxed tone on inflation. While the PBOC still expects only a modest rise in CPI this year, in line …
Drought conditions add to woes By far the biggest problem afflicting Europe’s energy markets is Russia’s decision to cut its natural gas exports, but extreme weather conditions are making things worse. Water levels on the Rhine are already close to their …
Until recently, Norway appeared well positioned to cope with Europe’s energy crisis and to help other European countries through it too. It has little exposure to Russian supply and, as a net exporter of oil and gas, it has benefited from rising …
BJP-led NDA loses some clout For all its power in parliament’s lower house (Lok Sabha), a majority in the upper house (Rajya Sabha) has remained elusive for PM Modi’s BJP. As the main party in the National Democratic Alliance (NDA), it has been closing in …
A very weak Q2 Most countries in the region have now published second quarter growth figures for 2022, and the numbers have been generally disappointing. (See here .) In q/q terms, GDP contracted in the Philippines, China, Taiwan and Singapore. Korea and …
Net migration worsened population decline Japan’s population fell by 726,342 (0.6%) last year. The figure would have been less alarming if not for negative net migration of 107,202, which is a trend we do not think will last. (See Chart 1.) Chart 1: Net …
ABS will publish monthly inflation figures It’s been a long time coming, but the Australian Bureau of Statistics revealed this week that it will start publishing monthly in addition to the existing quarterly data on consumer prices. We hope the new …
PIF stumping up the cash for Egypt Saudi Arabia’s Public Investment Fund (PIF) established an arm in Egypt this week and has moved quickly to purchase stakes in several firms, which will help to ease external financing concerns. But a weaker pound is …
11th August 2022
The further falls in home sales and employment in July add to the evidence that the economy is losing momentum. With no sign of a material easing of inflationary pressures, however, it is too soon to expect the Bank of Canada to pivot. Home sales down by …
5th August 2022
Zambia’s latest step towards debt sustainability News that Zambia’s official creditors agreed to provide debt relief is certainly encouraging and will unlock IMF funding. But the terms of the deal remain unknown, leaving in doubt that the country’s public …
Pelosi goes to Taiwan With the Democrats at risk of losing control of Congress in November’s midterm elections, House Speaker Nancy Pelosi’s visit to Taiwan this week was probably partly motivated by a need to bolster the party’s national security …
Costing Chile’s new constitution A recent report from Chile’s Centro de Estudios Públicos (CEP) that looks at the fiscal costs implied by the draft new constitution has made a splash this week. It estimates that the total annual cost for the government of …
The tide is turning on monetary policy in CEE The decision by the Czech central bank to keep its policy rate on hold this week, while Romania’s hiked rates, is representative of a growing divergence between central banks in the region. Poland’s central …
The Bank of England’s decision to step up the fight against high inflation by raising rates by 50 basis points (bps) from 1.25% to 1.75% was in line with our expectations. Moreover, we have been saying for some time that the UK economy would soon fall …
Inflation the main concern for Thai policymakers Thailand is one of the few countries in the region not to have raised interest rates this year, but that looks set to change on Wednesday. We, along with the majority of other analysts, are expecting a 25bp …
Taiwan has dominated the headlines this week, with Nancy Pelosi’s visit triggering Chinese military drills and restrictions on cross-strait trade. These moves appear largely symbolic. China’s bans on exports of natural sand and imports of some Taiwanese …
Activity turning downwards The data published this week add to the evidence that a recession is just around the corner. Retail sales fell sharply in June and are on a clear downward trajectory. Admittedly, that might partly be because households are …
According to Google it’s “kanariefugl i kulminen” Against the backdrop of heightened tensions between China and Taiwan, and ongoing question marks over whether the US economy is in recession or not, it’s fair to say that the precipitous plunge in the …
Trade data point to softening in exports Preliminary data released this week showed India’s goods trade deficit widening from a seasonally-adjusted $25.8bn in June to $29.3bn in July, the largest on record in dollar terms. But while the widening in the …
Shifting energy mix to renewables The Tokyo Metropolitan Government is planning to mandate the installation of solar panels on new homes. The plan follows a proposal at the national level to install solar panels on public buildings across Japan and …
RBA turns more pessimistic The RBA delivered yet another 50bp rate hike on Tuesday as widely anticipated. However, following the release of weaker-than-expected Q2 inflation data last week, financial markets are now pricing in a peak in the cash rate of …
Does Egypt really want an IMF deal? Egypt’s Finance Minister Mohamed Maait argued this week that any financing agreement with the IMF would be much smaller than some analysts’ estimates. If anything, Egypt could be hinting that it does not want IMF …
4th August 2022
The slump in the CFIB Business Barometer in July – to a post-pandemic low – shows that the jump in borrowing costs is hitting more than just the housing market. With the survey still pointing to elevated price and wage expectations, however, the mounting …
29th July 2022
Big challenges for Argentina’s new “superminister” President Alberto Fernández announced a major cabinet reshuffle yesterday in an effort to tackle the latest economic crisis. One of the casualties of the reshuffle is Silvina Batakis, who had taken over …
More signs of weakness This week continued the run of downbeat economic data, with the 0.9% annualised decline in GDP in the second quarter, following the 1.6% decline in the first, inevitably leading to a fresh round of calls that the economy has fallen …
Russian gas cut off raises energy supply risks The news flow this week continued to be dominated by concerns about energy supply this winter after Gazprom reduced gas exports to Europe further. The immediate consequence will be higher energy bills and an …
The fall in 10-year gilt yields from 2.60% in late June to 1.95% now has been in line with the global trend and shows that the markets are looking through the further near-term rises in inflation and interest rates and focussing more on the risks of …
Nigeria’s budget woes Data published by Nigeria’s Budget Office this week highlighted that, despite what should be a favourable high oil price environment, the public finances are actually getting worse. The figures showed that the federal government …
GDP target RIP It turns out that GDP growth targets aren’t such a big deal after all. The Politburo yesterday said that only “provinces that are in a position to do so” need hit their targets this year. And it signalled that no major new stimulus measures …
Data to mid-July show that the RBI’s FX reserves have dropped to US$572bn, the lowest level in almost two years. (See Chart 1.) Chart 1: FX Reserves (US$bn)* Sources: CEIC, Capital Economics While part of that is a valuation effect, it is mainly due to …
Gazprom’s announcement this week that it is reducing the supply of gas through Nord Stream 1 to only a fifth of its normal capacity has pushed European natural gas prices up from €125/MWh to €190/MWh over the past week, and will further increase inflation …
A tournament to forgot for Nordic football fans Of course, Sweden measures up well against the UK in many ways, including on the economic and political fronts. After all, the estimated 1.4% q/q rise in Swedish GDP in Q2 (data released on Thursday) is in a …
New president backs “Build, Build, Build” In his first State of the Nation address, the president of the Philippines, Ferdinand “Bongbong” Marcos Jr., this week pledged to resume the “Build, Build, Build” infrastructure programme of his predecessor, …
