Saudi and the UAE to benefit from OPEC+ fallout OPEC+’s decision last week to accelerate the pace at which it is raising its oil production quota lays the ground for Saudi Arabia and the UAE to capitalise to increase output quicker, which will provide a …
9th June 2022
Following its second 50 bp policy rate hike, the Bank of Canada hinted that it will consider an even larger move next month. With CPI inflation heading to 7.5% this month due to the surge in gasoline prices, there is a clear chance of a larger move, …
3rd June 2022
The 390,000 gain in payrolls employment last month demonstrates that the real economy is holding up well, although the further rise in energy prices will put households under even more pressure. Gas prices headed to a record $5 gallon With no end in sight …
Mining underinvestment taking its toll The 0.8% q/q rise in Q1 GDP left output 4.4% above its pre-pandemic peak, one of the strongest performances among advanced economies. (See Chart 1.) With stagnating real incomes weighing on consumer confidence and …
Recovery in services spending gaining momentum The 1.3% m/m fall in industrial production in April is a clear sign that supply shortages remain a major headwind for exposed sectors such as carmaking. It left manufacturing output around 4% down on both its …
Stage set for strong GDP growth in 2022… GDP data for Q1 (Q4 of FY21/22) released this week showed that the economy weathered the Omicron wave pretty well. Even though the annual growth rate slowed from 5.4% y/y in Q4 of 2021 to 4.1%, GDP still eked out a …
Accelerating towards a fiscal cliff Last week’s announcement of 33 support measures in six areas by the State Council has been followed by a flurry of statements by ministries signalling that they understand the urgency of the situation. A State Council …
2nd June 2022
Thailand: rates unchanged on Wednesday GDP figures published from across Asia over the past few weeks confirm that Thailand’s recovery from the pandemic has been the slowest in the region. (See Chart 1.) A steady increase in tourism arrivals should …
South Africa’s fuel levy cut: round two The authorities in South Africa once again stepped in to supress the rise in local petrol prices on the back of the war in Ukraine and, while this will contain fuel price pressures in the near-term, the fiscal costs …
1st June 2022
Colombia election: may be too early to cheer Populist Rodolfo Hernández is now the favourite to become Colombia’s next president and this has buoyed local financial markets this week. But we think that the scope for a further rally is limited. To recap, …
Enough has been said elsewhere about how the leap in euro-zone inflation in May is making it difficult for the ECB, which will need to explain next week why policy rates are still negative. So in this Weekly we will turn our attention to how inflation is …
The unexpectedly strong rise in unsecured borrowing in April adds to the evidence that consumer spending hasn’t collapsed, despite the plunge in consumer confidence and fall in households’ real incomes. (See Chart 1.) Chart 1: Consumer Confidence & …
EU oil embargo not a disaster for Russia After weeks of intense negotiation, the EU eventually agreed to impose an embargo on seaborne imports of Russian crude and petroleum products that will likely result in a 90% fall in Russian oil exports to the EU …
Gulf states to step up oil output increases? Reports that OPEC+ may suspend Russia from its oil output deal reinforce our view that the Gulf states will raise production faster later this year. The West has increased pressure on OPEC+ to rethink the …
One is not amused by King Harald V’s luck With the UK gripped by Jubilee fever, it is worth pointing out that Sweden, Norway, and Denmark are also constitutional monarchies whose current rulers have been on the throne for decades. It is hard to compare …
Strong consumption growth fuelled by savings The 0.7% jump in real consumption in April, together with the upward revision to March’s gain leaves consumption on track for a 5% annualised gain in the second quarter. Thanks to a rapid rebound in exports, …
27th May 2022
CBN governor: in or out? Reports this week suggesting that Nigeria’s central bank (CBN) governor, Godwin Emefiele, had been sacked have subsequently been denied by officials. Even so, the rumours did no good for the CBN’s independence and, with or without …
Another Petrobras CEO gone The news this week that Brazil’s President Bolsonaro sacked the CEO of oil giant Petrobras, José Mauro Coelho, provides a worrying sign about the direction of policymaking in the run-up to October’s elections. Mr. Coelho became …
With core inflation rising well above the ceiling of the 1% to 3% target range and first-quarter GDP growth likely to have been as strong as 5.0% annualised, there is little to stop the Bank of Canada from hiking its policy rate by another 50bp this week, …
Russia and default (yes, we’ve been here before!) A Russian sovereign default moved a step closer this week after the US government decided not to extend a waiver that allowed US investors to receive debt payments from Russia’s government. We looked at …
There are some question marks over quite how big the fiscal stimulus announced by the Chancellor yesterday proves to be. Much depends on whether the 25% levy on the profits of oil/gas producers lasts beyond the next year, which Sunak said would happen if …
Inventories at record high relative to sales Most observers assumed that China’s Omicron wave would worsen goods shortages both at home and abroad but the data increasingly point to the opposite outcome, at least at the macro level. The latest evidence …
Nordics to follow ECB (following the Fed) The change to our ECB forecast this week (see here ) has big implications for Scandinavian central banks so we are now formally changing our projections for the Riksbank, Norges Bank and Nationalbank. (See Key …
Contraction in Q2? The euro-zone PMI survey for May, published this week, suggested that the economy may fare a little better in Q2 than we had assumed. Indeed, the Composite index remained well above the 50 “no change” mark, leaving it consistent with …
Governor Das confirms more rate hikes to come… RBI Governor Shaktikanta Das was in a candid mood when on media duties this week. Among the more notable comments, he said that the MPC would be revising up its inflation forecasts for this year and next in …
Singapore inflation climbs higher Rising inflation and a strong economy have fuelled talk that monetary policy in Singapore will need to be tightened further. But we think the backdrop will have changed by the time the Monetary Authority of Singapore …
Surge in utility bills adds to price pressures The activity data released this week were a mixed bag. While retail sales powered ahead in April, real private investment probably fell in Q1. What’s more, it now looks likely that house prices started to …
Tax reform unlikely to change behaviour The government’s planned mix of tax hikes and tax breaks to promote corporate investment and discourage saving is unlikely to have the teeth required to significantly alter corporate behaviour. Media reports suggest …
Saudi gearing up to loosen the purse strings Comments from Saudi Arabia’s finance minister this week provide some hints that the fiscal purse strings could soon be loosened if oil prices remain elevated. Finance Minister Mohammed al-Jadaan said that the …
26th May 2022
Chile: moving towards a bigger state Some of the doubts over Chile’s political system have eased after the Constitutional Convention completed a draft of the new charter. But political risks remain high for now, which may keep the Chilean peso on the …
20th May 2022
Central bank hawks ascend amid market ruffles Recent investor risk-off sentiment has pushed up sovereign dollar bond yields across Sub-Saharan Africa, fuelling debt risks further. And central banks appear to be taking note, with some policymakers turning …
China the exception China today cut interest rates, but the notable recent shift across the rest of the region has been an embrace of rate hikes. Central banks in India , the Philippines and Malaysia have all hiked for the first time this cycle in recent …
The Bank of Canada will have eyed this week’s data releases and market moves with some trepidation. The further acceleration in core CPI inflation in April means the Bank is all but guaranteed to push ahead with another 50bp interest rate hike at its …
With China’s economy hampered by its zero-covid lockdowns, and Europe’s economy suffering because of the massive surge in imported energy prices caused by the war in Ukraine, the American consumer has once-again emerged as the world’s spender of last …
Hungary: policymakers seek to fight imbalances Officials in Hungary sought this week to reassure investors that they will tackle inflation and mounting macro imbalances. Tighter policy is needed, which underpins our below-consensus growth forecasts. In a …
This week’s news on the euro-zone economy has continued to be pretty gloomy. Admittedly, there was a small upward revision to Q1 GDP (to 0.3% q/q) which means the economy will not fall into a technical recession in the first half of the year. And …
Another week, another set of target-busting inflation figures, with CPI inflation shooting up from 7.0% in March to a 40-year high of 9.0% in April. (See here .) In contrast, the rise in the euro-zone was smaller, with inflation ticking up from 7.4% in …
50bp is the new 25bp? It was a quiet week on the data front, but we had plenty of comments and speeches from policymakers to pick through – notably from three of the members of the Riksbank’s Executive Board. Deputy Governors Henry Ohlsson and Martin …
Three lessons from past outbreaks With the Omicron outbreak subsiding and policy support being ramped up, how quickly can the economy get back on its feet? Previous virus waves offers some clues. Table 1 summarizes how long it took key indicators to go …
Heatwave damage could extend beyond wheat The news has been dominated this week by the government’s decision to restrict exports of wheat on food security grounds, following heavy damage to crops from the heatwave. This has caused ructions in the global …
Real incomes not plunging as sharply as elsewhere Japan’s GDP shrank slightly in Q1 as consumer spending was kept in check by the Omicron outbreak. In contrast to most other advanced economies, Japan’s GDP has therefore yet to surpass its pre-virus level. …
RBA to keep hiking by 25bp in June The 0.7% q/q rise in the wage price index in Q1 was a little weaker than we had anticipated and left the annual rate at a sluggish 2.4%. Digging a little deeper though, it’s clear that wage growth is set to accelerate …
Tunisia: further rate hikes needed The central bank of Tunisia (BCT) joined the region’s tightening cycle this week, in part to shore up the dinar and mitigate the risks stemming from the currency to the public finances. But we doubt that this will …
19th May 2022
Gas supply concerns remain The threat of gas supplies from Russia being cut off continued to rise this week. First, Ukrainian pipeline operator GTSOU suspended the flow of gas through the Sokhranivka transit point, which could reduce gas supplies to …
13th May 2022
Monetary politics in Nigeria Presidential guidance requiring the resignation of current government officials running for Nigeria’s highest office will likely leave the central bank without a governor as he is set to contest the presidential ticket, …
The unexpected further jump in gasoline prices, reflecting a sharp widening of refiners’ margins, means we now expect headline CPI inflation to rise above 7% in May. While the rise in refiners’ margins presents an upside risk to our inflation forecasts …
Fed officials will have been eyeing the flood of red on their screens this week with a growing sense of foreboding. Admittedly, for GDP growth to slow and inflation to fall, they want financial conditions to tighten, which includes lower equity prices, a …
Banxico gearing up for more aggressive moves? The hawkish tilt by Mexico’s central bank at its meeting yesterday, when it raised its policy rate by 50bp (to 7.00%), suggests Banxico may soon shift its tightening cycle into a higher gear. The decision to …
Shanghai officials today said they hoped to eradicate community transmission by next Friday. In Beijing, case numbers remain stable. Smaller outbreaks elsewhere have receded, with the result that there has been a sharp drop in the share of economic …
Finland, NATO, and Russian gas supplies The fact that Russia is reportedly close to cutting off the supply of natural gas to Finland in retaliation for its intention to join NATO poses a risk for Finnish industrial firms that are most reliant on gas – …
