Zambia: IMF deal done, debt sustainability next This week’s rubber-stamping of Zambia’s IMF deal is certainly a welcome step but, with crucial sovereign debt restructuring details unknown, it remains unclear if it will prove to be sufficient to place …
2nd September 2022
Inflation concerns easing Inflation and activity data published over the past few days have surprised to the downside, supporting our view that Korea’s tightening cycle will finish by the end of the year. Headline inflation in Korea fell back from 6.3% …
Brazil: will the consumer surge last? One of the most striking features in Brazil’s Q2 GDP release this week was the stellar performance of household consumption, which rose by 2.6% q/q – a figure bettered only six times in the GDP series’ …
Our tracker models suggest the odds of a recession are rising although, on balance, we still expect a period of weak growth rather than an outright contraction. If we are wrong and a recession drives the unemployment rate up more significantly, then that …
Q2 GDP figures show a mixed performance across the region, with economies most exposed to the war in Ukraine hit hard while the largest economies in the region generally held up well. But given the mounting economic headwinds, there are plenty of reasons …
SNB with more work to do In the week when Joel Wicki was crowned “Schwingen King” in the national Swiss wrestling championships, SNB Chairman Thomas Jordan used his speech at Jackson Hole to reiterate his intention to grapple inflation into submission. Of …
Two quarters of strong outperformance have not been enough for the recovery in GDP to catch up with that in the US and, with growth now grinding to a halt, the divergence is set to widen again. GDP still well below pre-pandemic trend The 3.3% annualised …
Sentiment towards the euro-zone has fallen to new lows. The Eurostoxx equity index lost 4% of its value this week, the spread between Italian and German bonds widened, and euro-zone sovereign bonds reported their biggest monthly price fall on record. …
Adult population shrinking more quickly While Japan’s population peaked in 2010, it only edged down over the subsequent decade as positive net migration cushioned the decline in the “natural” population that was caused by deaths outstripping births. …
This week’s warnings from industry leaders about the adverse impact of rising energy bills on their operations should serve as a reminder to the incoming Prime Minister that the recent surge in wholesale gas prices will affect more than just the …
COVID-19 rears its head again Virus cases have fallen back over the past few weeks as the large outbreak on Hainan island has come under control. But that masks a rapidly deteriorating situation nationwide, with 44 cities now undergoing outbreaks, …
New GDP forecasts GDP data released this week showed that growth surged from 4.1% y/y in Q1 to 13.5% y/y in Q2 (Q1 of FY22/23). But on our own seasonal-adjustment, that implied a gain of only 0.1% q/q. That seems improbably small given the strength of …
Jobs summit tweaks migration goalposts The headlines were dominated by the Jobs Summit this week, where the Labor government announced that it will lift the 2022/23 cap on the annual number of permanent migrants from the current 160,000 to 195,000. …
Egypt to let the pound fall more quickly Comments from officials suggest that the Central Bank of Egypt (CBE) is pressing forward with its shift to a more orthodox exchange rate policy that, coupled with the increased likelihood of an IMF deal , should …
1st September 2022
With this week’s flash PMIs from major economies signalling that demand is tailing off rapidly, the upcoming August trade data from Korea, due Thursday, will give a timely signal of how Asian exporters are faring. We had expected evidence of fading …
26th August 2022
In a hawkish Jackson Hole speech, Fed Chair Jerome Powell argued that “restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening …
Current account deficits and the pesos’ divergence Current account figures released this week go a long way to explaining the starkly different performance between the Mexican and the Chilean pesos. Data from Mexico showed that, while the current account …
There was some better news from the CFIB Business Barometer and new home sales data this week, although both still point to weak economic growth. Meanwhile, the fall in firms’ selling price expectations to a 10-month low in August suggests that core …
Another win for Angola’s ruling party President João Lourenço is on course to secure another term following this week’s elections in Angola. With the political backdrop little changed, we think that the economy will revert to its low growth path following …
What’s even more scary than today’s announcement that the Ofgem price cap will increase by 80% on 1 st October, from £1,971 to £3,549, is that the cap will leap even further early next year. Our wholesale gas price forecasts point to an increase to over …
Governments step up support as gas prices soar Europe’s gas crisis deepened this week, with gas and electricity prices surging further into the stratosphere and governments stepping up policy support and shoring up energy supplies ahead of winter. The …
Foreigners’ net purchases of Indian equities have surged to near record levels in recent weeks. On a one-month rolling basis, inflows have only been higher in US dollar terms on one occasion, in December 2020. (See Chart 1.) Chart 1: Foreigners’ Net …
Martin Flodén sets his stall out in advance Martin Flodén struck a hawkish note in a presentation in Stockholm on Wednesday, noting that inflation has been “quite a lot higher” over the summer than the Riksbank had expected and that it is clear the …
This week brought yet more doom and gloom for the euro-zone economy and from a now all-too-familiar source: wholesale energy prices. The announcement of additional maintenance for Nordstream 1 at the end of this month aggravated concerns about energy …
Lots of talk, not much action There has been a raft of policy announcements during the past week. Last Friday, officials unveiled a scheme to channel financing to developers. On Monday, the Loan Prime Rates were lowered. And on Wednesday, the State …
Nuclear restarts still in the balance The timely Tokyo CPI showed that inflation jumped from 2.5% to 2.9% in August. That was partly due to the fading drag from last year’s mobile phone tariff cuts, but another key driver was the 29% y/y surge in …
GDP growth is holding up The August S&P Global flash PMIs are consistent with our view that the euro-zone is entering recession. And with inflation set to hit 14.5% early next year, the UK economy will shrink before long, too. The composite PMI for the …
What does Egypt need to do to get an IMF deal? Egypt’s Prime Minister Mostafa Madbouly said earlier this week that talks with the IMF over a new deal were in their “final stages” and the hurdles to securing a deal are not particularly high. We have …
25th August 2022
Ruto wins, but political risks remain elevated Deputy President William Ruto was this week declared winner in Kenya's presidential election, but the result is being challenged and the threat of violence lingers. Even if that is avoided, Mr. Ruto will …
19th August 2022
The further rise in core inflation in July was largely due to a surge in travel services prices, much of which should be reversed after the summer. Nevertheless, that rise in core inflation, the continued strength of broader housing-related activity, …
Lula & the state banks: déjà vu Brazil’s presidential election campaign officially kicked off this week with heated barbs between the leading candidates. On the economic front, one thing that has stood out is front-runner Lula’s focus on the role of …
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 …
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 …
