Signs Omicron wave about to break The 1% m/m falls in both retail sales values and industrial production in December point to Japan’s post-Delta rebound having lost some momentum heading into 2022. As Omicron cases surged in many of Japan’s main trading …
4th February 2022
One of the more eye-catching elements of the Union Budget was the pledge that the RBI would introduce a Central Bank Digital Currency (CBDC) “starting 2022 and 23”. That would make the Reserve Bank a global front-runner. Many central banks are considering …
UAE: 2023 to be a taxing year for firms The UAE announced this week that it will introduce a corporation tax which will help to further diversify public revenues away from oil and may provide Dubai’s government with greater resources to step in if …
3rd February 2022
Nigeria’s fuel subsidies: Don’t stop me now The announcement this week by the Nigerian authorities to maintain fuel subsidies – instead of ending the scheme as planned – will limit inflation risks, but the budget deficit is set to come in wider than …
28th January 2022
Argentina & the IMF: Devil will be in the details The Argentine government’s agreement with the IMF for a new $44.5bn deal is a positive step to improve macroeconomic stability. But, at first glance, the deal seems to be based on rosy economic …
Powell fuels fears of Ratemaggedon The conventional wisdom is that Fed Chair Jerome Powell left the door open to more than four rate hikes this year in his post-FOMC press conference this week. To our minds that was a bit of a stretch. There is enormous …
Although the Bank of Canada kept policy unchanged this week, its signal that it intends to start quantitative tightening soon was more hawkish than most were expecting. In the press conference, Governor Tiff Macklem and the new Senior Deputy Governor, …
CBRT puts emphasis on “lira-isation” The upward revision to the Turkish central bank’s inflation forecast in its Q1 Inflation Report this week, from 11.8% y/y to 23.2% y/y for end-2022, was just a matter of catching up with reality. The lira has sunk 30% …
Prime Minister Boris Johnson is in a precarious position. With Sue Gray’s (delayed… again) report on ‘Partygate’ due to be published at some point in the next few weeks and the police now conducting a criminal investigation into the scandal, support for …
The raft of country-level Q4 GDP data published this morning point to the euro-zone eking out some marginal growth at the end of last year, with Germany contracting by 0.7% q/q. (See here and here .) Nor does the euro-zone appear to have made a strong …
Stage set for Riksbank mea culpa in February The 0.3% m/m increase in Sweden’s GDP Indicator in December, released this morning, left it a whopping 4.7% higher than its February 2020 level. (See Chart 1.) We will have to wait until the 28 th February for …
Korea learning to live with COVID-19 A successful vaccination campaign means that, despite a surge in COVID cases, Korea is sticking with its plans to reopen the economy. Chart 1: Daily New Cases of COVID-19 in Korea Source: JHU Korea recorded a record …
Profit margins reach record-high Amidst all the negative news about soaring input prices, supply shortages and production disruptions from Omicron-related staff quarantine, it’s easy to overlook the fact that Japanese firms are in better shape than ever. …
R&D spending: more is not always better China has made a strong start toward meeting the R&D targets in the 14 th Five Year-Plan (FYP), which are part of the country’s push to become a global leader in cutting-edge technologies. Data published this week …
Underlying inflation set to surpass 3% The 1.0% q/q rise in trimmed mean consumer prices in Q4 was the largest since 2008 and lifted the annual rate to 2.6%. That marked the first time since 2014 that the RBA’s preferred measure of underlying inflation …
Finance Ministry likely to bank recent fiscal gains For watchers of India’s economy, next week is one of the most significant of the year as Finance Minister Nirmala Sitharaman delivers the Union Budget for FY22/23 on Tuesday. Unusually, the fiscal …
Egyptian structural reform push resumes Further reports that Egypt’s government and military will sell stakes or wholly privatise companies this year provide hope that structural reforms will regain momentum, but the proof will be in the pudding. Planning …
27th January 2022
Whether the Bank of Canada raises interest rates next week or not, the more important question now is how high will rates eventually rise? Our view is that current market pricing is too aggressive. The Bank’s quarterly business and consumer surveys, which …
21st January 2022
Ukraine’s markets in for a tough few months A positive reaction to today’s talks between the US and Russia may have brought some relief but, even if a renewed conflict doesn’t materialise, local markets are likely to face a difficult few months. Tensions …
A raft of recent economic developments have shaken up our near-term views on monetary policy in South Africa, and we now expect a 25bp interest rate hike at next week’s MPC meeting. However, our forecasts for the next 12-18 months are still more dovish …
We expect the Fed to deliver some heavy hints at next week’s FOMC that it is planning an interest rate hike in March. With the Omicron wave now past its peak nationally, there is little to hold the Fed back, particularly if next week brings news of a …
The key event of this week (for us at least) was the release of our European Economic Outlook setting out our forecasts for 2022 and 2023. We think the euro-zone will come through the Omicron wave of coronavirus relatively well but think growth will be …
Denmark achieves a geranium “greenium” Denmark joined the growing list of countries to offer a green sovereign bond, on Wednesday. The country is far from a trailblazer in the area, with the Netherlands, Germany, and the UK all amongst those to have …
Thai tourism to support the baht Better times lie head for Thailand’s tourism industry after the government this week announced it would resume its quarantine-free travel scheme from 1 st February. The scheme was suspended late last year due to fears …
Chile: Boric appoints ‘Super Mario’ Marcel President-elect Boric’s announcement today that (now outgoing) Governor of the Central Bank, Mario Marcel, will be Chile’s next Finance Minister is a clear signal that his government will pursue prudent fiscal …
While Boris Johnson has survived another week without a formal challenge on his leadership, next week’s publication of the (delayed) report on “Partygate” by Sue Gray may well determine his fate one way or the other. We highlighted in last week’s UK …
Sharp but short Omicron hit With Omicron cases rocketing to record highs, quasi-state-of-emergency declarations are coming thick and fast. Such measures began in 13 more prefectures today – Tokyo among them – and from early next week restrictions are set …
Policy easing is putting a floor beneath home sales Official efforts to shore up housing demand continued this week, with a 5bp cut to the 5-year Loan Prime Rate (LPR), the benchmark used by banks to price mortgages. A reduction of this size may seem …
Virus cases peaking in parts of India Daily COVID-19 cases in India are still rising sharply and are now around an eight-month high. But encouraging signs are emerging in the state-level data. New infections have stabilised in Maharashtra, and they have …
Labour market tightest since 2008 The 64,800 rise in Australian employment in December meant that the unemployment rate fell from 4.6% to 4.2%, the lowest rate since 2008. RBA Governor Lowe noted last year that if the economic data exceeded the Bank’s …
Our new oil price forecasts The price of oil has risen sharply since the turn of the year and, while we still expect it to fall back by year-end, recent supply issues suggest that it will not decrease by as much as we had expected. As a result, the door …
20th January 2022
SA: ANC leadership electioneering kicking off Leftist factions of South Africa’s ruling ANC are already gearing up to take on President Cyril Ramaphosa in December’s leadership election and this is likely to push fiscal policy in a looser direction, …
14th January 2022
Brazil: Early clues on Lula’s policy stance There have been some recent clues that Brazil’s former left-wing president Lula, the current favourite to win October’s election, may not be as radical as some fear. But there is still a clear risk that he would …
The various reports this week of intense labour shortages and the slump in the Ivey PMI in December suggest that the Omicron variant is causing widespread economic disruption. The Ivey all-economy PMI plunged by 16 points to 45.0 in December, its lowest …
The continued surge in Omicron infections suggests that the disappointing December activity data will be followed by further weakness in January, but there are no signs that it will delay the Fed’s accelerating plans to tighten policy. This week’s Senate …
“Dynamic clearing” hasn’t failed yet It is too soon to conclude – as many seem to have – that Omicron will swamp China’s efforts to suppress COVID. Those efforts are far more forceful than anyone else has tried. The country’s first …
Russia-Ukraine tensions hit a new crisis point A tense week of negotiations between Russia, the US and NATO have ended with what now seems to be a more serious ratcheting up in tensions that is likely to weigh on local financial markets for some time. The …
It is striking how quickly the political momentum has shifted. This time last week, Prime Minister Boris Johnson was probably feeling smug about his decision not to ramp up the COVID-19 restrictions in the wake of the Omicron wave. This week, he has faced …
Employment back above pre-crisis levels At face value, the Korean labour market figures for December (published earlier this week) paint an encouraging picture, with total employment rising to a record high. (See Chart 1.) Chart 1: Korea Total Employment …
Ha det bra, Governor Olsen You don’t have to be Sherlock Holmes to deduce that next Thursday’s announcement from the Norges Bank will be a non-event in terms of policy action. Having raised interest rates to +0.50% at the last meeting, in December , we …
Economy close to standstill in Q4 The latest activity data for the final quarter of last year are a mixed bag. The industrial production data for November published this week suggest that manufacturing output may have declined in the fourth quarter. (See …
Tokyo readies restrictions We think that Japan’s economy rebounded by 2.4% q/q last quarter and entered Q1 on a strong footing. The Economy Watchers Survey conducted in the second half of December rose to a 16-year high, while the Reuters …
Halfway to the peak? India’s third virus wave is still building rapidly. New COVID-19 cases have doubled over the past week, with the Omicron strain likely driving the surge. The good news is that the impact on healthcare remains manageable. For example, …
Economy running hot before Omicron The economic data released this week corroborates our view that GDP surpassed its pre-lockdown level in Q4. For one thing, retail sales values jumped by 7.3% m/m in November and were 6% above their previous peak a year …
Window for Gulf fiscal loosening to close Oil prices have risen to near pre-Omicron highs this week, but we think that is likely to be short lived. As prices drop back the window for governments in the Gulf to loosen fiscal policy will shut. Brent crude …
13th January 2022
SA’s Omicron-experience bodes well for SSA Evidence is growing that South Africa’s latest virus outbreak, driven by the Omicron variant, has been brief and not as economically damaging as previous waves. This should bode well for other economies in …
7th January 2022
Omicron taking hold in Latin America New virus cases have jumped almost five-fold in Latin America over the past two weeks as the contagious Omicron variant is taking hold, but we suspect that the economic fallout will be limited. Caseloads are …
The Omicron wave will be characterised more by heightened absenteeism from work than previous waves. This raises the risk that the hit to activity will be larger than current restrictions alone might imply. Canada’s two most populous provinces, Ontario …
Omicron tsunami shows few signs of peaking The surge in Omicron infections has quickly developed into a full-blown tsunami, with the seven-day national average now close to 600,000 – three times higher than the previous peak last winter. (See Chart 1.) …
With the next few months set to bring higher inflation, utility prices and taxes, the pressure on household finances is mounting. That’s prompted headlines about the looming cost of living crisis. In our key calls Update , we outlined the upward revision …
