GDP to contract, but recession unlikely As new infections in Sydney have hit fresh highs this week, the lockdown there has been extended until end-August. The blanket ban on construction has been lifted, but construction will remain banned in hotspots. …
30th July 2021
Disruption a key concern for global supply chains Industry in Malaysia and Vietnam was already feeling a pinch from restrictions and worker shortages brought about by a jump in COVID-19 cases, but the situation is deteriorating fast. Daily new cases in …
A bankruptcy code to aid the COVID recovery The amendments to the Insolvency and Bankruptcy Code (IBC) that were approved in the Lok Sabha (lower house of parliament) this week would, if passed in the Rajya Sabha, provide much-needed support to India’s …
The latest on Tunisia’s political turmoil Tunisia’s President Kais Saied’s power grab on Sunday has been followed by further moves that will reinforce concerns about the future of democracy in the country. Whichever way events unfold in Tunisia, the …
29th July 2021
Delta variant unlikely to derail the recovery Concerns have grown over the past week about the spread of the Delta variant of COVID-19 but high vaccine coverage across much of the region has reduced the risk that policymakers will be forced to reimpose …
23rd July 2021
As the recent decline in bond yields have been most pronounced at the long end of the curve, it is unlikely to trigger much of a renewed fall in five-year mortgages rates. We expect mortgage rates to increase in the coming years, which will contribute to …
Mexico: Possible fallout from the third virus wave The third virus wave currently underway in Mexico, driven by the contagious Delta variant, will probably weigh on activity this quarter. But, for now, we don’t think that it will derail the economic …
Vaccines and variants in Sub-Saharan Africa A boost to vaccine supplies in Sub-Saharan Africa is likely to breathe some fresh air into struggling vaccine campaigns across the region at a time when third waves are sweeping across key economies. This week …
Fiscal policy still plagued by uncertainty Although the $600bn bipartisan infrastructure deal fell at the first hurdle in the Senate this week, centrist Republican Senators indicated that they would be willing to provide the support to overcome the threat …
The ECB followed up on its new strategy this week by raising the bar for future interest rate hikes. (See here .) The key change is that the Governing Council now says it will leave policy rates at current rates or lower until it sees inflation reaching …
US currency deal reduces risks for Vietnam The near-term outlook in Vietnam has taken a turn for the worse in recent weeks, with a surge in virus cases and the introduction of restrictions leading to a fall in economic activity. However, there has also …
With a whopping 1.1 million people having been asked by the NHS App or Test & Trace system to self-isolate in the week ending 14 th July, the “pingdemic” has weakened the near-term outlook for activity. (See Chart 1.) After all, the result of some workers …
Next year’s games will be better for Team N&S While the Swedish women’s football team humbled the USA in the first game of their Olympic campaign this week, Switzerland and the Nordic countries don’t tend to excel in the summer games. Indeed, as shown in …
From bad to worse Evergrande is being pummelled again. Over the weekend it came to light that one of the developer’s deposit accounts had been frozen by court order in a dispute with Guangfa Bank. Then on Monday, Shaoyang city authorities revealed they …
Economic hit from fifth wave to be small With export volumes rising to a record high in June and machinery orders and capital goods shipments data pointing to a strong rebound in business investment in Q2, the economy may have just about avoided a …
RBA to delay tapering until November With New South Wales today declaring a “national emergency” as virus cases continue to rise, we now expect the Reserve Bank of Australia to reverse the tapering of its bond purchases and leave them unchanged at least …
Activity already close to pre-virus levels One key lesson from the past 18 months is that economies can rebound quickly once virus waves have subsided. Even with this mind, the pace at which activity in India has rebounded from its second wave has been …
Concerns about the Delta variant of COVID-19 have grown over the past week but high vaccine coverage in the Gulf means that policymakers are unlikely to resort to harsh containment measures. Other parts of the region are more susceptible, adding to the …
22nd July 2021
There are signs that the worst of the violence and unrest that has gripped South Africa this week may be over. Any hit to economic activity is unlikely to be long-lasting but the risk that the government’s austerity plans are watered down has increased. …
16th July 2021
Brazil: hiccups on the fiscal front Proposed changes to Brazil’s income tax setup add to the view that fiscal risks will resurface. The plans presented this week aim to cut corporate tax but offset that with an end to exemptions and the introduction of a …
Israel’s virus wave could be a warning for others The experience of Israel in recent weeks serves as a reminder that vaccine campaigns across Emerging Europe still have some way to go and that we are likely to have to learn to live with COVID long term. …
The Bank of Canada expects GDP to move above its pre-pandemic trend in 2023 but, given the potential for oil prices and residential investment to decline, we think its forecasts will prove too optimistic. Alongside its decision to keep the policy rate …
The Democrats’ $3.5trn budget proposal is only the first step in what could be a protracted negotiation to a final bill, which will be roughly fiscally neutral. Meanwhile, another dovish showing from Fed Chair Jerome Powell this week hasn’t prevented …
Earlier today we published our European Economic Outlook , in which we revised up our euro-zone GDP growth estimates this year and next, to an above-consensus 5.0% and 4.5% respectively. The rebound will be faster in the core countries than in the …
Cyclically healthy, structurally ailing China’s post-lockdown recovery has often been called patchy, with household spending still weak. We’ve never been entirely comfortable with that characterisation. Retail spending on goods has been back near the …
You guessed it: no change at the SNB The Swiss National Bank is nothing if not consistent. It has left interest rates unchanged since 2015 and is not shy about using the “copy and paste” function in its press releases. So it seems only natural that …
In response to the jump in CPI inflation from 2.1% in May to 2.5% in June (see here ) and yet more signs that the labour market is bouncing back (see here ), two members of the Monetary Policy Committee (MPC) this week indicated that policy will need to …
Virus cases surge in South East Asia The virus situation across South East Asia has gone from bad to worse over the past couple of weeks (see Chart 1), with Indonesia, Thailand, Malaysia and Vietnam all reporting a record high number of daily cases. The …
RBNZ will hike rates next month We forecast at the end of last year that the RBNZ would end its asset purchase scheme by the middle of this year, one year ahead of schedule. While we had expected the Bank to wait until August, the Bank announced this week …
Fifth wave shouldn’t delay vaccine bounce While a delta-driven fifth wave has begun, we doubt restrictions will have be tightened much further and still expect them to be relaxed in late-Q3 once most adults are vaccinated. A state of emergency began in …
Bad bank will help to improve balance sheets The contours of India’s long-awaited National Asset Resconstruction Company (NARCL) – or “bad bank” – have emerged over the past couple of weeks. In recent decades, bad banks have been used to clean up …
Saudi-UAE oil spat seemingly resolved Reports suggest that Saudi Arabia and the UAE have reached an agreement over oil output quotas, which will boost economic recoveries across the Gulf. In principle, the pair have agreed to the Saudi-Russia proposal of …
15th July 2021
Banxico minutes: surprises and hints of more hikes The minutes to Banxico’s June 24 th meeting , where it delivered a surprise 25bp hike, were fairly hawkish and reaffirm our initial view that more tightening is in the pipeline. We now expect a further …
9th July 2021
Tech crackdown goes to New York… Decoupling has entered a new phase over the past year. Where China previously was trying to temper US efforts to decouple, in key areas it now appears to want the same. The Five-Year Plan’s push for self-sufficiency in …
The local real estate board data suggest that home sales fell further in June but, with new listings declining as well, house prices look set to keep rising. The data released this week showed that home sales fell by another 9% m/m in Toronto in June, …
The drop back in Treasury yields has accelerated over the past few weeks, as persistent supply shortages and the spread of new coronavirus variants have raised doubts about the pace of real economic growth in the second half of this year and beyond. We …
Loose for (slightly) longer The ECB’s new symmetric 2% inflation target, with some tolerance for overshooting, is not as radical as it could have been, and does not grant the Bank as much flexibility as the Fed. But it is an important change that means …
SNB policy tied to the ECB’s The adoption of a 2% inflation target by the ECB this week, and the announcement that the Bank will allow inflation to overshoot if needed, will not have been a he surprise to policymakers in Switzerland and the Nordics. …
Supply shortages were once again evident in the final PMIs released this week. June’s manufacturing PMI showed supplier delivery times lengthened still further and the measures of prices paid by firms rose to their highest levels since the surveys began …
South Africa’s austerity plans on a slippery path? South Africa’s government is giving up further ground in wage negotiations with trade unions, raising the threat that the austerity plans unravel. A three-year public sector wage freeze is at the heart of …
MNB to stay hawkish for now The surprisingly large rise in Hungarian inflation to 5.3% y/y in June – its highest rate in almost nine years – suggests that the risks to our interest rate forecast are skewed to the upside. The central bank (MNB) took a …
Inflation won’t threaten monetary policy outlook The yield on India’s ten-year government bond this week jumped to its highest since the start of April. (See Chart 1.) Overnight index swap rates have also spiked since mid-June. Taken together, they point …
Singapore rebounding as restrictions are lifted The government in Singapore is starting to ease restrictions, and the success of the country’s vaccination programme will hopefully allow a rapid return to normality. This should set the stage for a decent …
RBA starts to taper RBA Governor Phillip Lowe has had a hectic week, with two speeches and the RBA’s July Policy decision. While the Governor reiterated that the RBA still believes policy support is likely to be needed for a long time, the stance of …
There are signs that price pressures continue to strengthen. Producer prices of consumer goods are rising at a similar pace as they did at the peak in 2013 even though the yen has weakened far less sharply than it did then. The June manufacturing PMI …
OPEC+ fallout highlights rising Saudi-UAE tensions The failure of OPEC+ to reach an agreement over new output quotas has raised the risk that the deal collapses and the Gulf states ramp up production. This would mechanically lift GDP growth this year and …
8th July 2021
CBRT unlikely to win the war with dollarisation Turkey’s central bank (CBRT) took steps this week to tackle deposit dollarisation in the banking sector, but these efforts will fail to make headway in the absence of a stronger commitment to rein in high …
2nd July 2021
Colombia downgrade may prompt earlier hikes As we warned would happen , Colombia is now a ‘fallen angel’. After mass protests against austerity led the government to dilute its fiscal reform plans, yesterday Fitch followed S&P by downgrading Colombia’s …
We aren’t convinced that it will mark the start of a sustained acceleration, but the stronger gain in June payrolls will embolden those Fed officials calling for an earlier end to the Fed’s asset purchases. The 850,000 rise in non-farm payrolls in June …
The upward revision in March and smaller-than-expected fall in April mean that GDP is now on track to surpass its pre-pandemic level in July, a couple of months earlier than we previously thought. This raises the chance that the Bank of Canada will …
