China’s surplus is huge in global terms One extraordinary development of 2020 has been the impact of the biggest global economic slump in memory on the world’s biggest exporter. When much of the world went into lockdown, demand for masks, medical …
11th September 2020
Exaggerated worries about the euro After more than two years when the exchange rate barely featured in ECB policy debates, the euro has been in the limelight this week. Prior to the ECB policy meeting, there was a growing expectation that the Bank would …
Second wave fears ease The recent jump in coronavirus cases in Korea, Hong Kong and Vietnam had a negative impact on each economy, with hospitality sectors bearing the brunt of the damage. But with infection numbers now falling again and restrictions …
Outlook for business investment not great The second estimate of Q2 GDP released this week was broadly in line with the preliminary estimate. However, the Cabinet Office now estimates that business investment plunged by 4.7% q/q instead of the previous …
Melbourne lockdown extended Victorian Premier Daniel Andrews confirmed this week that the state would remain in the current lockdown until at least the end of September, in line with our own expectations. (See here .) But the path out of lockdown he …
On course for most cases in the world India this week overtook Brazil to become the second-worst affected country by the COVID-19 pandemic. Total cases now stand at almost 4.5m, and it is only a matter of time before India overtakes the US. After all, …
Gulf financing sources widen amid low oil prices The fall in the price of Brent crude oil this week has put further pressure on fiscal positions across the Gulf, with most likely to run large budget deficits over the second half of the year. At the time …
10th September 2020
Ethiopia nudged to progress on Nile dam talks The United States move to partially suspend financial aid to Ethiopia due to the country’s dispute with Sudan and Egypt over the Grand Ethiopian Renaissance Dam (GERD) this week adds to uncertainty surrounding …
4th September 2020
Brazil & Mexico’s PMIs diverge The manufacturing PMIs for August published this week were surprising, both for the strength they implied in Brazil’s economy and the weakness in Mexico’s. But in both cases, the surveys are painting an exaggerated picture …
Despite further signs of strength in China’s manufacturing sector, the prices of most industrial commodities – as well as gold and silver – fell this week owing in large part to an appreciation of the US dollar . However, the ongoing fiscal stimulus in …
In the wake of the Fed’s new policy strategy, a range of officials have used speeches in recent days to play down expectations that a major loosening in policy is imminent. While we still expect the Fed to strengthen its forward guidance and step up the …
This week brought more news that the Canadian economy rebounded strongly as the lockdowns were eased over the summer. But the slowdown in employment growth in August is an early warning that the pace of recovery may be losing some momentum, at a time when …
Indigestion from the success of the government’s “Eat Out to Help Out” scheme seems to have struck in Westminster. The scheme boosted the number of diners in restaurants by over 200% y/y on the last day of August and by more than 20% y/y over the month as …
Regulatory headwinds in property are intensifying China’s property sector rebounded rapidly from the COVID-19 downturn. In fact, sales and new property starts are now growing faster than they were at the end of last year. (See Chart 1.) And property …
Recovery losing pace and inflation falling Data published this week add to the evidence that the economic recovery is losing momentum, particularly in the periphery. Online retail sales fell in July for the second consecutive month, but this time this …
Riksbank still biding its time Policymakers at the Riksbank won’t admit it, but they will be feeling pretty comfortable with their position, all things considered. After all, the further increase in the services PMI in August suggests that activity in the …
Ruble vulnerable amid sanctions threat The ratcheting up in geopolitical tensions in Russia this week amid concerns about the use of a chemical nerve agent is a warning sign for the ruble and further falls are likely to lie in store over the coming …
Slow recovery in the Philippines A long and strict lockdown meant the Philippines suffered one of the biggest falls in GDP in the region in the second quarter. (See here .) The most recent data suggest that it is also experiencing one of the slowest …
Suga favouring more monetary easing Chief Cabinet Secretary Yoshihide Suga has secured the backing of a majority of LDP lawmakers and is widely expected to win the party’s leadership election on 14 th September. That means he would become Japan’s next …
Woeful Q2 to be followed by weak recovery GDP data released this week showed that the economy shrank by almost a quarter in Q2 (Q1 of FY20/21). As we highlighted in our Data Response , that was one of the most severe contractions anywhere in the world and …
Pandemic decimating some services sectors The 7.0% q/q plunge in Q2 GDP was larger than we had anticipated and meant that Australia entered its first recession in 29 years. And while we’ve pencilled in a 0.5% q/q rise in Q3, the risks to that forecast are …
Lebanon and Tunisia not out of the woods yet Developments in Tunisia and Lebanon this week have raised hopes that policymakers will soon tackle their respective economic problems, but there are still plenty of reasons to remain cautious. Tunisia’s new …
3rd September 2020
Argentina & the IMF: Take 22… Barring any unexpected hiccups, $66.2bn of Argentina’s international sovereign bonds will be restructured next Friday. As will $41.7bn of local-law FX bonds. Now the government wants to tackle the debts owed to its historic …
28th August 2020
After a brief hiatus for their summer break, various Bank of Canada Governing Council members spoke again this week. Given their communications provided few hints about the direction of policy, arguably the bigger news was the announcement from the US …
Nigeria’s foreign currency woes Fresh measures by Nigeria’s central bank to clamp down on foreign currency transactions underline the severe pressure on the naira. While the currency will probably be allowed to weaken, further restrictions are likely to …
The confirmation this week that the Fed is adopting “a flexible form of average inflation targeting” indicates that further monetary stimulus is coming soon. But with long-term interest rates already so low, that’s unlikely to have much bearing on the …
Turkish lira still vulnerable as EU tensions escalate The Turkish central bank’s tightening of monetary conditions has helped to stabilise the lira but the further ratcheting up of tensions with the EU mean that the risks to the currency lie to the …
Euro-zone governments have been understandably keen to avoid repeating the blanket lockdowns of earlier this year in response to the resurgence in coronavirus cases over the past month or so. Low hospitalisation rates have allowed policymakers to focus on …
Nordics top of the league in H1… The Nordic economies emerged at the top of the economic league in Europe in H1, with comparatively small declines in output. (See here .) The second reading of Swedish Q2 GDP, released this morning, shows that the …
After the 8.7% m/m gain in GDP in June, another surge as the economy re-opened in July is already baked in the cake, perhaps of 7.5% m/m according to our CE BICS Indicator. (See here .) But while this rise sounds impressive, GDP would still be 11% below …
Low oil prices are boosting corporate profits… Chinese firms are benefiting from a favourable combination of strong demand at home but weak global demand for energy and low oil prices. Data published yesterday showed that profit growth among industrial …
LDP to remain in charge After racking up a record number of consecutive days as Prime Minister on Monday, Mr Abe announced today that he will step down due to health concerns. A chronic bowel condition already forced Abe to cut short his first term as PM …
Consumption & investment holding up Recent data suggest that activity has held up better than many had anticipated. For one thing, retail sales values rose by another 3.3% m/m in July, leaving them an astonishing 11% above pre-virus levels. And in …
QE is edging closer The Bank of Korea (BoK) surprised no one by keeping rates on hold at 0.5% this week. (See here .) Less expected was Governor Lee’s assertion that the Bank has “room for a rate cut”. We’ve now pencilled in a further 25bp cut to 0.25% in …
RBI OMOs a sign of things to come The rise in government bond yields over recent weeks appears to have jolted the RBI into action. The central bank this week held an open market operation (OMO) in which it purchased long-dated bonds with the aim of …
Lebanon in limbo as crisis deepens Nearly three weeks after the Lebanese government resigned following the Beirut blast there has still been no progress in forming a new one as the country falls further into the depths of its crisis. Former Prime Minister …
27th August 2020
Nigeria’s public finances: walking a tightrope Nigerian government spending proposals for 2021, floated this week, shine a light on the bind the authorities are in. In preparation for next year’s budget, officials circulated a plan that would increase …
21st August 2020
It has been a busy week for the government, with the resignation of Finance Minister Bill Morneau, the proroguing of Parliament until 23 rd September, and the announcement of extended financial aid for households by new Finance Minister Chrystia Freeland. …
Industrial metals prices pushed higher this week, while the prices of oil and gold were broadly flat . For now, the robust recovery in Chinese demand for metal still seems to be enough to offset weaker demand elsewhere. That said, the latest PMI data …
Brazil at a fork in the road Fears that Brazil’s economy minister, Paulo Guedes (the linchpin of the government’s reform agenda), might resign have flared up again this week, and we think that there is now a political risk premium of around 20bp on …
Housing on fire This week brought more evidence that the housing market has caught fire – with record low mortgage rates driving a V-shaped recovery despite high unemployment and an elevated mortgage delinquency rate. Housing starts rebounded to nearly …
The surprise rise in CPI inflation, from +0.6% in June to +1.0% in July, highlights that the effects of the pandemic will not only be deflationary. While some of the increase was due to recovering oil and fuel prices, core inflation also rose. That was …
Reasons for caution about Turkey’s gas discovery Turkey’s discovery of gas in the Black Sea will provide some boost to the country’s external position, but it might be quickly eroded. President Erdogan unveiled the discovery on Friday of a field …
Are virus ripples turning into waves? The upward trend in daily virus infections in the euro-zone is partly due to increased testing, but the proportion of tests coming back positive is also on the rise. It seems likely that there will be further …
“Two-speed” Swiss industry finds reverse gear The belated release of Q2 industrial production data from Switzerland on Thursday laid bare the stark divergence in fortunes within the sector. Total manufacturing output dropped by 8.3% q/q in Q2, which was …
Banks hit with co-pay on stimulus bill When the Global Financial Crisis struck, Chinese policymakers leant heavily on the state-owned banks to shore up economic activity. While the 2009 RMB4trn fiscal stimulus package receives much of the credit, the …
Small dividend makes Fin Min’s job harder The RBI’s annual dividend transfer took place this week and was met with far less fanfare compared to last year. That is in large part because the size of the transfer has reverted to more normal levels after a …
Net trade to provide large boost to Q3 GDP The 7.8% q/q plunge in GDP in Q2 wiped out all the gains since PM Abe returned to power in 2012, but timelier data suggest that a strong rebound is now underway. The 7.4% m/m rise in export volumes in July was …
Lowering our GDP forecasts for Korea A growing second wave of infections in Korea is likely to slow the economic recovery. Korea reported 324 new cases a day on Friday, the highest since early March. (See Chart 1.) Newly confirmed infections have now been …
Australian wine in China’s firing line China has launched an anti-dumping investigation into the Australian wine industry which could impose costly tariffs on Australian wine. This is not the first incident of trade tension with China this year. In May …
