Foreign demand for CGBs is growing FTSE Russell yesterday announced that it will include China in its World Government Bond Index (WGBI). This is an important milestone and means onshore Chinese Government Bonds (CGBs) are now included in all major bond …
25th September 2020
Back to normal? The 4.1% m/m fall in private consumption in July announced by the Cabinet Office this week suggests that the second wave of coronavirus infections prompted consumers to curtail spending. But with that wave now over and mobility surging …
Better than expected in Victoria Recent data show that the draconian lockdown in Victoria that forced all non-essential business to shut at the start of August had a much smaller impact on activity than we had anticipated. We learnt last week that hours …
Labour reform could boost longer term prospects Three labour reform bills ostensibly tabled in response to the coronavirus crisis were approved in both houses of parliament this week. The highlight of these new laws is that firms now only need to obtain …
Saudi: low oil prices limit scope for policy support Saudi policymakers are apparently “assessing all the options” in a bid to boost the Kingdom’s economic recovery but, with oil prices still low, the scope to row back on fiscal austerity plans is …
24th September 2020
Drop in lira unlikely to prompt outright rate hikes The Turkish lira has come under additional pressure this week as the risk of EU sanctions has continued to rise. The central bank has tightened monetary conditions further, but an outright hike to policy …
18th September 2020
IMF increases lending to Angola The approval of Angola’s IMF programme expansion by $765mn this week will go some way towards easing balance of payments pressures, but further debt restructuring is still not out of the question. In addition to disbursing …
Argentina clamping down on dollars Argentina’s central bank has tightened capital restrictions (“ el cepo ”) to try to regain control over the peso. The strategy is just a short-term fix, though, which may come back to bite in a few years’ time. One of …
Recent calls for the government to commit to a new “fiscal anchor” means next week’s throne speech might be a bit less exciting than we first thought, but it still seems likely that the government will signal some ambitious new spending plans ahead. MPs …
Fed underwhelms with new forward guidance After seeming to take a bold new step when it recently announced it would be adopting a flexible average inflation target, the Fed risked disappointing markets this week when it failed to back that up with much …
Investment holding back the recovery It seems that consumers have largely forgotten about the pandemic already. Retail sales are now 4.0% above their pre-pandemic level (see here ) and the mini-boom in the housing market will continue to support …
“No change” three ways on the policy menu Central bankers will take centre stage next week, with the Riksbank kicking things off on Tuesday, and the SNB and the Norges Bank both set to make scheduled policy announcements within 30 minutes of each other on …
A key assumption in our forecasts has been that there will not be a repeat of the spring’s strict nationwide lockdowns that would cause the recovery in economic activity to go into reverse. That assumption is looking a bit shakier in light of headlines …
Peso to hold up in months ahead The Philippine peso has been the best performing currency in Emerging Asia so far this year (see Chart 1.) and is now at its highest level against the US dollar since late 2016. We expect the peso to strengthen further over …
First new Prime Minister since 2012 Despite its similarity to PM Abe’s cabinet – which faced mounting disapproval – public support for PM Suga’s new cabinet has surged. Suga Yoshihide became PM on Wednesday having won a landslide victory in the LDP …
China’s economy is largely back to normal It’s now a consensus view that China’s near-term economic prospects are bright, especially relative to elsewhere. But even amid upbeat expectations, the August activity and spending data published this week still …
NZ economy should rebound quickly Production GDP in New Zealand fell by 12.2% q/q in Q2 due to the strict lockdown which restricted most activity in April. That compares to the smaller 7.0% fall in GDP in Australia. That makes sense given that the initial …
Strength in car sales won’t last Data released this week show that new passenger vehicle sales jumped by 14% y/y in August, the first positive rate of growth since the nationwide lockdown and the strongest monthly number since 2018. (See Chart 1.) That …
OPEC meets as clouds gather over the oil market The OPEC ministerial meeting that takes place today is unlikely to result in any immediate policy changes, but the cartel will probably acknowledge the worsening demand outlook and may signal that it stands …
17th September 2020
A way out of Brazil’s fiscal straitjacket? Brazil’s congress will reportedly receive a plan for the Federative Pact reform next week, which could ease concerns about the public finances. The essence of the Pact is that it will shift spending …
11th September 2020
Russia’s services sector cushions the fall in Q2 GDP The production breakdown of Russian GDP for Q2 showed that the economy’s sectoral structure helped to cushion the fall in output from the pandemic. Rosstat revised its estimate for the fall in GDP from …
Following the Bank of Canada’s decision to keep interest rates unchanged at 0.25% this week, Governor Tiff Macklem’s speech on Thursday was another sign that the Bank is heading toward including some measure of inequality in its monetary policy framework. …
The July Job Opening and Labour Turnover Survey (JOLTS) released this week suggests the labour market is in much better health than the downbeat jobless claims figures imply. The JOLTS report did confirm the sharp slowdown in the pace of payroll growth in …
A 6% fall in the pound from $1.35 to $1.28, questions over the legality of the government’s actions and condemnation from the EU are all sure signs that the summer is over, a Brexit deadline is looming and the possibility of the transition period ending …
Seeing the good, the bad and the ugly in SA data Figures released this week provided little cause for optimism about South Africa’s prospects for a strong rebound in activity. The slew of terrible data might, at least, prompt policymakers to lend more …
Sweden’s virus approach may be bearing fruit Interpreting Covid data is of course part science, part art, but the fact that confirmed virus cases per capita in Sweden fell below those in its Nordic peers in early-September appears to vindicate Sweden’s …
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 …
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 …
