Brazil: reformists losing hope A growing dispute over the direction of fiscal policy in Brazil threatens to derail the reform agenda and worsen the country’s public debt problem. Two secretaries in the Economy Ministry resigned this week, reportedly due …
14th August 2020
The data this week imply that the recovery in construction is ahead of that in manufacturing, which is partly thanks to the swift rebound in home sales. Housing starts soared to a three-year high of 246,000 annualized in July, from 212,000, which was a …
A week later, it is still unclear whether President Donald Trump’s executive orders on unemployment benefits and payroll taxes will provide any meaningful fiscal stimulus during the second half of this year. With congressional talks deadlocked, the odds …
CBRT does enough, for now Turkey’s central bank has acted swiftly over the past week to tighten monetary conditions and comments from officials suggest that the authorities are shifting away from directly intervening to defend the lira. The lira’s recent …
Rapid rebound in Malaysia The collapse in Malaysian GDP in the second quarter that was reported earlier today generated all the headlines, but what was more revealing about the GDP release is how quickly the economy is bouncing back. The economy …
Denmark’s lockdown pays off … According to the GDP indicator released on Friday, the Danish economy contracted by 7.4% q/q in Q2, broadly in line with our forecast. While this was its biggest decline since data began in the 1990s, it was a far cry from …
Two-speed recovery This week saw more evidence of the extent of the rebound as euro-zone industrial output rose by 9.1% in June. However, this left it 11.4% below its pre-coronavirus level in February – a situation which was similar in all the major …
The overwhelming bulk of the pain from the huge 20.4% q/q fall in real GDP in Q2 (which hides the bigger peak to trough fall of 25.6% between February and April) has so far been borne by the government and businesses rather than by households. But that is …
SA: drop in virus cases no silver bullet for economy New coronavirus cases in South Africa appear to be dropping off in a sign that the authorities are managing to curb the outbreak but, even if this leads to a further easing of containment measures, the …
RBI measures ease shadow banking strains Severe strains in the shadow banking sector that were amplified during initial stages of the coronavirus crisis are showing signs of easing. Support measures from the RBI including hefty cuts to policy rates, a …
Is the second wave breaking? While it’s too early to jump to any firm conclusions, the slowing spread of the virus over the past week lends support to our view that the economy will be able to rebound strongly in the second half of the year. But with the …
Demand for trucks rising at fastest pace since 2010 Data published this week showed that vehicle sales expanded 16.4% y/y in July, the fastest pace in over three years. Most of the focus has been on the strength of passenger car sales, which is …
Falls in employment ahead Official labour market statistics for July showed Australian employment rose a further 0.9% m/m to be up 2.8% from its trough in May. Even so, the 0.6ppt rise in the participation rate means that the unemployment rate edged up to …
Lebanon’s investors should ready for larger losses The resignation of Lebanon’s government is unlikely to result in the political change that protestors are demanding and, with debt restructuring negotiations on hold, bondholders will probably have to …
13th August 2020
The labour market recovery moved ahead of that in the US in July, but we doubt this means the Canadian economy will outperform in the longer-term. The Labour Force Survey showed a further 419,000 increase in employment in July, which means 55% of the …
7th August 2020
Upbeat manufacturing data from the US and China bolstered risk appetite this week, helping the prices of industrial commodities record another strong week . However, precious metals prices also did well, as further declines in real interest rates in the …
Argentina’s restructuring: more challenges ahead After months of back and forth, Argentina’s government and major bondholders (finally) reached a deal to restructure $65bn of international sovereign bonds. But, as we argued was likely , this agreement …
The incoming data this week were almost universally stronger than expected, with even July’s non-farm payroll figures coming in above consensus. With the number of new daily coronavirus infections beginning to abate, we expect further improvement in the …
Services activity takes a hit, despite no lockdown Given the wider interest in how Sweden’s economy performed under its light-touch lockdown, its preliminary estimate of Q2 GDP growth, released on Wednesday, was perhaps watched more closely-than usual. …
Interest rates lower for longer The Monetary Policy Committee (MPC) could have saved itself some time and just read our UK Economics Focus , published on 4 th June, or our UK Economics Update , published 14 th May, both of which came to much the same …
Nigeria: ShopRite takes stage right The announcement this week by South Africa-based food retailer ShopRite that it will exit the Nigerian market reinforces concerns about the country’s increasingly inhospitable business environment. While the coronavirus …
CBRT unlikely to satisfy markets The sharp fall in the Turkish lira this week appears to be pushing the central bank (CBRT) towards monetary tightening. But we’re not convinced that it will do enough to placate financial markets. Towards the end of July …
Taking stock of the latest coronavirus numbers With worries about a major second coronavirus wave in Europe intensifying this week, it is worth taking a step back and putting the current cases numbers in a bit of context. Three trends stand out. First, …
More containment measures, but still a light touch Over the past few days, three of Japan’s 47 prefectures have reintroduced states of emergency to curb the spread of the coronavirus. And with some other local authorities also rolling out fresh …
Singapore bouncing back The second and final estimate of second quarter GDP for Singapore, due to be published on Tuesday, will confirm that the economy suffered a historic slump last quarter. A strict lockdown, a fall in exports and a collapse in visitor …
A marriage of convenience heading for divorce US and Chinese officials will conduct a semi-annual review of the implementation of the Phase One trade deal at the end of next week. The discussions are likely to be fraught. The Chinese purchase commitments …
Recovery slowing to a crawl The state of Victoria entered a severe lockdown on Thursday, with most non-essential businesses now shut. As we outline here , this should push activity in Victoria around 20% below normal levels until September and means we …
Loan restructuring won’t prevent NPL surge In yesterday’s otherwise uneventful policy announcement, RBI Governor Shaktikanta Das introduced a new framework for banks to restructure loans to struggling borrowers. The move suggests to us that the debt …
Beirut blasts to deepen Lebanon’s crises The catastrophic blast in port of Beirut on Tuesday has led to widespread destruction in the city and a significant loss of life. The disaster will, sadly, only deepen Lebanon’s economic, humanitarian, and …
6th August 2020
The data this week showed a stronger rise in GDP in May than the consensus expected, and the timelier indicators point to an even larger increase in June. The 4.5% m/m rise in GDP in May was stronger than the consensus estimate of a 3.5% gain, albeit a …
31st July 2020
Colombia next in line for early pension access The bill sent to Colombia’s congress this week that would allow citizens to tap up to 10% of their pension savings is similar to those recently passed in Chile and Peru. We analysed the implications of such a …
Angola’s debt sustainability in the spotlight Angolan authorities are reportedly seeking to expand the country’s $3.7bn IMF Extended Fund Facility (first approved in 2018) which, if granted, would ease balance of payments strains. But that’s a big if …
The second-quarter GDP data released this week, which showed output plunging by a record 32.9% annualised, highlighted the unprecedented hit to the economy from the pandemic. We know that activity started to rebound from May onwards but, with the recovery …
Huge variations in scale of Q2 contraction The Q2 GDP data published this week highlight that euro-zone member states have had very different experiences of the coronavirus crisis so far, reflecting the variation in the number of virus cases and …
Czech economy one of Europe’s most resilient in Q2 Preliminary Q2 GDP figures released by the Czech Republic on Friday support our view that Central Europe will recover more quickly from the coronavirus crisis than most other EM regions. The Czech economy …
Mixed messages from the retail data Retail sales data from Switzerland for June, released this morning, show that consumer spending lost a bit of steam at the end of Q2 following the initial sugar-rush as restrictions were eased. Having surged by almost …
Easing the economy off life support As we enter August, we come to the first of many crunch points in the economy’s recovery from the coronavirus. (See here .) The labour market has been in suspended animation with the government’s furlough scheme …
Pressure mounting on Dubai’s GREs The past week has highlighted the strains that the coronavirus crisis has inflicted on some of Dubai’s government-related entities (GREs) and reinforced our concerns over their ability to service large debts. Reports this …
30th July 2020
Activity holding up despite surging cases The 13.1% m/m jump in retail sales in June points to a strong rebound in consumption even if spending on services recovered less rapidly. And while Japan is in the midst of a “second wave” of coronavirus cases, …
New outbreak in Vietnam After going 100 days without a single case of community transmission, over 40 new coronavirus infections have been reported in Vietnam over the past week. The jump puts the country’s economic recovery at risk. The outbreak is …
The “nuclear option”? The threat of US sanctions on Chinese banks is drawing renewed attention to their reliance on SWIFT, the financial messaging system used to process most cross-border transactions. SWIFT is a co-operative of global banks and is …
Employment starting to fall again Weekly payroll data released this week suggest that the recovery in employment has gone into reverse. Between the reference period of the June labour force survey and 11 th July the number of jobs has fallen by 0.5%. …
High-frequency data suggest loss of momentum The post-lockdown recovery has stalled over recent weeks. Our in-house COVID mobility tracker has edged down since the start of July. (See Chart 1.) Congestion levels in major cities are not much higher than …
AMLO presents new pension system This week, President López Obrador unveiled a plan to revamp Mexico’s pension system in a rare coalition with business leaders and unions. There are two main facets to the reform, which is expected to enter into law next …
24th July 2020
EU fund proposals a major benefit for CEE This week’s agreement on the EU budget is generally a positive outcome for Central and Eastern Europe. There are two important parts of the EU budget. First, a €750bn Recovery Fund has been agreed in which the EU …
The first increase in initial jobless claims since late-March last week has heightened fears that the economic recovery has started to go into reverse. Most other high-frequency indicators point to the recovery levelling off, but do not show a consistent …
The historic agreement reached this week over the EU’s €750bn Recovery Fund has given euro-zone assets a lift. The euro rose from just over $1.14 last Friday to $1.16 at the time of writing, and ten-year Italian bonds yields have fallen from 1.28% last …
The renewed rise in Covid-19 case growth is not yet a big cause for concern, but there is clearly a risk that a second wave of infections will cause further economic disruption later this year. The number of new daily cases of Covid-19 continues to …
Nordic economies comparatively well placed In case you missed it, we published our Nordic & Swiss Economics Outlook this week. (See here .) The key message is that we forecast the Nordic economies to experience the shallowest recessions in Europe, and our …
An anniversary present for the PM? This morning’s retail sales and PMI releases, which appeared to suggest that the economy is quickly recouping the output lost during the coronavirus lockdown and is getting back to normal quicker than the euro-zone, were …
