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 …
28th August 2020
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 …
Oman’s government reshuffle A government reshuffle in Oman this week saw Sultan Haitham relinquish some of his powers. Changes at the foreign ministry may help to improve relations with other Gulf countries and pave the way for Oman to secure bilateral …
20th August 2020
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, …
