The announcement that OPEC+ will deepen output cuts by 0.5m bpd in the first quarter of 2020 boosted oil prices this week . While the decision means that the market will be a bit tighter next year than we had anticipated, we think the drop in supply won’t …
6th December 2019
There were further signs this week that the Bank of Canada has little intention of cutting interest rates. While November’s disappointing Labour Force Survey may make policymakers question their stance, the Bank will feel more confident if Canada’s …
The incoming data this week were, on balance, positive and certainly wouldn’t prompt the sort of “material reassessment” of the outlook that Fed officials have said would be necessary to cut interest rates again at next week’s FOMC meeting. Fed on hold …
No sign of green shoots in Swedish industry Another week, and yet more data from Sweden that call into question the wisdom of the Riksbank’s probable rate hike later this month. As in Germany, conditions in the industrial sector are going from bad to …
Still no light at the end of the tunnel If Christine Lagarde had been hoping that the economy would perk up this year, taking the heat out of the disputes between hawks and doves on the Governing Council, this week’s data will have been a disappointment. …
The public could give economists an early Christmas present at next Thursday’s election. Either a Conservative majority (most likely) or a Labour-led government (still plausible) would make what will happen with Brexit a bit clearer and allow us to switch …
Old habits in Turkey Data published this week provided familiar signs that growth in Turkey is increasingly unbalanced. The Q3 GDP figures published on Monday showing growth of 0.4% q/q caused some to highlight that the economy is slowing (growth in Q1 …
Trade war disruption US trade data released earlier this week for October reveal the extent to which the US-China trade war is disrupting regional supply chains. In the first 10 months of the year, US imports from China fell by 15% as tariffs caused US …
RBI waiting for clarity on fiscal loosening The Reserve Bank’s unexpected decision to keep interest rates on hold yesterday was primarily driven by its concerns over the spike in headline inflation above the 4.0% target in October. (Our response to the …
South Africa: Weak Q3, and trouble ahead Data released this week showed that South Africa’s economy contracted again in the third quarter, and more timely figures suggest that conditions remained bleak in Q4 - raising the spectre of another recession. The …
Bond defaults picking up again Corporate bond defaults have surged again recently, having subsided during the first half of this year. The value of bonds defaulting this year is now on course to exceed last year’s total. (See Chart 1.) Chart 1: Onshore …
Household spending remains the Achilles heel The RBA kept interest rates unchanged at the meeting that occurred one day before the release of the Q3 GDP data and reiterated that the economy had reached a “gentle turning point”. At first glance, the …
Falling profits point to weaker investment Data released this week showed that capital spending rose a strong 7.7% y/y in the third quarter. Unfortunately, that strength is unlikely to last. One reason is that investment was bolstered last quarter by …
Lebanon: Next stop the IMF? News that Lebanese banks will make some interest payments on FX deposits in local currency underscores that strains in the balance of payments are worsening. The risk of a debt restructuring and devaluation is rising by the …
5th December 2019
Commodities prices were little changed this week . Prices were initially boosted by President Trump’s comments that the US and China were in the “final throes” of a trade deal. But they pared their gains as fears emerged that the signing into law of the …
29th November 2019
We expect the Bank of Canada to leave its key policy rate unchanged next week, as fears of stoking the flames of the resurgent housing market outweigh the risk that economic growth will slow by more than expected this quarter. After peaking in early 2016, …
Brazil: Real’s fall doesn’t rule out a final cut The Brazilian real continued to tumble this week, hitting a record low of 4.27/$ and prompting the central bank to sell FX. The currency has regained ground over the past 48 hours, but is still down by 5% …
Below, but close to, 2 degrees centigrade Reports that Christine Lagarde wants climate change to feature in the ECB’s forthcoming review of its monetary policy strategy suggest that the Bank will be even more political under her leadership than it was …
Setting the stage for a December repo rate hike The pick-up in GDP growth in Sweden in Q3 (see here ) was much stronger than the small contraction that we had pencilled in, and was at odds with the raft of weak survey data that we had put emphasis on. It …
Turkey: interventionist policy stores up problems Interventionalist policymaking in Turkey has come back on the radar this week. This is likely to lead to a misallocation of resources and adds to the reasons to think that the country’s next crisis could …
The latest polls suggest that the Conservatives are increasingly likely to win a big enough majority in the election on 12 th December to allow them to pass Boris Johnson’s Brexit deal, which would mean the UK leaves the EU on 31 st January and enters a …
VAT cut a risk to Sri Lanka’s fiscal health In his first major policy move since being elected Sri Lankan president earlier this month, Gotabaya Rajapaksa on Wednesday cut the rate of VAT from 15% to 8% (the cut will take effect on 1 st December). On the …
Nigeria: CBN holds rate, toes government line The governor of the Central Bank of Nigeria (CBN) used this week’s MPC statement to heartily defend the government’s latest round of protectionist policies, which will add to the impression that the bank is …
US politicians are all China hawks now The HK Human Rights and Democracy act that President Trump signed into law this week does not require any immediate changes in US relations with China and Hong Kong, but it underlines the extent to which “standing …
Retail sales and industrial output plunge The sharp falls in retail sales and industrial production in October suggest GDP might contract more sharply than the 0.7% q/q drop we have pencilled in for the fourth quarter. The 14.4% m/m fall in retail sales …
Higher bar for QE will be reached before long In a much-anticipated speech this week Reserve Bank of Australia Governor Lowe laid out the Bank’s thinking around unconventional monetary policy. For the most part, the speech confirmed our existing views. …
BJP steps aside in Maharashtra Developments this week have brought an end to the political gridlock in Maharashtra. To recap, Prime Minister Modi’s BJP won the most votes in the recent state election there, but fell short of achieving an outright …
New term for CBE governor, orthodoxy to stay The appointment of Egypt’s central bank governor, Tarek Amer, for a second four-year term will welcomed by investors as a sign that the government remains committed to orthodox policymaking and supports our …
28th November 2019
We still expect GDP growth to slow a little further over the coming months, but the latest data suggest that the slowdown in the fourth quarter won’t be quite as bad as we had previously feared. The narrowing in the advance goods trade deficit to $66.5bn …
27th November 2019
Ecuador: Dollar bonds likely to rebound Legislators’ rejection of President Lenín Moreno’s latest fiscal reform bill caused a sharp sell-off in Ecuadorian bonds this week. But we think that investors have gone too far. The spread of government dollar …
22nd November 2019
The data released this week suggest that GDP growth was 1.3% annualised in the third quarter, a bit weaker than the 1.5% that we previously had pencilled in, but in line with the Bank of Canada’s estimate. Growth is likely to slow even further in the …
Big pharma, big statistical distortions Perhaps the most eye-catching data release of the week was on Thursday when the Federal Statistical Office in Switzerland reported that Swiss industrial production jumped by 8% in Q3 from the same period a year ago. …
What would St Francis do? “Start by doing what’s necessary; then do what’s possible; and suddenly you are doing the impossible”. This quote from St Francis of Assisi is how Christine Lagarde ended her first speech as ECB president on Friday morning. We’re …
The Johnson-Corbyn TV debate, the release of the Labour and Lib Dem manifestos, and a fake fact-checking twitter page all gave the impression that the election on 12 th December is getting close. The Conservative manifesto may be released on Sunday, …
The key housing releases this week provided further evidence that the big decline in mortgage rates is feeding through to a rebound in residential investment. That won’t be enough to prevent the overall economy slowing in the fourth quarter. But we do …
Nigeria: New data underlines struggling economy Economic growth in Nigeria remained very weak in Q3 , with the economy again failing to escape the slow-growth trajectory on which it has been stuck since 2017. (See Chart 1.) Chart 1: Nigeria GDP (% y/y) …
Russia: boost from fiscal policy seems optimistic Signs that Russia’s government is ramping up spending have raised hopes that economic growth will strengthen further in the coming quarters. But we don’t think that it will provide the large boost that …
Latest data point to start of slow recovery Economic data published this week by Singapore and Korea, which are both good bellwethers for the rest of the region, add to evidence that the worst is now over for regional growth. The second estimate of …
Phone tariff hikes no immediate concern for RBI India’s three largest telecoms firms (Vodafone, Bharti Airtel and Reliance Jio) revealed this week that they will simultaneously raise mobile phone tariff prices at the start of next month. This appears to …
Government stimulus underwhelming The government appear to have had a change of heart with PM Scott Morrison this week promising additional stimulus in the Mid-Year Economic and Fiscal Outlook (MYEFO), which is usually released in mid-December. The …
Trump may move slow on HK bill amid trade talks On Wednesday, the US Congress passed the HK Human Rights and Democracy Act in a near-unanimous vote. Trump will need to sign the bill by early December unless he decides to veto it, which is unlikely as a …
PM Abe surpasses PM Katsura Shinzo Abe surpassed Meiji era leader Taro Katsura to become Japan’s longest serving Prime Minister this week. Overall, his track record on the Japanese economy has been mixed. Under PM Abe GDP growth has hovered around 1%, …
Lebanon triple crisis fears escalate The Lebanese government will probably meet a FX debt repayment due next week, but this will act as a further drain on the country’s FX reserves, piling the pressure on the dollar peg. The chances of a messy …
21st November 2019
Chilean markets recover on government offer The Chilean peso rallied against the US dollar today after lawmakers accepted protestors’ demand that a constituent assembly will play a role in writing a new constitution next year, which may help to …
15th November 2019
There was some good news for exporters this week, as US House Speaker Nancy Pelosi indicated that the Democrats will soon give their support to the revised NAFTA, aka CUSMA. We’re not convinced that the passing of the CUSMA into law will materially lift …
We expect economic growth to slow over the coming quarters, but the fading downside risks from the global backdrop and trade policy, together with new, less dovish language from the Fed means we are no longer forecasting a final 25bp rate cut. We now …
Turkey current account set to deteriorate Turkey’s current account has been in surplus for three consecutive months now, but the government’s efforts to speed up the recovery will probably cause the external position to deteriorate again soon. The surplus …
Views from the ground in Stockholm One of the issues that came up a lot in our client meetings in Stockholm this week (see here ) was the appropriate mix between fiscal and monetary policy in Sweden. In a speech on Wednesday, Martin Flodén added to the …
With employment falling and GDP contracting in September, the government will have been glad to close the door on Q3. But looking out of the window onto Q4, the view isn’t much better. It has (thankfully) been a relatively quiet week on the political and …
Q3’s 0.2% quarterly expansion in the euro-zone economy, which was confirmed this week in Eurostat’s second estimate of GDP , was almost certainly driven entirely by domestic demand. We will not have a Q3 GDP breakdown for the euro-zone by either …
