Filtered by Region: G10 Use setting G10
We doubt the recent resilience of business investment in the face of higher interest rates will last. Instead, we think a drop back in business investment will contribute to the economy continuing to stagnate in the first half of this year and a modest …
15th January 2024
There was a wide disparity in house price growth across regions in 2023 and little reason to think that this year will be any different. Following the recent decline in mortgage rates, we suspect the largest rises in prices will be in the regions that …
We doubt that the modest fall in mortgage rates we anticipate this year will bring a great deal more stock onto the market. Because of that, the supply of existing homes will remain very tight, so we’re now forecasting a more subdued recovery in existing …
12th January 2024
The lagged effects of the weak economy and high interest rates may mean that loan default rates rise in the coming months. But the prospect of interest rate cuts later this year will mean they won’t rise much. Higher interest rates and the weak economy …
10th January 2024
The surge in Chapter 11 business bankruptcy filings last quarter is not as bad as it looks, as many of them related to the WeWork failure. Excluding those, bankruptcies trended lower at the end of 2023 and, with corporate bond yields falling sharply in …
Our total returns forecasts for 2024 are significantly below consensus, as we predict that value falls will reach double digits for the second consecutive year. Retail stands out as the only sector where we expect positive returns, but distress in the …
9th January 2024
The surge in spending by state & local governments has boosted economic growth over the past year but, with tax revenues falling back in recent quarters, that boom is now set to fade. While there has been plenty of commentary on the support to the economy …
In what was an extremely volatile year for the housing market, we made two key forecasting errors. Firstly, we didn’t anticipate the extent of the rise in mortgage rates. Because of that, we underestimated how tight supply in the existing housing market …
5th January 2024
Our forecast of earlier Bank Rate cuts means that mortgage rates will be significantly lower than we had anticipated this year, which will lead to a stronger recovery in demand from mortgaged buyers. With little reason to think that demand from cash …
The redirecting of trade ships away from the Red Sea and the associated rise in shipping costs are unlikely to lead to a resurgence in global inflation. However, if the warfare underpinning the disruption to shipping escalates into a wider regional …
4th January 2024
Australian household finances are in better shape than the plunge in the household savings rate would suggest. While we still think that GDP growth will slow more sharply than expected over the coming quarters, there’s a clear risk that households will …
While SVB’s collapse in March and sharper rises in interest rates led to larger-than-expected falls in commercial real estate (CRE) values, our expectations for sector and regional winners were broadly correct. A year ago, we outlined our key calls for …
3rd January 2024
JOLTS data point to slower wage growth The further decline in job openings to 8.79 million in November, from 8.85 million, was a bit gloomier than expected given that the JOLTS measure had previously dropped below the level implied by the both more timely …
It is no secret that strong immigration is pushing up rents but, as rent growth for new tenancies was little changed last year, this does not fully explain the surge in CPI rent inflation. The CPI measure is picking up unusually large rent increases on …
In a change to our previous forecast, we now think that the first interest rate cut from the Bank of England will happen in June this year rather than in November. We still think that interest rates will be reduced from 5.25% now to 3.00% in 2025. That’s …
Although the manufacturing PMIs have overstated the weakness of industry for a while, the big picture from December’s surveys was that global industrial activity was barely growing at the end of 2023. The forward-looking indicators point to further …
2nd January 2024
Housing market still set to cool Australia’s housing market showed signs of life in December. However, we still think an affordability crunch will temper house price gains in the months ahead. Allowing for seasonal swings, house prices across the eight …
We expect the sharpest fall in apartment completions in 2025-26 in Boston, Denver, NYC and Seattle. Those cities will also be joined by Sunbelt markets where oversupply is already denting rents, including Austin and San Antonio. By contrast, there is …
28th December 2023
While we got mortgage rates and lending roughly right in 2023, house prices fell by less than we expected as longer mortgage terms, strong demand from cash buyers, and tight supply came together to support them. There is little reason to think that these …
Industrial output has usually fallen rather sharply whenever firms were as pessimistic about the production outlook as they are now. That’s consistent with our view that GDP growth next year will be weaker than most anticipate. One thing that stood out …
The rerouting of trade ships away from the Red Sea has come at a time of disruption to shipping elsewhere in the world, but it is unlikely to alter the broad pattern of falling core inflation in 2024. We expect the recent rise in oil prices to prove …
21st December 2023
House prices will limp along in 2024 Although house prices in Melbourne have started to fall anew, we doubt that they are the canary in the coal mine. A persistent shortfall in housing supply should ensure that house prices across most of Australia keep …
Most major DMs need to shrink their primary budget deficits significantly and, for various reasons, most are likely to find it hard to do so. This will exacerbate growing worries about fiscal sustainability. Fiscal deficits increased significantly in …
20th December 2023
While the income tax cuts due next year are widely seen as necessary to reverse bracket creep, the income tax burden isn’t particularly onerous by historical standards. However, Australia taxes income far more heavily than most other advanced economies …
Although the economic backdrop is likely to be less favourable for the stock market in the US over the next two years than it was in second half of the 1990s, we doubt this will prevent a similar bubble in equity prices from inflating as investors seek to …
19th December 2023
The Bank of Japan left policy settings unchanged today as widely anticipated. And while Governor Ueda is sounding more confident that 2% inflation will be sustained, we now expect the Bank of Japan to end negative interest rates in March rather than in …
Some of the negotiations by trade unions and large firms in advanced economies over recent months have resulted in large pay rises of up to 10%. However, they have typically also locked in much smaller gains for next year and hence shouldn’t cause serious …
18th December 2023
There is considerable uncertainty surrounding our forecast that GDP will increase by 1.2% next year, but we have a relatively high conviction in our call that core PCE inflation will be very close to the 2% target by mid-2024. Nevertheless, even small …
We recently held an online Drop-In session to discuss the December policy meetings and the outlook for monetary policy in the year ahead. (See a recording here .) This Update answers several of the questions that we received. Would the Fed ease policy …
Australian households have built up more excess savings than those in other large advanced economies and we estimate that those savings will only be depleted by the end of 2025. Even so, we still expect consumption growth to keep disappointing. Real …
A weak November but lower mortgage rates ahead November was a weak month all round for housing, with prices falling at a faster pace and starts plunging. Lenders are already cutting mortgage rates in response to the recent drop in bond yields, which could …
15th December 2023
Although the flash PMIs ticked up in most cases in December, they suggest that advanced economies will start 2024 on a weak footing. Meanwhile, outside of the US, the subdued outlook for demand seems to be weighing on employment growth, which should take …
The Bank of England sprung no surprises, leaving interest rates at 5.25% for the third time in a row and pushing back against the prospect of near-term interest rate cuts. While the recent soft wage and inflation data mean the Bank may not wait as long as …
14th December 2023
Falling mortgage rates breathe life back into the market Declining mortgage rates have already generated a significant improvement in demand, with the new buyer enquiries and sales expectations balances recording their strongest readings for over a year …
The Fed’s reluctance to acknowledge that it will need to begin cutting its policy rate soon – to prevent a run-up in real rates – was predictable enough based on its intransigence ahead of previous turning points in the policy cycle. We continue to expect …
13th December 2023
Falls in financial market interest rate expectations mean that mortgage rates will drop to a six-month low in December. That will support a further recovery in housing market activity in the near term. But, if we are right to think the Bank of England …
The detailed mortgage lending data for Q3 show that the high cost of borrowing has continued to price many out of the market and made new BTL investment unattractive. But while arrears are rising, they are not translating into repossessions so we still …
Today’s budget update showed that the government now expects a balanced budget in 2023/24, as opposed to the modest deficit it had projected a few months ago. With revenue likely to outperform the government’s conservative assumptions, we think an …
We doubt that the removal of the RBNZ’s employment objective would make much difference to economic outcomes, but forcing the Bank to achieve its inflation target within too short a period of time could cause unnecessary swings in output when inflation is …
11th December 2023
Even though we expect the economy to be weaker than the consensus in 2024, we think that lingering constraints on domestic supply will prevent wage growth and services CPI inflation from falling quite as fast as is widely expected. As a result, we think …
7th December 2023
We think that sovereign bond yields in most major economies will generally reach their troughs around the same time over the next year or so. But with the Bank of Japan seemingly set to buck the trend once again, yields there may be an exception. The …
The Bank of Canada is clinging on to the idea that restrictive policy is still needed to get inflation back to 2%. Nonetheless, with core inflation pressures muted, GDP and house prices falling, and labour market conditions loosening rapidly, it won’t be …
6th December 2023
November JOLTS data suggest that labour market slack is growing, even as payroll growth remains relatively resilient. With signs pointing to a sharper fall in wage growth ahead, the Fed can be reassured ahead of its meeting next week that that …
5th December 2023
First-time buyer (FTB) loan originations have been weak for over a year now. That’s mainly down to higher mortgage rates which have made buying too expensive for many younger adults. And as we think mortgage rates are unlikely to drop much below 6.0% …
Given the high bar for further rate hikes, we’re more confident than ever that the Reserve Bank of Australia is done tightening policy. That said, there is a good chance that the cash rate will remain at its cyclical peak for longer than we currently …
Although we expect US equity office REITs to benefit further from falling long-dated Treasury yields, we continue to think that their long-run prospects are blighted by a structural reduction in demand. Real estate was the best-performing sector of the …
4th December 2023
The manufacturing PMI surveys have overstated the weakness in industrial production over the past couple years. But, even taking this into account, November’s PMIs suggest that while global industry might be past the worst, it looks set to end 2023 and …
1st December 2023
While global goods trade rose in September, timelier indicators suggest that it has softened so far in Q4. And with props to Chinese exports likely to prove temporary, and advanced economies set to slow, we think that the general weakness of world trade …
29th November 2023
The usually strong relationship between NAHB homebuilder confidence and housing starts has broken down recently. That can be explained by the composition of the NAHB’s builder members, which are largely smaller private homebuilders. Unlike their larger …
Even though we expect the Fed to go into cutting mode within the next six months and the 10-year Treasury yield to fall below 4% in 2024, we don’t expect this to provide any respite for real estate. Indeed, given we think the 10-year yield will range …
