We think most developed market (DM) central banks will look through temporary rises in inflation and leave rates unchanged until at least early 2023. Even so, we expect the yields of 10-year DM government bonds to rise in the next couple of years, …
3rd June 2021
Emerging markets as a whole will increase their share of global GDP over the coming decades, with the largest expansions likely to come in EMs with rapid population growth (sub-Saharan Africa), those with manufacturing sectors that can drive productivity …
T he latest IPF Consensus forecasts are consistent with our view that prime office rents will fall this year and the recovery in 2022 will be weak, even as the easing of virus restrictions allows economic activity to rebound. However, outside of Emerging …
Sunday’s midterm elections in Mexico are widely seen as a referendum on President López Obrador’s tenure, and a strong result for his coalition could embolden him to pursue more interventionist policies. This Update outlines five key questions (and …
2nd June 2021
Saudi Arabia’s economy suffered a small downturn in Q1 and the recovery so far this quarter has been slow-going. But, with the vaccine roll out picking up pace and restrictions being relaxed, coupled with rising oil output, the recovery is likely to …
Price pressures in Central Europe are building from a broad range of sources and, while most of these are likely to be temporary, the issue is that countries were experiencing stubbornly high inflation before these pressures emerged. With output gaps set …
Markit’s aggregate emerging market manufacturing PMI dropped back in May as new virus waves took a toll on some countries, notably India, although they suggest that the manufacturing recovery in Central and Eastern Europe (CEE) continued strongly. …
1st June 2021
The global manufacturing PMI held broadly steady in May as a sharp drop in India’s survey was offset by rises in other major economies whose recoveries appear to be continuing unabated. Meanwhile, goods shortages are exerting upward pressure on prices, …
Several emerging market commodity currencies have struggled this year, despite the rally in most commodity prices. We think that most will face further headwinds, even if the current valuation gap may provide some buffer. Last year the prices of …
House price expectations have taken off since the start of the year, and that raises the risk of a self-reinforcing bubble forming. However, there are no signs that lenders are rapidly loosening credit conditions on the back of higher house prices, and …
Although office values have held up well in tech hubs such as Seattle and Austin, they have also seen some of the largest falls in occupier demand. Further substantial reductions in floorspace by tech companies will cause vacancy in these markets to rise …
The breakdown of Q1 GDP data showed that strong domestic demand supported expansions in Hungary and Poland, despite severe virus waves, whereas another fall in household spending held back Czechia’s recovery. Growth will gather steam from Q2 onwards, but …
The key takeaways from China’s May survey data are that while demand remains robust, supply shortages are leading to inventory drawdowns and price inflation. The data are broadly positive for commodity demand, but we think the withdrawal of fiscal …
The Reserve Bank of Australia still sounded dovish when it kept policy settings unchanged today. We think it will expand its bond purchase program by another $100bn next month. The RBA’s decision to keep interest rates and the parameters of its bond …
Despite the worsening virus situation and the announcement of a “total lockdown”, Malaysia’s economy is likely to hold up relatively well, as booming exports offset the hit to private consumption. We are only nudging down our GDP growth forecast for this …
31st May 2021
Although Japan’s stock market has substantially underperformed its counterparts in the US, UK and euro-zone during the past few months, we don’t expect it to remain a laggard. Chart 1 shows the relative performance of MSCI total return indices in US …
28th May 2021
There are signs that countries whose rollouts are advanced have hit something of a limit, with the remaining population now reluctant to be vaccinated. But this will not necessarily prevent economies reopening once the vulnerable are vaccinated. Potential …
Chilean financial assets have been hit hard following the Constitutional Convention election, and this Update outlines three key political risks which could keep local markets under pressure over the coming quarters. These are likely to shape how Chile’s …
27th May 2021
While the breakdown in Treaty talks between Switzerland and the EU makes the outlook for Swiss exporters more uncertain, we doubt that the lasting economic impact will be very big. Yesterday’s news that the Swiss government has walked away from talks with …
We think that the prices of wheat, corn and soybeans will decline over the next six months owing to a rebound in global supply and slower demand growth in China . The prices of wheat, corn and soybeans all soared to multi-year highs earlier this year …
We expect the S&P 500 to make only small gains over the next few years. But we think some sectors – such as financials – will continue to do better than the index as a whole. The rally in the S&P 500 has lost some steam lately . After gaining ~11% over …
The Norges Bank has a history of beginning to tighten policy earlier than the ECB and we think it will follow that pattern again this year. Meanwhile, although it’s not the most likely scenario, we think that financial markets are under-estimating the …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and given that the recovery still has a way to go, the BoK is likely to leave policy accommodative for at least the next few quarters. But concerns about financial stability are …
Sales of expensive homes have done particularly well over the past year, with the share of existing homes sold for over $500,000 surging from 15% a year ago to a record high 26% in April. An extreme shortage of cheaper homes for sale, coupled with a jump …
26th May 2021
Limited domestic supply, expensive imports and strong growth in demand have fuelled the rally in US steel prices. But with supply set to improve, at a time of softer growth in demand, prices should fall . Steel prices have soared globally since their …
Industrial yields look likely to reach our end-2021 forecasts by mid-year, leading us to re-evaluate the outlook for pricing. Although gains in rents and capital values are driving increased development, we think investors’ willingness to pay for solid …
Growth in the key monetary aggregates and bank lending has turned up over recent months (see Chart 1), driven in part by the Fed’s continued asset purchases . The Fed’s $120bn monthly purchases will push its balance sheet above $8trn soon. (See Chart 2.) …
Italy’s Recovery and Resilience Plan could provide a significant boost to aggregate demand in the coming years. And arguably even more important are the accompanying structural reforms, which could raise GDP in the long run. Having said that, there are a …
House-price-to-earnings ratios are close to record highs even in regions where there isn’t a shortage of supply. But the varying cost of rent across the country suggests that limited supply is an important reason why house prices are even higher in the …
In the short-run, China has no choice but to grit its teeth and keep buying Australian iron ore, even as bilateral ties continue to fray . But this dependence will diminish over time thanks to increased supply from other sources, greater use of recycled …
Strong vaccine rollouts in the Gulf and Morocco have allowed for an easing of travel-related restrictions but there is still a long way to go and recoveries in tourism sectors are likely to be slow-going. And in the rest of the region, struggling …
While China’s announcement that it will crack down on speculation and market irregularities has taken some of the froth out of the iron ore market in recent weeks, we think the price of iron ore will ultimately be driven even lower by less favourable …
The Reserve Bank of New Zealand sounded more optimistic at today’s meeting and signalled that it will start to hike rates in the second half of next year, in line with our long-standing forecast. If anything, the risks are that the Bank tightens policy …
Policymakers in Nigeria kept their benchmark rate on hold at 11.50% at today’s MPC meeting, opting to emphasise the fragile nature of the economic recovery over elevated inflation. With price pressures likely to ease, we think that monetary policy …
25th May 2021
Remittances into EMs were surprisingly resilient last year and should continue to hold up over the coming quarters. The outlook is strongest in Mexico and parts of South East Asia, due to the recovery prospects for the US economy. In contrast, the risk of …
The price of Pacific coal has surged to just over $100 per tonne for the first time since 2019. We think that the price will remain elevated for the rest of this year in large part owing to strong demand . Despite China’s unofficial ‘ban’ on coal imports …
Bank Indonesia (BI) left interest rates unchanged at 3.5% today and signalled that it was in no rush to adjust its monetary policy settings again this year. We expect interest rates to remain low to support the recovery for some considerable time. The …
Although we think that the recent outperformance of the energy and materials sectors will soon come to an end, we still expect the financials sector to continue to fare better over the next few years than sectors, such as information technology (IT), …
24th May 2021
The pick-up in Nigeria’s GDP growth in Q1 was driven in large part by the oil sector and rising oil output will support a further acceleration in growth over the coming quarters. But FX restrictions, limited fiscal support and a very slow vaccine rollout …
The flash PMIs for May suggest that the recovery is well underway in those economies that are now on top of the virus. However, supply is still struggling to keep up with surging demand. And as well as exerting upward pressure on prices, there are some …
21st May 2021
The recent disruption to global auto production stemming from ongoing semiconductor microchip shortages poses a downside risk to our price forecasts for platinum and palladium. In this Update , we map out the potential impact on demand for the metals from …
Sub-Saharan Africa’s already slow vaccination campaigns received another blow with news this week that a key supplier, India’s Serum Institute, is delaying shipments further. African policymakers will probably struggle to fill the vaccine supply gap and, …
The announcement of a ceasefire between Israel and Hamas removes one of the key uncertainties about the outlook for Israel’s economy and we maintain our forecast for a rapid recovery in GDP to take hold from Q2 onwards, inflation to remain low and the …
Taiwan’s economy is being buffeted by several apparently unconnected shocks – a drought, power outages and an outbreak of COVID-19. But they are all linked to severe capacity shortages resulting from the extraordinary strength of global electronics …
While the consensus has become more optimistic about the near-term recovery, most analysts – and the majority of central banks – still believe that the pandemic will leave a legacy of lower global output over the long term. We disagree. And if we’re …
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today, while laying the foundations for normalising monetary policy. We think that rate hikes are some time off as the Reserve Bank’s focus will remain squarely on supporting a weak …
20th May 2021
Egypt’s natural gas sector struggled last year as the slump in regional energy prices caused production and exports to fall. But the re-opening of key LNG infrastructure in recent months and prospects for rising exports into Europe will help to improve …
While pay growth has risen across the developed economies, in several cases this reflects reduced hours or the fact that a disproportionate number of low paid workers have lost their jobs. There are clear signs of labour shortages in the US, but for now …
The Bank of Canada has voiced concern about the loonie although, following the signs of emerging inflationary pressures in April, it will probably be more welcoming of the disinflationary impact of the strong currency. Either way, the Bank’s concern about …
Social distancing and the imposition of new restrictions in response to a surge in infections are weighing on economic activity across the region. But with manufacturing and construction sites remaining open, and online spending offsetting at least some …
