The recent depreciation in the US dollar has helped to boost commodity prices. But while we expect a stronger dollar to weigh on most commodity prices later this year, we think that oil prices will still rise . The majority of commodity benchmarks are …
20th May 2021
Commercial banks left the Loan Prime Rate (LPR) unchanged for the 13 th consecutive month today. Official goals for reining in credit have already been achieved by other means. As such, we do not expect any changes to policy rates in the coming months. …
Consensus more optimistic about industrial and apartments Consensus forecasts for the next two years have been revised upwards, largely driven by a more upbeat view on the industrial sector. As a result, we are now more downbeat than the survey …
19th May 2021
Despite its recent resurgence, we continue to think that the euro will weaken against the dollar this year. Since the end of March, the euro has appreciated by about 4% against the dollar, and at ~1.22 the EUR/USD exchange rate is now back roughly where …
For now, it seems unlikely that the drought affecting Brazil will hit hydropower production hard enough to cause disruptions to electricity supply and broader economic activity. But the drought does pose a risk to the outlook for inflation (and possibly …
Booming home sales, record low inventory, the shift to working from home and a surge in savings have all helped boost home improvement spending over the past three quarters. While home sales are set to ease, tight inventory and accumulated savings will …
We expect long-term Treasury yields to rise more decisively before long, driven by long-term real yields. The nominal 10-year Treasury yield has bounced around a bit following some significant data releases lately . (See here .) But the big picture is …
South Africa’s hard activity data for March showed a strong rebound in industrial sectors while the retail sector struggled. Over Q1 as a whole, GDP probably managed to expand by about 1.5% q/q on an annualised basis but major headwinds will keep economic …
Although the spread between 10-year sovereign bond yields in the US and Germany has narrowed so far during the second quarter of this year, we doubt this will continue for much longer. To re-cap, the spread surged in the first quarter. This reflected a …
The rise in global agricultural prices in recent months has sparked concerns about a surge in EM food inflation. While it would be remiss to dismiss these, we think the impact may not be as severe as feared because, crucially, domestic conditions tend to …
Euro-zone inflation is likely to keep increasing as the economy re-opens, but we doubt it will rise as high as in the US. That’s because base effects will be smaller and the rebound in consumer spending slower. We think that headline euro-zone inflation …
Producer prices are rising the most in years, but this largely reflects global supply shortages that should abate as vaccines are rolled out. We expect consumer price inflation to average a muted 0.6% next year. The resilience of goods demand during the …
There is typically more scope for female participation rates to rise and boost labour supply in EMs. This is particularly so in India and is one reason why we expect its economy to outperform in the long run. Increasing female labour force participation …
African economies have benefitted from the rally in commodity prices in recent months, but we think that most of the gains from the terms of trade improvements are behind us. In the coming quarters, net commodity exports are likely to worsen in most …
18th May 2021
The latest COVID-19 outbreaks in Latin America have passed their peak and the near-term outlook is improving. But, with the probable exception of Chile, the latest developments reinforce the message that the threat of renewed outbreaks will continue to …
While the vaccine rollout in Europe has finally kicked into gear, the legacy of the slow start means the EU is more exposed than the UK or the US if the Indian variant spreads quickly amongst the unvaccinated. The vaccine rollout on the continent has gone …
Retail has been the hardest hit of the major sectors during the pandemic, though hope is returning with the re-opening of economies. But new challenges are emerging. In particular, we think that more home working will divert (already-weak) instore retail …
A revival of the nuclear deal with Iran would pave the way for sanctions to be lifted, boosting the country’s oil production and weighing on prices. By contrast, while we still expect Iranian output to increase if a deal isn’t agreed, we think this would …
17th May 2021
The “Polish Deal” outlined by the ruling Law and Justice party over the weekend strengthens the shift in policy since 2015 towards higher social welfare spending and support for families. Fiscal policy looks set to be looser over the next few years to the …
The first major outbreak of COVID-19 in Taiwan has triggered the first significant restrictions on activity. Consumer spending will suffer, but the rest of the economy should still perform strongly. Having made it through most of the last year without a …
Turkey’s government has lifted a three-week national lockdown today and this should pave the way for a recovery over the coming months. But the hit to activity during the lockdown means that the economy is likely to record a contraction over Q2 as a …
Goods trade data for April add to evidence from elsewhere that that the new round of virus restrictions has not been as economically disruptive as the national lockdown last year. India’s goods trade deficit widened from $13.9bn in March to a four-month …
Although the valuation of the MSCI UK Index has become even more attractive compared to those of the MSCI USA Index and MSCI EMU Index since the outbreak of COVID-19, this is partly due to its sector composition. Even so, we remain of the view that it …
14th May 2021
Increased demand for larger apartments to accommodate working from home is already evident in NYC, where the inventory of units with two or more bedrooms has seen a sharper decline compared to smaller units. With working from home set to stay even as …
The major oil producers have seen the biggest gains in exports from the rally in commodity prices this year, although most of this windfall is likely to be saved which will limit the boost to economic recoveries. We expect that commodity prices will fall …
In this Update , we take a look at the valuations of a broad range of the “risky” assets that we cover on our Asset Allocation service. We think that six key points stand out. First, in absolute terms the valuations of risky assets look quite high almost …
The statement accompanying the Banxico Board’s decision to keep the policy rate at 4.00% suggests that policymakers’ concerns about inflation risks are growing, but it doesn’t change our view that they will keep rates unchanged throughout this year and …
While we don’t think there is much scope for corporate credit spreads generally to narrow much further from here, in our view spreads in the euro-zone could fall a bit more than those in the US or the UK. Despite the wobble in equity markets over the past …
13th May 2021
We now expect inflation to surpass the upper limit of the Bank of Canada’s 1% to 3% range for most of the rest of the year, but we continue to think that it will drop back to less than 2% in 2022. The focus has been on US inflation this week and, after …
Last year, rents held up better in Barcelona’s CBD, and we expect this trend to continue this year. That said, higher rents in the CBD mean that they are also likely to be hit harder from the shift to remote working and associated reductions in office …
South African hard activity data for March paint a bright picture of the recovery in the mining and manufacturing sectors. The easing of lockdown measures combined with favourable base effects are probably at play. We suspect the road ahead will be …
There are three overarching themes present in the agriculture document associated with China’s 14th Five-Year Plan – improving food security, continuing with the modernisation of the rural economy and higher environmental standards . In this Update we …
The sharp fall in virus cases and increase in the rate of vaccinations since March means that a sustained economic recovery in Central and Eastern Europe looks set to begin over the coming months. But, the latest decline in infections in Turkey is …
12th May 2021
High-frequency data suggest that outflows from India’s bond and equity markets have picked up in recent weeks as the country’s COVID-19 outbreak has worsened. At an aggregate level, though, outflows from EMs were moderate at the start of this month and, …
Security problems in Mozambique are putting huge natural gas investment projects at risk, clouding the country’s otherwise bright economic outlook while reigniting default concerns. In the early 2010s, major oil companies discovered natural gas off the …
We think that the broad-based rally in commodity prices will go into reverse later this year, so the upward pressure on inflation in advanced economies should be temporary. But there is a clear risk of a more sustained pick-up in inflation, especially if …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, and while a temporary rise in inflation means interest rates are set to remain unchanged for the next few months, the dire economic outlook means the central bank …
This Update sets out the main calls of our new FX service. As part of our expanded coverage of currency markets, we will maintain and continuously update this set of core predictions. Our first FX Outlook includes more detailed analysis, as well as …
After a month-long delay, the key results from China’s once-a-decade census were published today. They weren’t as bad earlier media reports had suggested – the population continued to rise at much the same pace last decade as it did in the 2000s and, if …
11th May 2021
The 2020 US and China censuses add to the reasons why we think China will struggle to overtake the US as the world’s largest economy. China’s birth rate has continued to fall and the population will peak earlier than previously thought, so demographics …
The NFIB and JOLT surveys published today add to evidence from the April employment report that labour shortages are widespread, pushing up prices and potentially acting as a brake on the recovery . The further increase in the NFIB jobs hard to fill index …
Saudi Arabia’s budget deficit narrowed in the first quarter of the year on the back of higher non-oil revenues and a sharp reduction in capital spending. Higher oil revenues will support a further reduction in the shortfall in the coming quarters and it …
Following its strategic review, we think the ECB will set its formal definition of price stability as an inflation rate of 2%. But it might also adjust its forward guidance to signal some tolerance for a brief period of overshooting 2%. With …
Treasurer Josh Frydenberg revealed in today’s Budget that the government will spend nearly all of the windfall accruing from the stronger economic recovery. That will result in a permanently larger role of the state and a sizeable structural budget …
We suspect that a bout of inflation triggered by the economy reopening will be brief and that a more widespread and sustained rise in inflation that would concern the Monetary Policy Committee (MPC) won’t happen until late in 2023. The pandemic has been …
As the recovery in occupier demand gets underway, we think that the low amounts of vacant modern space, limited supply pipeline and comparatively cheap rents will mean that prime office rental growth in Hamburg outperforms the other main German markets in …
Recent protests have pushed Colombia’s government away from the fiscal reforms that are needed to reduce the public debt ratio in the coming years. It’s therefore likely that the sovereign will lose its investment grade rating, which will keep local …
10th May 2021
Our Mobility Trackers suggest that global economic activity has continued to pick up and this positive trend should continue as vaccination programmes gather pace and there is a more widespread lifting of restrictions. That said, the surge in new cases in …
The recent strength in Japan’s wage data largely reflects a compositional shift, as more lower-paid workers have dropped out of the workforce over the past year. With vacancies still far below pre-virus levels and firms no longer reporting severe staff …
We expect equities in the euro-zone to outperform those in the US between now and the end of 2022 even as the economic recovery in the former continues to lag that in the latter . After underperforming the MSCI USA Index for the most part of 2020, the …
