Supply issues have raised price pressures for producers, which they have begun to pass on. But with doubts around the reliability of survey evidence and the limited pass-through to consumer prices, the surge in pipeline price pressures is, for now, an …
10th May 2021
We don’t think stock markets in emerging Asia will come roaring back to life any time soon, and forecast relatively small increases in equity indices there over the next few years. Having been among the best performers during the earlier stages of the …
7th May 2021
There currently appears to be little economic scope for conversions to residential across the six major office markets. But our forecasts of falling values and rising vacancy in the office sector suggest the incentive will increase, particularly in NYC …
China’s commodity imports fell back in April compared with a month earlier. This chimes with our view that imports of industrial commodities into China will come off the boil as economic growth there slows. In turn, this should be a factor dragging the …
The Czech National Bank (CNB) left its two-week repo rate on hold at 0.25% today and backtracked on its recent dovish guidance about the timing of policy tightening. We expect a first 25bp interest rate hike in November, but the risks are becoming …
6th May 2021
While voting today to leave interest rates at +0.10% and the stock of Quantitative Easing (QE) at £895bn, the Monetary Policy Committee (MPC) suggested conditions for tighter policy may be in place in late 2022. But our forecast for subdued inflation over …
The re-opening of Israel’s economy since March has driven a sharp tightening of labour market conditions and a growing share of firms are reporting labour shortages. This appears to be concentrated in the leisure and hospitality sectors where government …
The further strong rises in commodity prices present upside risks to our GDP forecasts, although the boost to growth is likely to be smaller than during previous periods of strong commodity price gains. The Bank of Canada’s commodity price index (BCPI), …
Turkey’s central bank didn’t spring any surprises and left its one-week repo rate on hold at 19.00% today and, while the accompanying statement maintained a hawkish tone, policymakers left the door open for the start of an easing cycle over the coming …
Despite tentative signs of improvement in the euro-zone economy recently and our expectation that long-term US Treasury yields will rise significantly over the next couple of years, we forecast that the yields of 10-year euro-zone government bonds will …
Following stronger than expected Q1 data, we have revised up our rental forecast for 2021. And Prague’s low costs and constrained supply means that we think rental growth has further to go this year. Following an increase of 0.5% last year, we had …
The statement accompanying Brazil’s central bank meeting, at which it raised the Selic rate by 75bp to 3.50%, was more hawkish than the previous one. While we doubt that the tightening cycle will go as far as most expect, the risks to our forecast for a …
As expected, the Norges Bank left its policy rate on hold at a record low of zero once again this morning but remains on track to be the first advanced central bank to start to raise interest rates, later this year. Given that the Bank tends not to be …
While the high numbers of COVID-19 cases will drag on the recovery in many in EMs in Q2, there are – at least outside India – encouraging signs that the worst of the current waves may be over in most places. But so long as vaccine coverage remains low, …
The fact that Bank Negara Malaysia (BNM) left its policy rate on hold at 1.75% today despite the worsening economic outlook means any further loosening is unlikely. But with the recovery set to be slow and fitful, we think BNM will leave interest rates at …
Following the recent progress on vaccinations across the euro-zone, we are revising up our GDP forecasts. We now think that the recovery will begin in Q2 and that the economy will return to its pre-pandemic size in the second quarter of next year. But it …
5th May 2021
In this Update , we outline the key data that will help us gauge the evolution of inflationary pressure in advanced economies as they open up. Pandemic-related distortions mean that it is particularly important to understand the detail to distinguish …
The UAE has been one of the global leaders in its vaccine rollout thanks to the aggressive procurement of vaccines, numerous vaccination centres and wide eligibility. Containment measures have been kept looser than in the likes of the UK and Israel and …
Recently released survey data from South Africa point to a marked improvement in economic conditions but there were further signs that firms are suffering from supply chain disruptions. What’s more, we think that the slow vaccine rollout and fiscal …
We think that the absence of pipeline capacity constraints, a strong recovery in US oil demand, and increased output from OPEC+ members will all help to ensure that the Brent-WTI price spread remains narrow over at least the next year or so . Aside from …
There will be a surge in business insolvencies once the government’s moratoriums expire at the end of June and September. But a strong economic recovery should ensure that fewer businesses go bust than after the Global Financial Crisis (GFC) and fewer …
More working from home will inevitably change cities as we know them. However, cities are more than just workers. This means that cities where a higher share of jobs can be done remotely are not necessarily the ones where the impact of remote working on …
The impact of India’s COVID-19 crisis on other EMs through normal economic channels such as trade and financial links should be manageable. The more serious impact will come through delays to vaccine rollouts, particularly for countries in South Asia and …
The Bank of Thailand (BoT) left interest rates on hold at 0.5% today and sounded very downbeat on the prospects for the recovery. The poor outlook for the economy means rates are likely to remain unchanged well beyond the end of the year. The decision …
In an unscheduled announcement today, RBI Governor Shaktikanta Das unveiled an array of measures aimed at mitigating the economic and financial impact of India’s virus crisis. This Update takes stock of those measures and outlines what they might mean for …
While the government is likely to announce further tax relief at next week’s Budget, we suspect it will use nearly half of the recent improvement in the budget balance to reduce borrowing. Treasurer Josh Frydenberg will announce the Budget on Tuesday, 11 …
The sharp drop in demand for vaccines in recent weeks is a risk to our assumption that the rollout reaches critical mass over the coming months. That could mean infections and hospitalisations remain elevated, but we doubt that would be a big drag on the …
4th May 2021
Saudi Arabia’s economy is likely to have suffered a fresh downturn in Q1 on the back of oil production cuts and tighter virus containment measures. But with the vaccine roll out picking up pace and oil output rising from May, the recovery is likely to …
The rise in the global manufacturing PMI suggests that the strong recovery in industrial production continued in April, but supply constraints are continuing to push up prices around the world. While the IHS Markit surveys are yet to provide evidence that …
The Fed’s latest Senior Loan Officer Survey shows that lending standards are being eased across the board, which will help keep consumption and investment growth solid even as support from fiscal policy fades . The survey showed that a majority of banks …
Markit’s EM PMI rose to a four-month high in April, but manufacturing sectors are likely to enter a softer patch in places facing large virus outbreaks. Meanwhile, supply chain disruptions are causing price pressures to build in parts of Asia and Central …
The Reserve Bank of Australia upgraded its forecasts for GDP growth and inflation but reiterated that it is prepared to extend its asset purchases. We stick to our forecast of another $100bn extension in the Bank’s bond purchase program, though this would …
Results of the state elections that have been taking place over the past couple of months are unlikely to have undermined the BJP’s willingness to implement difficult economic reforms, particularly given its victory in Assam. But at the same time, the …
3rd May 2021
After a 20% y/y fall in 2020, we think the economic recovery in H2 and some pent-up demand will support an improvement in investment activity this year. Though we estimate that totals will rise by 25% y/y to £50bn this year, this would still make it a …
30th April 2021
Recent data have highlighted the strength of the rebound in physical demand for gold, especially in India and China. But we don’t think this poses much of a risk to our forecast for the gold price to fall this year . According to the World Gold Council’s …
The third round of pension withdrawals in Chile will help to boost its economic recovery in the near term, but is unlikely to be as impactful as the previous two. The broader concern is that it signals a shift away from pragmatic policymaking, which may …
29th April 2021
While commodities and US equities often move in the same direction, this is not always the case. We expect poor returns from commodities over the next few years, but reasonable returns from US equities. The correlation between the annual returns from the …
Recent developments add weight to our view that Stockholm office values will rise by more than most other western European markets over the 2021-25 period. However, even in Stockholm, these gains will be much weaker than in recent years. In our latest set …
The slowdown in money growth in March in year-on-year terms was largely due to base effects. It was still in the double digits and should remain strong over the rest of this year at least. But with the economy operating some way below its potential, we …
The pandemic has lifted the ratio of corporate debt to GDP to the highest level since the late-1990s and the Bank of Japan now fears that defaults could rise sharply in struggling sectors. However, there are several reasons why this is unlikely to saddle …
Although it took a more upbeat tone on the economic outlook and acknowledged that inflation has risen in its statement released after today’s FOMC meeting, the Fed offered no hints that it was considering slowing the pace of its asset purchases, let alone …
28th April 2021
The proposed national preschool system could increase the labour force, and therefore potential GDP, by 1.2%, but the impact will be spread over many years and might be dwarfed by changes to immigration. The headline policy in the 2021 Budget (see here ) …
All four previous recessions in the UK led to a sharp slowdown or an outright fall in house prices. (See Chart 1.) But 2020 was very different, with house price growth accelerating to a six-year high despite the largest collapse in output for 100 years. …
The Central Bank of Egypt (CBE) opted to keep interest rates on hold at its meeting today and, with inflation likely to rise over the coming months, we think policymakers will keep rates unchanged until Q4. But if the recent weakness of inflation …
Although the valuation of the US stock market is now approaching its peak during the dot com bubble, we doubt that it will reach such giddy heights. This reflects our forecast for a renewed rise in long-dated TIPS yields and judgement that US corporate …
There were 1.14m vacant homes not being used for any purpose in the first quarter, enough to double the inventory of existing homes for sale. Record low interest rates and the prospect of further house price gains mean owners have been reluctant to sell. …
The $1.8trn in spending and tax credits in the American Families Plan would provide a relatively small boost to GDP growth as, like the earlier infrastructure proposals, it would be mostly paid for with higher taxes. With the Republicans even less likely …
The ECB is likely as part of the strategic review to place more emphasis on housing costs and may initiate the creation of a parallel price index that includes them, but it will not change the inflation measure that it targets. Greater consideration of …
The poor near-term economic backdrop means that occupier activity will remain weak this year. But we think that the tightness in supply will prevent office rents from falling and support rental growth beyond this year. The latest data take-up data show …
China’s census has revealed the first population decline since the Great Leap Forward, according to the FT. If this is confirmed and the beginning of a trend, China’s challenge in sustaining rapid long-run economic growth has become even harder. While …
27th April 2021
