Next Generation EU has the potential to provide a significant stimulus to the economy over the next six years. But the impact on GDP might be smaller than most expect, while the impact on long-run potential output is uncertain. And when it comes to fiscal …
27th April 2021
We expect risk premia on emerging market (EM) bonds to diverge over the coming years even if appetite for “risky” assets generally continues to increase . To recap, after rising sharply in February-March last year, risk premia on EM bonds declined …
When taken together, the Bank of England’s forward guidance and its economic forecasts imply that the Bank may not raise interest rates until late in 2023 at the earliest. That would be later than the current pricing in the financial markets of towards …
The decision by the Riksbank to leave the repo rate and its other policy settings unchanged today will have come as a surprise to no one. While policymakers are increasingly optimistic about the near-term outlook for the economy, they are clearly in no …
Real-time data on traffic, electricity demand and mobility suggest that, so far at least, India’s virus outbreak has had more of an impact on behaviour than it has on activity. We will continue to keep close tabs on the high-frequency data over the coming …
The Bank of Japan kept policy settings unchanged today as widely anticipated. And by predicting inflation well below its 2% target all the way to FY2023, the Bank signalled that Governor Kuroda won’t start to tighten monetary policy before his current …
Income support and limits on spending had already led households in advanced economies to build up almost $3.5tn in extra cash by the end of 2020, equating to 7.6% of GDP. And the stockpile of these supranormal savings will continue to grow in 2021. We …
26th April 2021
Our expectation that the Bank of England will end quantitative easing (QE) sooner than the US Fed and the ECB is unlikely to mean that UK government bond yields rise much further than elsewhere or that the pound is materially stronger. The UK’s success in …
The advanced economy flash PMIs for April painted a positive picture, albeit with recoveries in the US and UK seemingly far outpacing those in the euro-zone and Japan as restrictions were relaxed in the former two economies. Input prices are still rising …
23rd April 2021
We expect a strong recovery in TV and film-related employment will support office demand in LA over the next five years. Alongside a relatively small development pipeline and low office rents, this means we expect vacancy rises and rental value falls in …
Russia’s central bank (CBR) hiked its policy rate by 50bp, to 5.00%, at today’s meeting and the accompanying statement strengthened the central bank’s hawkish message about the need for additional tightening to bring inflation back to target. We think …
Although last year probably marked a low point for lending towards commercial property, we expect the recovery will be subdued this year. After all, lenders have indicated that the availability of credit will remain weak in the coming months and a slow …
The minutes of the Reserve Bank’s April policy meeting – in which interest rates were left unchanged – show that the MPC is committed to keeping policy accommodative to support the economic recovery. The surge in virus cases since that meeting is only …
We doubt that the recent fall in long-term Treasury yields will persist, and are sticking with our view that they will rise a fairly long way by the end of the year. To recap, after increasing significantly in the first quarter of this year, long-term …
22nd April 2021
Given the outlook for corporate earnings and Treasuries, we don’t expect the recent partial unwinding of the rotation trade in the US stock market to last. On the contrary, we expect the rotation to resume. To re-cap, the rotation that began last November …
In today’s ECB press conference, Christine Lagarde did not seem fazed by the recent rise in bond yields or the evidence of tighter bank lending conditions. But we suspect that policymakers will push back against further increases in yields until next year …
New Zealand is playing with fire by criticising the human rights situation in China’s Xinjiang province. While China is highly dependent on New Zealand’s flagship dairy, meat and logs exports, it could impose restrictions on smaller product categories. We …
The Bank of Canada’s decision to trim its asset purchases and pull forward its guidance on interest rates confirms that it has become more upbeat about the economic outlook. We expect it to bring its QE program to a close by the end of 2021 but remain …
21st April 2021
Surging lumber prices have led to delays in housing starts and an increase in some new home prices. But, while we expect lumber prices to remain relatively high over the next couple of years, the impact on starts and house prices will not persist. Beyond …
With retailers in Belgium set to remain under pressure due to shifts in spending, we think that prime high street rents will extend their falls this year. And with e-commerce remaining a dark cloud over retail, the recovery in rents beyond this year will …
In our recent Office and Apartment Outlooks, we identified Washington D.C. as the top performer over a five-year forecast in both sectors. Those expectations are driven by several factors influencing both supply and demand, but none of these is more …
20th April 2021
Even though we expect lumber demand to hold up well for some time, we still think that a rebound in supply will lead to a sharp fall in the price of US lumber over the next eighteen months . The price of US lumber (CME random lengths) has skyrocketed from …
The amount of slack in the euro-zone’s labour market diminished slightly at the end of last year. But crucially, it remained higher than it was in 2019 and it is unlikely to have fallen much further at the start of this year. Accordingly, there is still …
Bank Indonesia (BI) left interest rates unchanged at 3.5% today, and despite the downbeat outlook for the economy we see little room for further rate cuts this year. Today’s decision was correctly predicted by all 35 analysts polled by Bloomberg, …
The expected rebound in economic activity in H2, continued growth in online sales and constrained supply outlook should allow prime industrial rents in the main four markets to return to growth by the end of the year. However, we expect occupiers opting …
We no longer expect the MSCI Switzerland Index to outperform the MSCI USA Index over the next couple of years and have lowered our end-2021 and end-2022 forecasts accordingly. Back in August, we predicted that the MSCI Switzerland Index would outperform …
Commercial banks left the Loan Prime Rate (LPR) on hold today. Given that official efforts to rein in credit are being achieved by other means, we do not expect any changes to policy rates in the coming months. The one-year LPR was unchanged at 3.85% …
The additional stimulus outlined in today’s Budget was in line with our expectations and, while a few of the proposals will raise eyebrows, the total package should help to support a strong economic recovery. The $101bn of fresh spending measures …
19th April 2021
The early evidence supports our view that the reopening of non-essential retailers and outdoor drinking/dining venues last Monday marked the start of a rapid rebound in economic activity. The normal time lags mean we won’t have a clear picture of how the …
The fact that the US Treasury refrained from calling Switzerland a currency manipulator in its latest report lowers the temperature in US-Swiss relations but doesn’t change the policy equation for the SNB. Having designated Switzerland a currency …
New Zealand’s experience suggests that the planned increase in risk-weightings for investor housing loans in Australia won’t act as a big deterrent to bank lending. If investor loan growth started to run hot, the banking regulator would have to respond …
The fourth virus wave has so far been largely concentrated in Osaka and a state of emergency declaration in that prefecture alone would not prevent national output from rebounding in Q2. However, as the surge in cases in Osaka is driven by more contagious …
The US Treasury today held off from labelling Taiwan and Vietnam currency manipulators in its semi-annual report, despite them both meeting all three criteria officially laid down by the Treasury. Talks will now begin, but we doubt they will lead to a …
16th April 2021
We think the IMF’s anticipated $650bn Special Drawing Rights (SDR) allocation is unlikely to have a major market impact, although it might provide countries with falling exchange rates and low levels of reserves – such as Argentina and Turkey – some scope …
15th April 2021
The easing of virus restrictions and return to offices for many white-collar workers will mean that apartment markets in cities such as NYC and Washington D.C. will outperform this year. But we think the longer-term outlook is most favourable in Sunbelt …
Worsening virus outbreaks and tighter lockdown measures are weighing on economic recoveries across Latin America, particularly in Brazil and Chile. Rapid progress with vaccinations may allow Chile’s economy to turn a corner before long, but the rest of …
The latest China trade data show that ore imports are rebounding, though scrap imports remain subdued. Meanwhile, imports of refined copper have seen a renewed surge. Nevertheless, we continue to expect China’s imports of ore and scrap to rise while …
The ongoing revival in global demand growth together with constrained global supply means that the price of corn is likely to hold onto most of its recent gains for some time. That said, we think that the corn price will fall in 2022 as demand growth in …
The decision by the US to impose sanctions on newly-issued Russian sovereign debt has caused a sell-off in the ruble and sovereign bonds today, but we think any further market fallout or the macroeconomic impact will be limited unless sanctions are …
The widening in India’s goods trade deficit in March came on the back of a surge in monthly gold imports to its highest on record. But this was driven in part by one-off factors. Looking ahead, we expect gold import values to remain contained over the …
The decision by the Turkish central bank (CBRT) to leave its policy rate at 19.00% was accompanied by reassuring language that the MPC, under new governor Sahap Kavciouglu, aims to bring down inflation. But the language also suggests that they are looking …
With the notable exception of Turkey, the net capital outflows from emerging markets seen in February and March appear to have eased in recent weeks. Outflows may yet intensify over the coming quarters amid the backdrop of rising US Treasury yields, but …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and given that the recovery still has some way to go, the BoK is likely to leave policy accommodative for the rest of 2021. The decision to hold was unanimous and expected by all 20 …
Property investment volumes held up better than we anticipated in 2020, and we are expecting 2021 to be a solid year for investment. We think that pent-up demand and the reopening of the economy will help transaction volumes reach over $500bn this year, …
14th April 2021
At face value, news of a marked rise in industrial completions this year should imply that rents may come under pressure soon. However, we expect strong occupier demand and the limited amount of speculative space to support rental growth in the sector. In …
The UAE banking sector’s non-performing loan ratio has hit its highest level since 2005, although banks’ high level of profitability coming into the crisis has helped to shield them so far. And strong capital buffers mean that they look well positioned …
South Africa’s hard activity data for February show that the recovery resumed following a January slump on the back of a second virus wave. While the economy will probably finish Q1 on a stronger note, we think that major headwinds will weigh on activity …
Virus outbreaks have taken a sharp turn for the worse across several large EMs – including India and much of Latin America – and look likely to hold back economic recoveries in Q2. The recent experience of Chile suggests that it will be a long slog for …
The delayed start to deliveries of the J&J vaccine is yet another blow to the rollout in continental Europe and on its own could delay things by at least one month compared to a situation in which the recent pace of vaccinations is sustained. This Update …
The COVID-19 crisis has caused bad loans at South Africa’s banks to rise, but the impact so far has not been as bad as feared. That said, the hit to profitability in the banking sector, combined with an apparent reluctance among households and firms to …
