Net portfolio inflows into many emerging markets reached multi-year highs towards the end of 2020, which allowed a handful of central banks to lean against the wind and accumulate FX reserves. That said, early data suggest that net portfolio inflows have …
10th February 2021
Problems at South Africa’s state electricity firm, Eskom, are an increasingly painful thorn in the side of the economy with higher tariffs and an overhaul of the firm’s finances needed to put it on a sustainable footing and upgrade the country’s energy …
Despite our relatively conservative forecast of supply growth, we still think that the price of iron ore will fall sharply this year owing to slower growth in China’s demand . The price of iron ore had a superb 2020, rising from around $80 per tonne to …
Saudi Arabia’s unemployment rate has risen sharply in the past year and, while we expect it to fall back, the weak recovery means that it might take many years before it gets close to its pre-pandemic rates. Saudi Arabia didn’t publish labour market data …
The easing of the coronavirus restrictions will support a rebound in employment, but the recovery is likely to be slow going for the next few months due to limited progress with vaccinations. Admittedly, almost all restrictions will remain in place in the …
This morning’s announcement that the Riksbank left its policy settings unchanged will have come as a surprise to no one. Policymakers are in no rush to raise the repo rate from zero, but there are likely to be differences in opinion about how to proceed …
The availability of high loan-to-value mortgages has dropped sharply, and the cost of those that are still available has rocketed. So it’s remarkable that the share of mortgage advances going to first-time buyers hasn’t dropped. We put it down to the …
There are fears that, by making the government’s debt servicing costs more vulnerable to short-term rises in interest rates, quantitative easing (QE) is storing up trouble for when Bank Rate rises. However, right from the onset of the scheme, it was clear …
Almost a month since the start of India’s vaccination drive, it appears highly unlikely that the government will meet its target of inoculating 300m people by August. For now, we maintain our assumption that it will take much longer to vaccinate the most …
While the exchange rate has strengthened sharply, goods prices are unlikely to fall. That should allow rising services prices to keep underlying inflation stable. Goods inflation rose to its highest rate in nearly 20 years at the end of 2020. One driver …
The latest NFIB and JOLT surveys suggest that labour market conditions remain stronger than the headline data imply and add to the evidence that inflation will rebound this year. The drop in the job hiring rate in December is no surprise given the …
9th February 2021
A debt write-off would wipe out much of the recent increase in public debt burdens and give the ECB more scope to expand its balance sheet in the future. But the fiscal benefits for euro-zone governments would be smaller than they seem at first sight, and …
We think that UK equities will outperform their peers elsewhere this year, as some of the headwinds that they faced in 2020 fade or even act as tailwinds. The MSCI UK Index generally underperformed the rest of the MSCI World Index of developed market (DM) …
Even though we don’t expect there to be much, if any, long-term economic scarring from the COVID-19 crisis, a surge in the number of businesses going insolvent, a jump in the long-term unemployment rate or a sustained sharp drop in the number of …
One threat to economic recoveries this year is that governments withdraw their generous fiscal support too quickly. So far, that threat does not seem to be an imminent one. That said, the level of fiscal support is set to remain more generous in the US …
Disappointing vaccine developments mean that policymakers in Africa could be forced to keep restrictions on activity in place for longer, delaying economic recoveries and deepening scarring effects. Many Sub-Saharan African economies have endured second …
8th February 2021
As it is based on asking prices, the recently launched Common Haus Price Index (CHPI) could lead other house price indices by 1-2 months, which would make it a useful tool for forecasting short-term changes in house prices. While its track record is far …
We think that concerns about the commitment of Brazil’s government to fiscal sustainability will intensify over the next two years and weigh on its sovereign bonds and the real . While they have recovered a bit over the past few days, Brazil’s sovereign …
Our analysis suggests that the apparent sudden drop in the population of the UK last year has led to a huge rise in vacancy rates in the London and Midlands rental markets. House prices in those regions are also most at risk, both from the direct …
With job losses during the pandemic concentrated in a handful of sectors and demand set to rebound as vaccines are rolled out, we think that the unemployment rate will fall to 5.5% by the end of this year. The virus has hit some industries much harder …
While we still expect US Real Estate Investment Trusts (REITs) overall to fare reasonably well over the next couple of years, we no longer anticipate that they will outperform the US stock market. US REITs have underperformed US equities as an asset class …
5th February 2021
In our view, major central banks will generally take a more cautious approach to tightening monetary policy than they did in the past. This underpins our forecast that the yields of 10-year government bonds in both developed and most emerging countries …
The rise in global agricultural prices in recent months has sparked concerns about a surge in food inflation across the emerging world but we think that these fears are overdone. In any case, most central banks would probably look through higher food …
Indian government bond yields have increased sharply since the Union Budget earlier this week but we don’t think they will rise much further, and they may even decline slightly from here. To recap, Indian bond yields have increased by ~15bp this week, to …
Stubbornly high inflation and concerns about a weaker exchange rate mean that Hungary’s central bank (MNB) will keep its powder dry in the next few months. But we think that inflation will ease over the first half of 2021, which should create scope for …
The MPC voted to keep the repo and reverse repo rates on hold today but committed to keeping policy “accommodative” for the foreseeable future. We no longer expect any more rate cuts, but markets are too hawkish in expecting modest rate hikes within the …
The Central Bank of Egypt (CBE) opted to keep interest rates on hold at its first meeting of the year and, with inflation set to rise over the next 6-9 months, we think policymakers will keep rates unchanged for much of this year. But a drop in inflation …
4th February 2021
The markets have reacted well to the news that Mario Draghi has been tasked with forming a new government. It is hard to think of a better candidate to lead Italy through a crisis, but we doubt that he would have as transformative an impact on the Italian …
Many media reports have linked silver’s recent price volatility to last week’s targeted buying of a handful of small US equities by retail investors. But we reckon that it marks just another bout of silver’s well-known price volatility . The price of …
In our Future of Property research, we identified important post-pandemic shifts in most real estate sectors. How these trends interact will be key to the outlook for the urban locations where most real estate is clustered. We think it is premature to …
An improvement in the share of in-person interviews in the fourth quarter HVS survey helped bring the homeownership rate back down from its recent implausible highs. And, with home sales set to slow this year, we expect it will stay close to 65.5% over …
Our forecasts that the Bank of England would not be able to use negative interest until the middle of the year and wouldn’t be willing to speed up the pace of its quantitative easing (QE) proved to be spot on today. And the more optimistic feel of the …
Fed Chair Jerome Powell’s claim that the ‘true’ unemployment rate is still close to 10% only makes sense if the four million workers who left the labour force last year will return. It’s still too soon to tell for sure, but the evidence so far suggests …
The latest high-frequency and survey data suggest that the region’s economic recovery slowed in January, with Colombia seemingly faring worst. That said, the early signs are that the economic fallout from second waves of the virus hasn’t been as bad as …
The emergence of new Covid-19 variants, and euro-zone authorities’ slow progress with vaccinations, mean that there is a growing risk of another summer tourist season being lost. That would put a huge dent in the Greek economy and substantially delay the …
The waves of protests that have taken place across Russia in recent weeks pose the biggest challenge to President Putin in close to a decade and have put a risk premium on the ruble. The government is likely to loosen fiscal policy to boost its support, …
The announcement of FX purchase programmes by several EM central banks has evoked comparisons with the “currency wars” that followed the Global Financial Crisis. One lesson from this period is that FX intervention is unlikely to prevent further currency …
Given its significant office supply pipeline, we have revised down our rental forecast for Warsaw offices this year despite a recovery in the labour market. And while we expect rents to pick up in 2022, we think that the shift to remote working will keep …
3rd February 2021
We think that the US will return to a more traditional approach to the greenback under Joe Biden, and we anticipate that the overall effect of his economic policies will favour a weaker dollar. Since the mid-1990s, US policymakers have generally taken a …
The natural resources sector looks set to recover sooner than we previously thought, which should help to prevent GDP from falling in the first quarter despite the coronavirus restrictions and vaccine delays. The recent commentary has understandably been …
Despite some dire public health situations, GDP outturns from the raft of recently released data have surprised on the upside in Q4. While some of the strength was due to industrial and construction sectors, the surprise lay in the resilience of some …
The Bank of Thailand (BoT) left its policy rate unchanged at an all-time low of just 0.5% today and sounded more downbeat about the prospects for growth this year. The poor outlook for the economy means that interest rates are likely to remain very low …
The recent surge in building approvals has largely been driven by the HomeBuilder Grant and probably won’t last. But with home sales soaring and house prices rising, dwellings investment should continue to recover even once HomeBuilder ends. Building …
We are more upbeat about the outlook for the economy than the Reserve Bank of Australia. But the RBA seems keen to err on the side of caution. With the latest extension of its QE programme already ending in August, we suspect the Bank will announce one …
Germany’s state-level data show that the sharp increase in inflation in January resulted from higher energy prices and delays to winter sales, as well as changes to the weights of the HICP basket. There is no evidence of an increase in underlying price …
2nd February 2021
There seems to be little appetite for harsh IMF-mandated fiscal austerity among the leading candidates in Ecuador’s presidential election this week. The public finances will therefore remain in dire straits, and sovereign default risks will stay high, …
The limited impact of the virus on New York City office construction means that we now expect at least 10mn sq. ft. of office space to be added across 2022-23. This could cause the vacancy rate to climb by 400-500 bps in the next three years. As a result, …
The Fed’s Senior Loan Officer Survey reveals that access to credit is improving for consumers, which will support an acceleration in consumption growth this year. Although the latest Senior Loan Officer Survey shows a small net share of banks continuing …
Myanmar’s biggest investors and trading partners are its neighbours, notably China, which won’t respond to yesterday’s coup with sanctions. But the economic consequences could still be significant if the EU and the US tightened restrictions on the …
An often-overlooked factor supporting oil prices last year was the surge in stockpiling by China and India. But given the rebound in prices since then, and how much inventories have now risen, we expect stock-related purchases of oil in both countries to …
