The Brazilian central bank’s decision to remove its forward guidance at last night’s meeting indicates that Copom is preparing the ground to raise interest rates. But we doubt that policymakers will deliver the aggressive tightening cycle that most …
21st January 2021
Despite the softness in occupier activity, prime office rents in the French capital grew at a healthy pace in 2020. And with the labour market set to recover in the second half of this year and a tight supply picture, we think that Paris rental growth has …
Despite the headwind from the third virus wave, the Bank of Japan revised up its growth forecasts for the next couple of fiscal years. And while Governor Kuroda didn’t provide much insight into what to expect from the upcoming review due in March, we …
The main change to the Bank of Canada’s policy statement today was a signal that the pace of its bond purchases will be reduced as the Governing Council gains confidence in the strength of the recovery. As well as keeping the policy rate at 0.25% and …
20th January 2021
The rollout of COVID-19 vaccines has slowly picked up across the region and we think governments will ease most restrictions by the middle of this year. But there is a clear risk that vaccine rollout progresses more slowly and that the bar for easing …
The surge in narrow money growth is entirely due to regulatory changes and a substitution out of savings accounts due to low interest rates. (See Chart 1.) Our measure of M3 shows broad money growth has slowed, dampening fears that a surge in money will …
Brazil was Latin America’s economic outperformer last year, but the outlook for this year is increasingly challenging and we expect that the economy will fall behind its regional peers in the coming quarters. We now think that GDP will expand by 3.0% over …
Bank Negara Malaysia (BNM) left its main policy rate on hold at 1.75% today, but with the country once again in lockdown following a surge in COVID-19 cases, we think that the Bank will eventually be forced into action. Of the 23 analysts polled by …
In this Update we take a look at the important elections and political events that are set to take place across Asia over the coming year as well as any potential flashpoints, assessing the implications for policymaking and economic growth. Later this …
Commercial banks left the Loan Prime Rate (LPR) on hold today. But with monetary conditions already being tightened in practice and underlying inflation set to rebound, we think it is still likely that the PBOC opts to formally hike rates later this year. …
Saudi Arabia’s economic struggled at the end of last year and a combination of a slow start to the vaccination programme, voluntary oil output cuts and tight fiscal policy means that the outlook for the first half of this year is pretty bleak. Final GDP …
19th January 2021
Although several factors could conceivably support the dollar in the near term, we still think it will weaken overall this year as Fed policy remains accommodative and appetite for risk continues to grow. The first factor that could potentially drive the …
The speed at which vaccines can be rolled out will be a key determinant of economic performance this year, and this is likely to differ widely across EMs. This Update sets out a provisional framework for thinking about this process and when it will allow …
The surge in global shipping costs over the past six months is likely to be short-lived and several factors will dampen the full pass-through to consumer prices. Even so, it adds to a growing list of developments that point to a rise in inflation over the …
The detailed breakdown of China’s Q4 GDP data published today shows that the services sector, which had been lagging construction and industry, has returned to its pre-virus growth path, with all types of services activity now expanding in year-on-year …
Our COVID Mobility Trackers indicate that activity weakened towards the end of Q4, and data up to mid-January suggest that it took another leg down at the start of 2021. With countries still in the early stages of their vaccination rollouts, we are …
18th January 2021
The rise in oil prices this year is likely to prove insufficient to remove strains in African oil producers’ balance sheets. Currencies in Nigeria and Angola will have to weaken further, and policymakers may turn to more desperate or draconian measures to …
Completions of new homes have made a full recovery from their collapse in Q2 2020, but builders appear more hesitant to start new projects. Given we expect the housing market to endure a rough patch later this year, that is unlikely to change anytime …
Although rental growth prospects for prime property are weak compared to recent years, the outlook is better than for secondary property. As such, we think that investors will continue to focus on prime assets this year, allowing prime office and …
The widening in India’s goods trade deficit to an 18-month high in December still has further to run, particularly as a recovery in both domestic demand and global oil prices pushes import values higher. That would be enough to tip India’s recent current …
We think that the surge in many agricultural commodity prices is somewhat overdone. Although ending stocks for the major grains and soybeans will be lower in the year ahead, they will still be relatively high by historical standards, which is why we …
15th January 2021
High-frequency data show that the surge in net inflows to EM bond and equity markets seen last month is now easing, but inflows remain strong. We think that will remain the case as global risk appetite continues to improve. The data provide signs that the …
Although Treasury inflation compensation – i.e. gaps between the nominal yields of conventional Treasuries and the real yields of TIPS with comparable maturities – has risen sharply since the spring, we don’t think this will prompt less accommodative …
Advanced economy headline inflation rates are set to jump by an average of nearly 2%-pts in the coming months as energy inflation picks up and, in some cases, the effects of last year’s temporary cuts in VAT cuts go into reverse. But with core inflation …
While we doubt that the US stock market’s current valuation will prevent it from making further gains, the fact that valuations are much lower in other parts of the world suggests to us that equities there could outperform over the coming years. Much …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today in a unanimous decision, and with signs that the latest virus outbreak is coming under control, further rate cuts seem unlikely this year. Korea’s third wave of the virus had …
Despite the new South African coronavirus variant, it appears that PGM production in the country will hold up well, for now, since the virus-containment measures are not as severe . The recent surge in new daily virus cases, in part caused by the latest, …
14th January 2021
We don’t think that there is a bubble in the US stock market. Yet even if we are wrong, it may inflate further before bursting given the outlook for the economy and monetary policy. To re-cap, one widely watched gauge of the US stock market’s valuation is …
The latest China trade data showed that commodity import volume growth eased back a little in December. But tailwinds from 2020’s stimulus should keep import volumes strong for a while yet . China’s exports climbed by 18.1% y/y in US dollar terms, …
Recent movements in the REIT market add weight to our view that structural factors, rather than cyclical ones, will determine the outlook for property markets over the coming years. In turn, irrespective of a successful vaccine rollout, the recovery in …
France’s tight restrictions are set to be in place for at least another month or two, so GDP will not recover strongly during Q1. However, although the slow start to the vaccine rollout poses a downside risk for 2021, we think the pace will pick up enough …
13th January 2021
Our working assumption is that the vaccine rollout proceeds fast enough for governments to start lifting restrictions in April and that the majority are lifted during May and June. This Update sets out these assumptions in more detail and discusses the …
Although Chinese equities have bounced back a bit so far in 2021, they have still underperformed those elsewhere since the news on vaccine efficacy in late 2020. We expect further underperformance this year. There was a stark contrast in the relative …
In this Update , we take a look at the key elections that are scheduled across the emerging world over the coming year and outline their implications for economic policy and growth . Table 1 gives a summary of the major elections taking place across the …
Egyptian inflation is likely to rise over the next 6-9 months due to stronger food and fuel inflation, as well as a weaker pound, which will prevent the central bank from resuming its easing cycle for much of this year. But a drop in inflation late this …
The latest lockdown will keep rental demand in London very weak and prolong the drop in rents there. There is no doubt that they will recover in the summer if vaccines are successful and the virus restrictions are eased, but we think that some of the …
After staging a stellar recovery in 2020, there is considerable momentum in metals prices as we embark on the new year. That said, while prices may rise further in the near term, we think that they will start to ease back in the second half of 2021 as …
Our GDP forecasts for this year sit some way above the rest of the market. The greatest risks to this upbeat view stem from unanticipated shifts in the virus and the fight against it, rather than the more orthodox macro events that typically derail …
Many commentators are arguing that firms will shift towards a “hub and spoke” model following the pandemic. But we think the arguments for this approach are not as strong as they first seem, and that other strategies will dominate in the years ahead. The …
12th January 2021
The plunge in small business optimism in December is mostly noise related to the election, but the clear signal from both the NFIB and JOLT surveys out today is that inflationary pressures appear to be building . The NFIB headline optimism index tends to …
If euro-zone households spent all of their forced savings from last year, it could provide a boost to GDP growth in 2021 of as much as 3%. In practice, we doubt that it will be anything like that large. Instead, we think that only some of these savings …
With the notable exception of oil, we are generally negative on the outlook for commodity prices this year. While oil should benefit from a vaccine-related revival in global transport activity, we expect that the prices of industrial metals and …
The shift towards orthodox policymaking at Turkey’s central bank has supported a rally in the lira and, so long as the policy shift sticks (as seems increasingly likely) and the external environment remains supportive, we think that the currency’s …
The decision by the Malaysian government to place the country under a two-week lockdown to slow the spread of the virus is likely to hit the economy hard. We are cutting our growth forecast for 2021 from 10% to 7%. We also now expect the central bank to …
We expect the prices of most energy commodities to rise in 2021, as demand revives in line with the global economic recovery. But coal prices are likely to fall back, as demand growth in major consuming regions drops back after the winter weather-related …
11th January 2021
While we have revised up our end-2021 forecasts for the Australian dollar and the New Zealand dollar against the US dollar to reflect the strength of their recent rallies, we still think that the Kiwi will outperform the Aussie over the next couple of …
Government reform of leasehold will reduce payments from leaseholders to freehold landlords a lot in some instances. In this Update, we provide two examples of how the changes will affect “enfranchisement premia” – the cost of buying the freehold or …
After hitting a decade-low in 2020, we think that commercial property returns will turn positive in 2021, but any improvement is likely to be modest. This reflects the delayed recovery in the economy following tougher restrictions in Q1 and continued …
