News about a vaccine has boosted financial markets and we have revised up our global economic expectations for the next two years or so. But while we think that this bodes well for the medium term, next year is still likely to be tough for most property …
2nd December 2020
The recovery is set to go into reverse in December amid the latest coronavirus restrictions, and we now think GDP will stagnate over the first quarter. But the high effectiveness of the first COVID-19 vaccines increases the chance that economic activity …
November’s headline manufacturing PMIs were generally encouraging and suggest that EM industrial sectors are faring well, even in Central & Eastern Europe where overall GDP will slump in Q4. We expect industrial sectors to continue to lead the EM recovery …
1st December 2020
The global manufacturing PMI rose for the seventh consecutive month in November. Restrictions seem to have weighed on industry in parts of Europe, but nowhere near as much as in March and April. And with recoveries elsewhere still strong, global …
A fresh rise in COVID-19 cases in Brazil and Mexico threaten to derail their recoveries in late-Q4 and Q1. On the flipside, the near-term outlook is relatively bright in Argentina, Peru and Chile. By the end of Q3, Brazil’s economy was relatively close to …
The distribution of effective COVID-19 vaccines is likely to be relatively quick in Emerging Europe, paving the way for robust economic recoveries that will leave economies much closer to their pre-virus trend by end-2022 than most other EMs. Poland is …
The ECB has said it is prepared to reduce its deposit rate further below zero. However, since any economic benefits would be small and it would be politically unpalatable to some on the Governing Council, we expect the Bank to instead focus on the TLTROs …
China’s November PMI readings surprised on the upside but were consistent with the rally in industrial metals prices last month. Given that fiscal stimulus is ongoing and export growth remains robust, metals demand and prices should remain supported in …
The RBA still sounded cautious when it left policy settings unchanged today. But if our more optimistic forecasts for GDP growth and inflation are realised, the Bank may not decide to expand QE in April. The Bank kept both its cash rate target as well as …
The government announced today that it expects to spend an additional $50bn this fiscal year to combat the damage from the second wave of the coronavirus. It also laid out plans for an investment-focused stimulus of between $70bn to $100bn, or up to 4.3% …
30th November 2020
We think that the outperformance of equities in EM EMEA and Latin America relative to those in EM Asia in November is a sign of things to come, as the world recovers from COVID-19. The outperformance of the MSCI EM EMEA and Latin America indices relative …
The recent surge in coronavirus infections means that economic growth will be slower than we previously assumed in both the fourth quarter and the first quarter of next year. As the associated restrictions on activity are eased early next year, however, …
The prospect of effective COVID-19 vaccines has prompted us to raise our forecast of global economic activity in 2021, which has positive implications for commodity demand. We think oil demand and prices, in particular, will rise sharply next year. But …
New Zealand is likely to be one of the few countries where output had recovered to pre-virus levels in Q3. Taken together with the recent positive news on the vaccine, we no longer expect the RBNZ to cut rates into negative territory. New Zealand removed …
The Bank of Japan’s new special deposit facility won’t lift the profitability of struggling banks meaningfully, nor should it result in a rise in money market rates. However, it is another sign that the Bank is becoming more worried about the impact of …
The distribution of an effective COVID-19 vaccine in India would significantly improve the near-term economic outlook, and we have revised up our GDP forecasts for 2021 and 2022. But the economy will still suffer repercussions from the crisis over the …
We think that the withdrawal of fiscal stimulus in China will offset any vaccine-induced boost to metals demand in 2021. And with supply bouncing back, we expect the prices of industrial metals to dip next year. By contrast, we expect that the price of …
27th November 2020
With widespread vaccination against COVID-19 now increasingly likely, we are revising up our oil demand forecasts for next year. And while OPEC+ will probably raise output a little faster in response, we still think that the oil market will remain in a …
While a difficult few months lie ahead for many economies, the news of effective vaccines has led us to revise up our world GDP growth forecast by 0.8%-pt and 0.5%-pt, to 6.8% and 4.6%, in 2021 and 2022. The positive effects will be biggest in DMs, while …
COVID-19 vaccines are a gamechanger for our economic forecasts and mean that we now think that by the middle of the decade the economy won’t be much smaller than if the COVID-19 crisis had never happened. This is a more positive outlook than the views of …
Following the run of positive news on the vaccine front, we now expect Switzerland and the Nordic economies to regain pre-virus levels in late 2021. Nonetheless, policymakers will be in no rush to tighten. We recently upgraded our economic forecasts for …
Retail sales are likely to fall further behind those in the US amid the latest coronavirus-related restrictions, particularly because the Canadian data do a worse job at capturing online sales. Nevertheless, we still expect the longer-term recovery in …
26th November 2020
We now assume that vaccines will be rolled out in the euro-zone next year and that most of the restrictions on economic activity are lifted during Q2. As a result, demand rebounds fairly rapidly and GDP increases by around 5% next year, regaining its …
The account of the last ECB Governing Council meeting confirms that policymakers were becoming more concerned about the outlook for both inflation and GDP growth in late October and that they were preparing to loosen policy in December. The vaccine news …
The announcement this morning by the Riksbank that it has left the repo rate on hold at zero was never in doubt, and positive news on the vaccine front means that we no longer expect it to cut back into negative territory next year. However, the expansion …
Lending growth is likely to pick up in the final two months of the year as firms again take advantage of loan guarantees to replace lost revenues during lockdowns. And the ECB looks set to support bank lending to the real economy by extending its Targeted …
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% in a unanimous decision, and with the economy set to rebound further in spite of a growing third wave of the coronavirus, further easing seems unlikely in the months ahead. Instead, rates …
Australia and New Zealand will benefit less than other advanced economies from a vaccine due to their success in containing the virus. Even so, we’ve lifted our 2021 GDP growth forecasts a bit and no longer expect the RBA to expand quantitative easing …
We now assume that one or more COVID-19 vaccines will be widely available in Japan next year, which suggests that the drag on activity from voluntary social distancing will come to an end. That should give a boost to GDP of around 1% spread over the next …
The Chancellor, Rishi Sunak, was right to say today that now is not the time to tighten fiscal policy. But given the OBR’s downbeat forecasts, the biggest danger is that the government is lured into withdrawing its support too much too soon. That could …
25th November 2020
The ECB looks set to announce an increase in the size of its Pandemic Emergency Purchase Programme in December and to extend the time for which it pledges to make net purchases and reinvestments. As a reminder, the Pandemic Emergency Purchase Programme, …
We anticipate that MSCI’s benchmark index of mid- and large-cap equities in the US will underperform its index of those in other developed markets, as investors continue to focus more on the roll-out of effective COVID-19 vaccines than on the current …
The launch of a new copper futures contract in China should help shift pricing power in metals markets towards Asia, but the contract will not immediately become a new global benchmark . Last week, the Shanghai International Energy Exchange (INE) launched …
The huge amount of personal savings built up during the pandemic, if unleashed, represents perhaps the biggest upside risk to the economy over the coming year or two. But even once the spread of the virus is brought under control, there are reasons to …
24th November 2020
Policymakers in Nigeria kept their benchmark rate unchanged at 11.50% today, highlighting the dilemma they face due to high inflation and a weak economy. But we think that the central bank will, on balance, opt to provide more monetary stimulus in early …
The US election outcome and positive vaccine news has triggered a jump in EM net portfolio inflows to their highest level since 2014. These inflows are likely to remain robust over the coming quarters. Our total EM Capital Flows Tracker is constructed …
Zambia became the first African government to default during the current crisis and debt risks are high in several other Frontier Markets, including Ghana and Kenya. The G20’s recently-announced ‘Common Framework’ to provide debt relief is a step in the …
23rd November 2020
As expected, today’s batch of flash PMIs confirmed that manufacturing has fared better than services in the face of the renewed virus wave. The strength of the US surveys was surprising and indicates that the economy has shrugged off the latest …
Nigeria’s Q3 GDP data showed that ongoing weakness in the oil sector was more than offset by a rebound in the non-oil economy and we expect this two-speed recovery to continue over the coming quarters. Figures released over the weekend showed that …
Although India’s economy has struggled more than most in the COVID-19 pandemic, its equity market has performed relatively well lately. We expect the contrast between the economy and the equity market in India to continue over the next couple of years. …
20th November 2020
US equity real estate investment trusts ( REITs) have underperformed ordinary US equities considerably in 2020 despite a plunge in US Treasury yields, which usually provides more of a boost to the former than the latter. However, we expect US REITs to …
The Treasury’s decision not to extend the majority of the Fed’s emergency lending facilities beyond the end of the year is unlikely to have a major impact on the economy given that those facilities made just $25bn of loans. At the margin, however, it …
The platinum market should move into a small surplus in 2021 as demand falls and production in South Africa rebounds strongly in the wake of lighter virus-related restrictions . In its latest quarterly report, the World Platinum Investment Council (WPIC) …
We have revised up our forecast for the euro against the US dollar, as we expect that conditions driving the euro’s appreciation will persist over the next few years despite near-term headwinds. The euro has appreciated more than 10% against the greenback …
