After a large fall in July, the EM manufacturing PMI only edged up slightly last month, suggesting that the sector fared worse in Q3 than in the first half of the year. The PMIs did at least provide encouraging signs that price pressures eased. The …
3rd September 2024
Attention in Egypt is turning to the timing of the first interest rate cut. The lessons from the start of the last easing cycle in 2018 suggest that this is likely to begin in April, which is a little later than most expect. But the more important point …
Several advanced economies have raised tariffs on imports of green technologies and semiconductors from China to address their growing trade deficits in these goods and tackle a perceived strategic weakness. As long as the process is gradual, this …
Recent estimates add to the evidence that online retail shares are growing more slowly across Europe. There has also been little sign of convergence in online shares, supporting our long-held view that online competition will be less of a drag on southern …
Inflation in Korea fell back sharply last month, supporting our view that the central bank will cut interest rates at its next meeting in October. Inflation data published today showed that the headline rate fell from 2.6% y/y in July to 2.0% in August. …
Stretched affordability to sap momentum from house price rally With transaction volumes moderating and inventory rising, we expect the Australian housing market to cool in months ahead. In seasonally-adjusted terms, house prices across Australia’s eight …
2nd September 2024
This report was first published on 2nd September covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on 4th September. Growth has stabilised thanks to policy support The PMIs for …
Belgium's political crisis and high budget deficit have largely gone unnoticed in past couple of months while all eyes have been on France. This Update answers some key questions about its political situation and prospects for fiscal policy heading into …
30th August 2024
The PBOC appears poised to step up its efforts to prevent bond yields from falling, even though lower borrowing costs would help the economy right now. The inconsistencies in its policy approach are linked to the shifting whims of the Party leadership, …
29th August 2024
Prime office rents look set to rise by more than we had previously expected over the next few years given still low CBD vacancy, preferences for prime space and cuts to the supply pipeline in 2025-26. While we still expect rental growth to slow, our …
The ongoing reassessment of the monetary policy outlook in the US and Europe has (again) made the UK look like an outlier. We doubt that will last. Since the start of the summer, expected interest rates have fallen significantly in most major economies, …
28th August 2024
City offices have underperformed their West End neighbours by a wide margin since 2022. More encouraging recent data have led us to revise up our City rental projections, but we still expect stronger gains in the West End over the forecast horizon. …
Capital Markets Union (CMU) is regarded by many European policymakers as one of the key reforms needed to close the gap between EU and US productivity. But a full CMU is a long way off, and in any case fragmented capital markets are just one source of …
The pick-up in Nigerian GDP growth seen in Q2 will probably be followed by a renewed slowdown this quarter. But we think the backdrop of rising oil production, falling inflation and possible interest rate cuts should set the stage for a more sustained …
Our fair value analysis suggests that appraisal-based NOI yields need to rise by 50-60 bps from Q2 levels. But downgrades to our expectations for Treasury yields in the latter years of our forecast horizon mean the cyclical peak in yields implied by this …
27th August 2024
While the S&P 500 is now nearly back to its all-time high in the wake of Fed Chair Powell’s dovish message at Jackson Hole, underlying risk premia are still somewhat larger than before the July correction began and the previously all-conquering “AI” …
Rates left on hold, easing cycle will be more “stop-start” from here The Hungarian central bank (MNB) suggested that its decision to leave the policy rate on hold today, at 6.75%, was likely to mark a temporary pause in the easing cycle, rather than an …
We expect most Asian currencies to make further gains over time, even if their biggest rallies may now be behind them. Much attention in FX markets over the past month or two has focused on the surge in the yen, which has continued to make headway over …
The persistent strength in producer price inflation probably still mostly reflects the lagged influence of the surge in import costs rather than any pick-up in wage growth. If the yen keeps strengthening over the next couple of years, inflation will fall …
Although the EU is making progress in expanding its semiconductor production capacity, including through a new plant in Dresden, it is still a long way behind the US and Asia and is unlikely to catch up anytime soon. This will keep the EU reliant on …
23rd August 2024
The latest flash PMIs suggest that strong activity in the service sector has continued to support GDP growth in advanced economies in Q3, but that the outlook has worsened somewhat. Meanwhile, services price pressures have continued to ease, meaning …
22nd August 2024
You can find all our research on Mexico's election on a dedicated webpage . The swearing in of a new congress next month gives Mexico’s outgoing president, Amlo, a one month window to re-start plans to pass controversial planned constitutional …
There’s growing optimism that South Africa’s economy is set for a period of faster growth under the Government of National Unity (GNU). And we think a combination of lower interest rates and higher consumer spending will help to lift demand in the near …
The scale of the fall in negotiated wage inflation in Q2 was largely due to one-off payments made in Germany in March but not repeated in Q2. However, the underlying trend in wage inflation is clearly downwards and is a good reason to expect the ECB to …
The Bank of Korea left rates on hold again today but sounded very dovish. With policymakers now more confident about achieving their inflation target and domestic demand set to remain weak, we think the BoK will start to cut rates in October and that the …
Central bankers are unlikely to offer much forward guidance at this weekend’s Jackson Hole symposium, preferring to stress their “data dependence”. Since most economies are expanding, inflation is easing back to target and financial markets have …
21st August 2024
We don’t think the slew of inflation-busting public sector pay deals that have been agreed by the new government will prevent wage growth from slowing next year to the rates of 3.0-3.5% we think are consistent with the 2.0% inflation target. But the big …
Capital flows into EMs reversed course during the bout of market turmoil earlier this month. But the decline was no larger than that seen in other risk-off periods this year and inflows have since rebounded sharply, in line with the broader recovery in …
With the Fed set to finally start loosening policy and a soft landing still looking like the most probable outcome for the US economy, we think unfavourable rate differentials and continued robust risk appetite will lead to some further weakness in the US …
China’s announcement last week that it would curb exports of antimony, a critical mineral, was another example of global fracturing unfolding in the commodities arena. Recycling offers an obvious way for the US and its allies to shore up their own …
We believe that employment growth isn’t as strong as the Australian Bureau of Statistics is reporting because net migration seems to have weakened more sharply than the ABS is assuming. While it will take many months for the labour force survey to reveal …
The South African Reserve Bank’s (SARB’s) new “supercore” inflation measure adds yet another piece of evidence that price pressures are being brought under control. We think the SARB should now be confident that it can start its interest rate cutting …
20th August 2024
The prevailing view that, over the medium term, Colombia will maintain its position as Latin America’s fastest-growing major economy looks overly optimistic in light of the collapse in its savings and investment rates. GDP growth is more likely to come in …
The rapid expansion of commercial bank lending in Saudi Arabia has raised the risk of an increase in non-performing loans and heightened the exposure of the banking sector to both the real estate market and global risk appetite. But, Saudi banks are …
There are good reasons to expect services inflation to start falling again towards the end of this year and in 2025. But as long as wage growth remains high, services inflation will stay strong too. This morning Eurostat published the full breakdown of …
China’s electric vehicle exports rose strongly in July despite EU tariffs coming into force. This, alongside the continued surge in battery exports, lifted our measure of China’s green export volumes to a record high. The US tariffs on Chinese-made green …
We think the Riksbank will follow today’s 25bp rate cut with a cut at each of the three remaining meetings this year to take the policy rate to 2.75%. But we expect the terminal rate to be 2.5% which will be reached in early 2025. This is higher than the …
The protests that have swept several EMs in recent weeks are likely to have a longer-lasting economic impact in countries with weak balance sheets and/or where they lead to a major shift in policy. To us, that suggests that the economic hit from recent …
Brazilian assets have generally underperformed other EMs so far this year, but measures of risk premia still appear low to us, especially given concerns over public finances. While bonds may offer large gains by end-2025, our downbeat view on commodity …
The global macroeconomic risks surrounding a possible ceasefire deal between Israel and Hamas are asymmetric. An agreement – while having significant economic consequences for countries in the region – would probably not itself be a game-changer for …
19th August 2024
Israel’s economy slowed more than expected in Q2 as weak investment and supply constraints continued to hold back activity. A ceasefire to halt the conflict in Gaza would clearly be positive for the near-term growth outlook, but we doubt the economy would …
Kamala Harris unveiled her economic plan today and it appears to be focused on mostly small-scale pocket-book populist issues. Our main take-away is that, like her opponent Donald Trump, she has shied away from promoting any large-scale deficit-financed …
16th August 2024
Housing recovery yet to take off Interest rate cuts have so far failed to stimulate the housing market, although the sharper drop in borrowing costs this month will lend more support. Regional divergences are growing, with Toronto likely to struggle with …
While expectations for interest rates in the UK have already fallen by 40bp by end-2025 since mid-July, our projections for UK CPI inflation to remain below the 2% target for much of 2025 and 2026 suggest to us that the Bank of England (BoE) will ease …
15th August 2024
Conditions have stabilised after a turbulent few weeks in financial markets, and we expect the rebound in equity markets over the past week or so to continue. Our assessment is that the market fallout from the weak early August US data was …
Given the revival in house prices and recent falls in mortgage rates, we are raising our Q4 2024 house price growth forecast from 1.0% y/y to 2.0%. We now think that the number of housing transactions per year will increase from 1.02m in 2023 to 1.07m in …
Despite better occupier data in H1, the weak consumer backdrop and still elevated vacancy mean we expect German retail rents to only hold steady this year. Thereafter, we expect rental gains to lag the euro-zone average, especially in Frankfurt given the …
EM goods export growth has accelerated over the past year despite a slowdown in economic growth in DMs. We think this is being driven by three structural factors: Chinese overcapacity, the AI revolution and friendshoring. These will continue to shape …
Norges Bank’s decision to leave its policy rate unchanged at today’s meeting, at 4.5%, was never in doubt. However, we still suspect that continued declines in inflation will allow it to start cutting before the end of the year, which would be earlier …
Since the Riksbank’s last meeting in June, Swedish inflation and activity data have been weaker than policymakers expected. We think this will encourage them to cut the key policy rate from 3.75% to 3.5% next week and to indicate at least a further 50bp …
14th August 2024
