The annual growth rate of M1 rose to a new record high in August but, with growth in the broader monetary aggregates now easing and bank loans continuing to decline, there is still little chance of that triggering a surge in price inflation. (See Chart …
7th October 2020
The surge in coronavirus cases in Russia looks set to trigger tighter restrictions in the coming months. But we doubt that policymakers will re-introduce a full lockdown. After all, it would be politically infeasible to do so at the same time as they …
6th October 2020
Fears over Dubai’s debts have re-emerged in recent weeks and, in this Update , we provide revised estimates of the Emirate’s debt pile. The short point is that the debts of Dubai’s government and of government-related entities remain large, and with the …
We estimate that the income tax cuts and other stimulus measures unveiled in today’s Budget will provide fiscal support of around 2.5% of GDP in 2021/22. That won’t prevent a major tightening in fiscal policy as the huge support provided during the …
After dragging its heels for several weeks, the government has finally appointed three new members to the RBI’s monetary policy committee (MPC). Not a great deal is known about their views on monetary policy but, given that the MPC tends to follow the …
The near-term outlook for Indonesia’s economy is dreadful. A failure to contain the virus means the country will experience one of the slowest recoveries in the region. But a series of landmark reforms passed by parliament yesterday could set the stage …
The RBA kept policy settings unchanged today but signaled that more stimulus is forthcoming. We now expect the Bank to cut the cash rate target, the 3-year yield target and the interest rate on the term funding facility to 0.1% next month. We suspect the …
Consumers appear to be much more miserable than the economic fundamentals would imply. But the prospect of a second wave of unemployment and the risk of future lockdowns are not captured well by the models. As such, consumer confidence is likely to stay …
5th October 2020
The narrowing in India’s goods trade deficit in September came on the back of a decent pick-up in external demand, while domestic demand showed encouraging signs of improvement too. But sustaining the pace of recovery in both will be difficult. India’s …
With the US election result likely to have limited near-term implications for world GDP, the main issue for the global economy is how it affects US trade policy. Joe Biden would take a less aggressive approach, but he would not prevent a further …
The output breakdown of Q2 GDP showed that virus containment measures hit the hospitality, recreation, and transport sectors hardest, while financial services were relatively unaffected. The more targeted nature of second wave restrictions suggests that …
2nd October 2020
There are tentative signs that the housing market mini-boom is running out of steam. We think house price growth and transactions are probably close to their peak. As pent-up demand from lockdown is expended in the coming months, we expect house price …
The resurgence in virus cases in the UK has led the government to reverse its advice on returning to the office. Given that many workers continued to work from home anyway, the impact of this change in policy is likely to be limited. That said, the new …
A collapse in foreign firms’ reinvested earnings and a stronger recovery in goods exports than imports have caused Poland’s current account surplus to swell to record levels during the pandemic. While some of these factors are likely to fade, we think …
While we continue to think that this year’s property downturn will be milder than in past cycles, next year’s recovery is looking more fragile. This in part reflects revisions to our economic view, but also structural changes which are weighing on the …
1st October 2020
September’s relatively strong batch of emerging market manufacturing PMIs suggests that recoveries in industrial production continued in September. But with the global rebound losing steam , growth in export-led EM industrial sectors is likely to slow in …
While it is not clear that inflation expectations are less well anchored than in the past, they are at a low level. With the actual inflation rate falling, this reinforces the case for further ECB policy easing. Christine Lagarde devoted several …
Today’s batch of manufacturing PMIs suggest that production continued to rebound in September, albeit at a slower pace than earlier in the quarter. The big picture, though, is that the state of the recovery in manufacturing is unlikely to be a good guide …
The central bank in the Philippines (BSP) left its main policy rate on hold at 2.25% today for a second consecutive meeting, but with the economic recovery proving to be one of the slowest in the region, we doubt the Bank has finished easing yet. The …
Despite the sharp drop in GDP, the relatively small fall in world trade has meant that industrial rents in port cities held up better than expected during H1. And we think that the ongoing recovery in global trade will prevent rents from falling this …
Surging demand has led to a sharp drop in the number of new homes for sale, with the fall driven by a collapse in the inventory of completed homes. A jump in single-family building permits will provide some support to overall new home supply but, given …
30th September 2020
President Lagarde’s speech today suggests that she will argue for a higher, symmetric inflation target and a move towards a form of average inflation targeting as part of the ECB’s strategy review. All else equal, this should support continued ultra-low …
If ever there were a sign of how extraordinary economic developments have been this year, India recorded a stonking current account surplus in Q2. This is unlikely to last long, as oil prices will rebound, remittances drop and the goods trade deficit has …
China’s September PMI readings suggest that the economy is now entering a period of above-trend growth, which is indisputably good news for the prices of commodities, particularly industrial metals . The official manufacturing PMI jumped to 51.5 – a …
A higher gold price, along with the ongoing recovery in industrial demand, particularly from China, means that the price of silver is likely to rise in the year ahead . The silver price has fallen sharply in recent weeks, from a peak of around $29 per …
Recent moves in real estate equity prices suggest that there is upside risk to our forecasts for industrial property values this year. However, even the industrial sector will not be immune if rising virus cases lead to widespread lockdowns. Earlier in …
The passing of Kuwaiti’s Emir Sheikh Sabah al-Ahmad al-Sabah has raised some concerns over political stability in the country, and, while the transition will probably prove to be smooth, the new Emir will accede to the throne facing several tough …
29th September 2020
In this Update , we consider the near-term outlooks for the yen, Japanese equities and government bonds under new Prime Minister Yoshihide Suga , and compare them with their performance in the early years of the tenure of his predecessor, Shinzo Abe. Abe …
Although WTI crude oil prices have partially rebounded from their second-quarter nadir, oil production in the US has yet to recover. We suspect that low prices and producers struggling to source financing will mean that US oil output won’t recover to …
EM financial conditions have tightened a little in recent weeks, although only in Turkey does this threaten to become a significant headwind to growth. Elsewhere, conditions remain very loose but the positive effect of this on activity will be dampened by …
Although the Norwegian krone has been the worst performing G10 currency so far in 2020 (see Chart 1), we expect it to make up some lost ground in 2021 even if it falls a bit more in the near term. The US dollar rose sharply against most other G10 …
The resurgence of COVID-19 in the euro-zone has hit Spain the hardest and hospital capacity there is under strain, most notably in Madrid. Restrictions have taken a toll on activity and stricter ones are likely to follow. So there is a serious risk that …
Most EMs in Latin America, Africa and South Asia that were battling worryingly large virus outbreaks appear to have passed the peak in recent weeks. That should allow a gradual scaling back of restrictions, supporting economic recoveries. Meanwhile, the …
China is ramping up its purchases of US energy and agricultural products as promised in the Phase One trade deal. But instead of reflecting a desire to meet its obligations to the US, we think China’s buying mostly reflects opportunistic purchases at low …
28th September 2020
Despite weakness in some urban apartment markets, which is set to weigh on home price inflation in Toronto and Vancouver, we see scope for the national average home price to rise by 12% by end-2022. While record home sales have made the headlines …
The fallout from COVID-19 will probably keep inflation subdued in the near term . But there is a risk of significantly higher inflation further ahead if earlier policy stimulus starts to push prices up sharply and central banks either fail to nip it in …
Having instructed many firms to cease trading during the lockdowns, governments understandably pulled out all the stops to prevent them from going under. However, we expect this support to be gradually withdrawn, causing the number of bankruptcies to …
Commercial property has outperformed both Treasuries and equities in the last two decades, but the fast-forward of structural change caused by COVID-19 will mean that in the next decade property is again likely to underperform equities. Over the last two …
25th September 2020
Short-time work schemes are not being used as much as they were in the spring, but they still account for about 5% of the labour force. So as euro-zone governments reduce support for jobs (in the way that the UK government announced this week), …
Despite falling back a little this week, we still expect most currencies in the Asia-Pacific region to make headway against the dollar over the next couple of years, led by a stronger renminbi. As we set out here , we have changed our view on the Chinese …
The Central Bank of Egypt (CBE) cut interest rates by 50bps at Thursday’s MPC meeting after a six month pause to the loosening cycle. Policymakers are likely to remain cautious about future easing, but we think rates will be reduced gradually over the …
The surge in lending growth during and immediately after lockdowns is well and truly over. But with the authorities tightening virus containment measures again and signs that the economic recovery is grinding to a halt, we wouldn’t be surprised to see …
Continued trade tensions between the US and China are providing a significant boost to economic prospects in Taiwan and Vietnam. Having also successfully contained the virus without significant economic damage, Taiwan and Vietnam are likely to be the only …
The experience from second virus waves in Australia, New Zealand and Japan is that consumer spending falls even if governments don’t impose major restrictions. However, there are three key reasons why second waves may be less damaging to economic activity …
Although a vaccine against COVID-19 may not dramatically alter the near-term economic outlook, we expect it would structurally improve the demand prospects for many commodities and therefore boost prices, particularly for crude oil . As a ‘second wave’ of …
24th September 2020
