The falls recorded so far, most notably in the CEE region, coupled with our view that the initial recovery in retail sales in Europe has started to run out of steam, has prompted us to downgrade our prime retail rental forecasts for the euro-zone and CEE. …
10th September 2020
The Bank of Canada repeated today that, despite the booming housing market and signs that core inflation could soon be back at 2%, it has no plans to raise interest rates for years. Alongside its decision to keep interest rates unchanged at 0.25%, and to …
9th September 2020
The recent drop in new Covid-19 cases in much of Sub-Saharan Africa is likely to encourage policymakers to further relax restrictions on economic activity, which will give a leg up to recoveries. The sharp rise in daily new coronavirus cases across much …
The frugal 2021 budget proposed by Mexico’s government underlines policymakers’ fixation about public debt risks and concerns about their credit rating. Meeting policymakers’ new and ambitious targets may prompt a shift to fiscal tightening next year, …
Egypt’s economic recovery, a fall in the pound and a small rise in global oil prices are likely to cause the headline rate of inflation to drift up over the coming months. But it is unlikely to reach the 9% mid-point of the central bank’s target range. …
The experience of the aftermath of the Global Financial Crisis (GFC) chimes with our EM rates view on two counts. The first is that easing cycles in many EMs are now at an end (Brazil) or will draw to a close over the coming months (Mexico, South Africa …
The use of traditional monetary policy tools alongside financial repression will keep government borrowing costs in India in check over the coming years. That should help to ensure that only modest fiscal tightening will be needed to put the public debt …
Jacinda Ardern’s incumbent Labour party looks set to win a solid victory at New Zealand’s upcoming election. That might keep business confidence subdued, but it probably wouldn’t be as much of a drag on GDP growth as the opposition National Party’s plans …
The Russian ruble looks set to lose further ground over the coming months as geopolitical tensions and the threat of international sanctions ratchet up. We expect the ruble to drift towards 80/$ by year end, before rebounding to 72/$ (previously 65/$) by …
8th September 2020
Brent’s recent price drop to a two-month low shows the fragile nature of its price recovery. We think that an uneven recovery in demand, combined with the hangover of vast oil stocks accumulated in the first half of this year, will limit any price gains, …
While the number of new coronavirus cases in Brazil remains extremely high, strains in the country’s health care system have eased significantly in recent weeks, reducing the risk of fresh lockdowns. But by the same token, containment measures are only …
Proposals by the banking regulator and the RBA that banks will need to hold more government bonds could be interpreted as financial repression. However, the surge in the outstanding stock of government bonds was always likely to result in higher holdings …
The economy’s impressive initial recovery from the coronavirus recession will soon fade. That was always going to happen naturally once most sectors had reopened. But the prospect of some tax rises in the Autumn Budget, the resurgence in Brexit …
7th September 2020
Despite Thailand’s success in containing the coronavirus, the country is likely to record one of the biggest falls in GDP in the region this year. A collapse in tourism and a slump in automotive demand are the two main factors holding back the economy. …
Saudi Arabia’s economic recovery has faltered in recent months and the backdrop of fiscal austerity, the partial suspension of pilgrimages and oil production cuts mean that it is likely to remain slow going. The latest signs are that the recovery in Saudi …
China’s commodity import volumes remained high in August, reflecting the broader recovery in economic activity. We expect commodity demand to remain strong in the coming months but import volumes may ease back given the recent rise in prices of many …
In contrast to the surge in mortgage forbearance following the CARES Act, we doubt the recently announced eviction ban will trigger a jump in rental arrears. For those who can afford it, deciding not to pay the rent still comes with significant costs. …
4th September 2020
Although we think a further shift in real yields in the US vis-à-vis other major economies will keep the dollar under pressure, we expect the overall move to be far smaller than those of the 1980s which were accompanied by big swings in the greenback. So, …
The housing market recovery has exceeded all expectations and we have substantially upgraded our 2020 house price forecast. But as pent up demand runs out, a weak economy, tight credit conditions and the end of the stamp duty cut will hold back further …
Commercial real estate transactions are on course to fall by nearly 50% this year, despite a strong Q1. And with the latest data hinting that our downside scenario is now looking more likely, volumes could still end next year 40% lower than before the …
3rd September 2020
While the Bank of England might not follow the Fed and change its inflation remit, we doubt this will stop it from significantly loosening policy and from keeping it loose for a very long time. The Fed announced last week that it will now seek “to achieve …
The jobs report due on Friday should show employment continuing to rebound in August, but the ongoing weakness of demand in sectors like leisure and hospitality – which account for a higher share of employment than they do of broader economic activity – …
National statistics offices in the euro-zone have taken different approaches to estimating public sector services output during the lockdowns this year. This means that the extent of the falls in GDP may not be strictly comparable, notably for France. …
The reopening of schools this week could give a boost to GDP of around 5% as output in the education sector returns to normal and parents who have had to provide childcare get back to work. The impact that school closures had on the economy was determined …
The latest data suggest that, after one of the world’s steepest economic declines in Q2, Peru’s recovery is already stalling against a backdrop of high and rising new coronavirus cases. But for those willing to squint hard enough, there are some reasons …
2nd September 2020
The coronavirus crisis has caused domestic demand across the Gulf to slump and deflation is likely to persist, with the key exception of Saudi Arabia. Most places are well placed to deal with the negative repercussions of deflation and, if anything, …
New daily coronavirus cases have hit record highs across Central and Eastern Europe over the past month and authorities have responded by tightening restrictions at a local level. Health systems in Poland and the Czech Republic are well placed to deal …
Employment rose in Italy for the first time in five months in August, but this is unlikely to be the start of a trend. With the short-time work scheme becoming less generous and then expiring at the end of the year, we expect employment to fall further …
The recovery in manufacturing output has been relatively muted up to this point but, with goods consumption surging and, as a result, inventories now looking very lean for this stage in the cycle, we expect manufacturing output to climb back to its …
Proposed changes to Bank Indonesia’s mandate, which include a shift to focus more on growth and unemployment, could lead to major changes in how the central bank operates. However, given the country’s high level of foreign currency debt, policymakers …
Although the Norwegian economy is set to contract less sharply than most of Europe this year, the fact that weakness in occupier demand has occurred alongside a large boost to supply means that Oslo prime office rents will decline by a greater extent than …
Remittances to Africa appear to have held up fairly well so far but this is unlikely to be sustained. Weaker inflows will drag on economic recoveries and add to balance of payments strains in many countries, most notably Nigeria. The result is that …
The recent spike in coronavirus cases in Vietnam has had only a small negative impact on the economy. With the virus now seemingly under control again, Vietnam is still likely to be one of the few countries in the world to grow this year. Having gone 99 …
Ongoing virus-related supply disruptions as well as one-off factors such as phone tariff hikes have kept inflation higher than we had anticipated over recent months. But with food inflation set to drop sharply and demand set to remain depressed, we are …
The further rise in the EM manufacturing PMI to a nine-year high of 52.5 in August, from 51.4 in July, suggests that the EM recovery continued in the middle of Q3. But the rebound has been uneven across countries, with PMIs falling in countries recently …
1st September 2020
We suspect that some of the recent underperformance of energy stocks will unwind over the next few years if, as we forecast, the prices of energy commodities grind higher. Nevertheless, we think that the longer-term outlook for the sector is far from …
August’s rise in the global manufacturing PMI was good news with improvements in economies hit hardest by the virus offering particular relief. But the index points to fairly modest growth and it is somewhat disappointing that the recovery has not gained …
The completion of a deal to restructure almost all $66.2bn of Argentina’s international sovereign bonds will give the government some much-needed breathing space over the coming years, as will an upcoming $41.7bn local-law FX debt restructuring. However, …
The Fed’s switch to an average inflation targeting regime and revised interpretation of its full employment goal are a response to challenges which are common to many economies, including the euro-zone. We think the ECB will move in a similar direction …
The 11% q/q drop in GDP in Turkey in Q2 was smaller than we had expected and we now forecast the economy to slump by 3% this year (previously 5.8%). But the recovery over the coming quarters will be held back by weakness in the tourism sector as well as …
Japan will very soon have a new Prime Minister. Close Abe aide Suga Yoshihide is the current front runner in the LDP leadership contest and would likely keep policy firmly on the course set by Mr Abe. But even if Abe critic Ishiba Shigeru were to win, we …
China’s August PMI readings support our view that the economy will return to its pre-virus trend by the end of this year, which is positive for almost all commodities prices, but especially industrial metals . That said, metals prices have already had a …
The RBA today expanded its Term Funding Facility which should contribute to continued strong growth in the money supply. And while it didn’t indicate that additional stimulus is forthcoming, we still expect it to expand its bond purchases before long . As …
The Bank of Japan’s recent purchases of Treasury Bills have yet to feed through into the money supply as the government’s deposit account at the Bank has ballooned. That will provide a further boost to the money holdings of households and firms but we …
31st August 2020
The surge in corporate profits in Q2 happened despite a large drop in sales and mostly reflects the impact of the JobKeeper wage subsidy. With that subsidy being scaled back, corporate profits should come off the boil and business investment will continue …
Global oil supply fell to a multi-year low in the second quarter, and recent data point to output having fallen further in the third quarter. With demand reviving, we think the oil market is now in a deficit, which – assuming there is no ‘second wave’ of …
28th August 2020
The impact of the pandemic on property has superseded that of Brexit, but that’s not to say that Brexit risks can or should be fully discounted. While we expect a slim deal to be agreed this year, we don’t envisage it having a notable upside effect on …
Retail malls are set to fare badly in this downturn as Americans avoid enclosed spaces and adopt online shopping practices. But regional and super-regional malls, which were already underperforming before the outbreak as tenants shuttered stores and …
While we think that nominal interest rates and bond yields in developed markets will remain around their current ultra-low levels for some time, we think that their real counterparts will fall further in the US relative to the euro-zone and Japan. In our …
On the face of it, the rise in core inflation in several advanced economies in July seems to challenge the idea that lower demand will dominate lower supply in the tug of war over consumer prices. But we continue to think that spare capacity will keep a …
