China’s commodity import volumes surged in June, while exports remained in the doldrums. We expect this trend to partially reverse in the coming months as higher commodity prices will curb bargain-hunting purchases and a further pick-up in economic …
14th July 2020
The debt restructuring deal provisionally agreed between Ecuador’s government and a group of its creditors would, if implemented, ease near-term pressures on the public finances. But we are more pessimistic on its potential to help Ecuador achieve debt …
13th July 2020
One consequence of the new policies announced by the Chancellor last week is that the UK will soon enter a period of deflation. But this will be the good form of deflation, which is temporary, boosts real incomes and incentivises people to spend, rather …
On the face of it, history doesn’t offer much reassurance that the world economy will be able to return to the path it would have been on had it not been for COVID-19. Indeed, looking back at all the downturns that have taken place in the OECD since 1965, …
The latest stamp duty cut will bring forward some housing demand and, by increasing perceptions that the government is standing behind the market, the cut reduces the chance of a house price crash. That said, with the potential tax savings unable to …
The slump in industrial production eased in May, confirming that the recovery in industry is now underway. But given the likelihood of a renewed tightening in containment measures and the substantial damage already caused during the lockdown, the road to …
The recent launch of the European Commission’s hydrogen strategy marks a step forward in the region’s decarbonisation push in which it hopes to use ‘green’ hydrogen in place of fossil fuels. We answer five key questions about hydrogen technology and …
10th July 2020
The most recent UK economic indicators have been better than expected. This suggests potential upside to our commercial property rental forecasts. But there are significant uncertainties ahead and, with activity expected to be well behind its pre-virus …
9th July 2020
Turkey’s credit boom that started towards the end of last year has been turbocharged in recent months and this should provide some welcome support to the economy as it emerges from the coronavirus crisis. That said, the nature of the lending reinforces …
Hard activity data from South Africa confirm that the economy has been among the hardest hit across major EMs by the coronavirus crisis and, while the lockdown has been eased in recent months, we think that the recovery will be a lot weaker than most …
A surge in the money supply has piqued fears of a leap in inflation. But in our view, there is little chance that this expansion of the money supply, driven almost entirely by quantitative easing, will lead to inflation because demand is very weak. There …
Several EMs in Latin America, as well as South Africa, Nigeria, India and Turkey could use financial repression policies to deal with the legacy of higher public debt burdens resulting from the coronavirus crisis. This Update explains what form these …
As the US economy continues to recover from virus-related disruption, we expect the housing and retail sectors to rebound. This, along with a stronger Canadian dollar and restricted supply (owing to social distancing measures), means that we expect the …
We continue to expect the 10-year conventional Treasury yield to remain firmly anchored, even as the S&P 500 rises further. This would be a marked contrast to the increase in the yield towards the end of the Global Financial Crisis (GFC), which gathered …
The Central Bank of Sri Lanka (CBSL) cut both its deposit and lending rates by 100bps to 4.50% and 5.50% respectively at its meeting today, and given the poor outlook for the economy, we think the easing cycle has further to run. The decision was …
Daily price data suggest that food inflation has eased over recent weeks and, with demand also likely to remain depressed, inflation does not appear to be a pressing concern. The focus of policymakers should therefore be to support the economy as much as …
The government confirmed today that it is allocating additional funds to various COVID-19 related programs that will cause the deficit to widen to $343bn this fiscal year, or 16% of GDP. And with Finance Minister Bill Morneau also hinting that the …
8th July 2020
We recently raised our price forecasts for base metals, including lead, as we now forecast a quicker economic rebound in China. And though we expect lead’s near-term price recovery to be driven by reviving car sales, a faster shift towards EVs will weigh …
A combination of timely policy support and resilient cross-border banking sector flows appeared to alleviate a collapse in EM credit growth during height of the coronavirus crisis. These forces should continue to buoy credit growth in the coming months, …
The high-frequency data suggest renewed fears about the coronavirus are starting to weigh on consumption even in states that haven’t moved to reimpose restrictions, reinforcing our view that the pace of the economic recovery will slow over the next few …
CMBS delinquencies have risen sharply in recent months, yet we aren’t expecting a repeat of the real estate debt meltdown witnessed in the GFC. However, non-performing loan rates are especially high in the retail and lodging sectors, meaning that holders …
After blowing out in April, budget deficits in Latin America remained wide in May. And while a pick-up in economic activity should help tax revenues to recover and social welfare spending to ease over the second half of the year, the slow pace of the …
The £30bn (1.4% of GDP) of extra measures announced today by the Chancellor may go some way to speeding up the economic recovery from the coronavirus crisis and limiting the long-term hit to unemployment. But we still doubt that GDP will return to its …
The pick-up in mainland Norwegian GDP in May was a tad underwhelming, with the economy’s recovery now seeming to follow a shallow “U” rather than the deep “V” seen in the euro-zone. Nonetheless, the total loss of output this year is set to be much smaller …
Weak core inflation is likely to keep the headline rate in South Africa close to the bottom of the Reserve Bank’s 3-6% target range both this year and next. This should allow the central bank to keep interest rates low for longer than markets currently …
Tunisia’s public finances have deteriorated sharply over the past decade and the government’s debt burden appears to be on an unsustainable path. This would be exacerbated if external financing conditions tighten and the dinar weakens sharply. A sovereign …
While we remain optimistic about the outlook for equities and other risky assets, the rapid increase in new coronavirus cases, especially in the US, poses a key downside risk to our generally optimistic forecasts. As we set out here , our forecasts for …
The fact that there were signs of improvement in Scandinavian transactions in June provides some hope for the rest of Europe. But overall, commercial property investment will still face an uphill battle as uncertainty lingers and economic activity remains …
News that a major US shale oil producer filed for bankruptcy last week has raised concerns about a new wave of coronavirus-induced corporate defaults. But even if the default rate does pick up in the coming months, we don’t think this will prevent credit …
7th July 2020
Some indicators suggest the UK is lagging behind other countries in the race to recover from the coronavirus, and it faces some additional hurdles which could slow it down even more. That’s why we expect UK authorities to keep fiscal and monetary policy …
Borders are slowly re-opening across Emerging Europe, but international tourists are unlikely to return to the region in significant numbers for the key summer season. Romania and Russia are the least vulnerable and efforts to promote domestic tourism …
The post-lockdown rebound has been quicker than we anticipated, so we are revising up our euro-zone GDP forecast from -12% to -7% for 2020. That does not alter our view that the economy will remain below its pre-crisis level for a long time yet, and that …
Renewed coronavirus outbreaks in some parts of the world have not caused us to rip up our economic forecasts. The initial stages of the recovery have been faster than we feared and we had always assumed that a limited recurrence of the virus would cause …
The Swiss labour market is expected to hold up comparatively well this year which would normally bode well for occupier demand. But we expect a shift in bargaining power in favour of the tenant and competition from new supply to contribute to rental …
The slump in euro-zone GDP in March and April was just as large as we had feared, but the subsequent recovery has been quicker than we expected. As a result, we now think that GDP probably contracted by “only” around 12.5% q/q in Q2, though the falls in …
Bank Negara Malaysia (BNM) cut its main policy rate by 25bps to 1.75% today, and with the economic recovery still in its infancy, we doubt this marks the end of the central bank’s easing cycle. The decision to cut was no surprise, 18 of the 25 analysts …
The RBA sounded more optimistic when it left policy settings unchanged today. But with the recovery set to remain bumpy and inflation likely to weaken more sharply than the Bank is anticipating, we still expect the Bank to resume its bond purchases before …
The average value of a home purchase mortgage application hit a record high $359,000 at the end of June. But that doesn’t mean house price growth is set to take-off. An increase in the share of new home sales, tighter credit conditions and perhaps …
6th July 2020
The latest surveys and high-frequency data suggest that Latin America’s economic recovery finally started to firm up in June. But it is still lagging other EM regions – and Chile’s recovery is yet to get going. After a raft of disappointing economic news, …
Online sales surged during the lockdown and rose further even as the Australian and New Zealand economies were opening up again. We suspect online sales will remain high which means measures of physical location may understate the resilience of …
While all-property capital values lag real estate equity prices, the movement in REIT prices can also tell us something about sector performance. The staggered recovery in REITs from March’s low point supports our view that capital values for industrial …
3rd July 2020
The end of the port blockade in Libya should mean that the country’s oil production is restored, but we think that supply will be slow to return not least because of damage to facilities and weak global demand. By way of background, the dramatic loss of …
While the quicker than anticipated pick-up in high frequency data has meant that the fall in Greek economic activity is likely smaller than initially feared, retail rents are still set to drop sharply this year. The following recovery in Greek rents will …
We expect real estate yields to spike this year due to both a rise in the property risk premium and lower expectations for property income streams. However, breaking down the observed yield gap into rental predictions and the risk premium has more than …
2nd July 2020
Our Recovery Trackers suggest that activity generally continued to rebound heading into Q3. But higher infections seem to have taken a toll in some US states, while Latam is the weakest link in the global recovery. Our proprietary Covid Recovery Trackers …
A rebound in fuel inflation will push up headline inflation in most EMs over the coming months, even as food and core price pressures moderate. Alongside the recovery in activity, this means that the broad-based EM monetary easing cycle is approaching its …
Poland’s central bank appears to have become concerned about the strength of the zloty recently and the negative impact this could have on the pace of the economic recovery, suggesting that it is likely do more to loosen policy this year. We think that …
The hit to the luxury retail market and prolonged weakness in international tourism will cause Paris prime retail rents to decline this year for the first time since 2009. Although some rental recovery is expected next year, the virus outbreak has …
Given the success of the government’s job furlough scheme and the signs of a strong initial rebound in economic activity we now think that the unemployment rate will peak later, in June 2021 rather than in July 2020, and at a lower rate of 7%, …
The strong rise in the EM manufacturing PMI from 45.4 in May to 49.6 in June suggests that EM manufacturing is firmly on the road to recovery. We think that the rebound in activity will probably be fastest in China and Emerging Europe. The headline EM …
1st July 2020
