Our new coal switching price indicator (CSPI) shows that, in the UK and the Netherlands, power generation using natural gas is much more cost-effective than coal. While this has been true for a while, it has been entrenched by the recent virus-related …
18th June 2020
A drop in house price expectations has helped boost demand from some looking to pick up a bargain, but it has also encouraged sellers to delay listing until the price outlook improves. Indeed, selling sentiment has seen a larger drop compared to buying …
We think that the recovery in equity prices has further to run, and now expect an even swifter economic rebound in China. Accordingly, we have raised our base metal price forecasts, which now show a return to their pre-virus levels as early as next year …
If the recent increase in US retail sales is anything to go by, consumption in the euro-zone will have recovered sharply now that the lockdown restrictions have been eased. Indeed, evidence from French and Spanish bank card transactions data suggest that …
Peru’s economy appears to be suffering one of the largest economic hits of any country from the coronavirus, which is likely to spur further policy easing. With short-term interest rates essentially at zero, further monetary loosening would initially …
We think today’s Monetary Policy Committee (MPC) decision to keep rates on hold at +0.10% and increase Quantitative Easing (QE) by £100bn is unlikely to be the last act of policy loosening. And while we wouldn’t rule out the Bank of England cutting …
The unexpected strength of the bounce-back in retail sales in May could mean that we are under-estimating the potential for economic activity to return to pre-pandemic levels soon. Nevertheless, capacity in some sectors, like eat-in dining, will remain …
Taiwan’s central bank (CBC) kept its policy rate on hold today at 1.125%, but given the poor outlook for the economy, we think it will cut again soon. Today’s decision to keep rates at 1.125% was unanimous. The decision was correctly predicted by 15 out …
Data published today show huge demand for the ECB’s targeted lending to commercial banks. So far, these operations and government loan guarantees have been successful in raising bank lending to the private sector, and there is scope for the ECB to make …
Bank Indonesia (BI) cut interest rates today for the first time in three months, but the modest 25bp cut suggests that it remains worried about the outlook for the rupiah. Given the bleak growth outlook we expect further gradual easing over the coming …
This morning’s decisions by the SNB and the Norges Bank to leave interest rates on hold at -0.75% and zero respectively were never really in doubt. Both banks are set to leave policy unchanged throughout our forecast horizon and, in the case of the SNB, …
The statement from yesterday’s Brazilian central bank meeting poured cold water on expectations in the market that the Selic rate would be cut further from its current level of 2.25% to as low as 1.00-1.50%. It seems that policymakers will consider only …
The rental market data have been surprisingly resilient. But informal rent cuts may be happening under the radar, while government support has delayed the crunch point for households. As a result, we have pushed back our expected fall in rents to the end …
Other forecasters were slow to appreciate the depth of the recession. Since then, the consensus GDP forecast has been revised down close to our own. But we think other forecasters are still underestimating how weak inflation will be, and how much further …
Banking sectors across the Middle East and North Africa are generally well placed to weather the current economic downturn but there are pockets of vulnerability, particularly in Qatar and parts of North Africa. And there is a growing risk of a wave of …
17th June 2020
A lot could still change over the next five months but, as things stand, Joe Biden appears to be the favourite to win November’s presidential election. Biden’s policies are more moderate than some of his earlier Democratic rivals’ and we would expect his …
The latest data highlighted a diverging trend between the two main measures of unemployment. Neither measure is perfect, but at least the claimant count is timelier than the ILO measure. Until the ILO measure catches up, we are putting more weight on the …
The rise in new infections in a handful of states across the South and West is nothing like the national surge we saw in late-March and early April that triggered widespread lockdowns . (See Chart 1.) It does illustrate that the background risk of …
The sizes and sources of second waves of COVID-19 are likely to be key factors in determining how much ground, if any, equities cede to government bonds in coming months. While our forecasts allow for new small, localised outbreaks in advanced economies, …
Worsening employment prospects for Indian migrants in the Gulf and the US mean that remittance inflows are likely to drop even as lockdowns are eased. While this won’t have severe ramifications for the balance of payments position, it will weigh on …
The decision by Chile’s central bank to leave its policy interest rate unchanged at 0.50% was accompanied by a statement which appeared to unveil a QE programme. The finer details will be fleshed out in the coming days but, along with a recently announced …
The high-frequency data that we track suggest that while all countries in the region are now rebounding, the pace of recovery varies significantly. The recovery is most advanced in China, Taiwan and Vietnam. The Philippines, Indonesia and India are doing …
The Canada Emergency Response Benefit has paid out far more than we expected and household income was probably broadly unchanged in the second quarter. Together with the confirmation today that the program will be extended by two months, this raises the …
16th June 2020
While we think that much of the rebound in emerging market (EM) currencies is now behind us, we still expect that most of them will make a bit more headway against the dollar in the second half of the year. Last week we revised down our forecast for the …
Most policymakers in Latin America are easing lockdowns even though the region is now the epicentre of the coronavirus pandemic. This may be less economically damaging than keeping stringent restrictions in place for longer, but the economic outlook in …
A continued return of risk appetite as the economy slowly recovers from the coronavirus crisis will boost equities and the pound so long as there is a compromise on Brexit. But with the Bank of England likely to keep interest rates close to zero and do …
There are increasing signs that the Swedish economy has weathered the crisis better than we first feared. Accordingly, we now expect GDP to contract by ‘only’ 2.5% this year (previously -7.5%). It has been evident for some time that Sweden’s economy would …
We were already expecting China’s economy to return to its pre-virus path faster than other major economies and sooner than most forecasters anticipate. But with output already back to year-ago levels, an even swifter recovery now looks likely. Since we …
The virus-related economic disruption has already dealt a huge blow to fossil fuel usage in European power generation. What’s more, we suspect that the transition towards renewables may be accelerated by post-virus policy support, which would have …
The effects of lockdowns have been felt unevenly across the region, with Romania and Turkey suffering among the largest falls in both retail sales and industrial production, while activity in Latvia and Ukraine has held up better. High-frequency data …
While demand for student accommodation has risen during past downturns, we expect it will be very different this time. Uncertainty around face-to-face lectures and travel restrictions could lead to falls in demand for student accommodation for 2020-21. …
The rising trade tensions between Australia and China in recent weeks are unlikely to meaningfully damage Australian exports. While China may introduce tariffs on Australian coal, it is unlikely to target iron ore and liquefied natural gas. Trade tensions …
The Bank of Japan today expanded its lending facilities further. The total amount of support for corporate funding is now equivalent to nearly 20% of the debt of non-financial firms and we don’t expect any further increases over the coming months. As …
The slight easing in the y/y contraction in goods exports and imports in May supports evidence from elsewhere that the worst has now passed for the economy. But both remain extremely weak, and a sharp improvement appears unlikely as external and domestic …
Lebanon’s government has made little progress with its economic rescue plan and there’s a growing likelihood that the sovereign debt and currency crises already underway will ultimately lead to series of bank failures. We already expected the economy to …
15th June 2020
The dramatic pandemic-related rise in government debt has attracted most of the attention, but it is the surge in corporate debt that could exert a bigger drag on the economic recovery in coming years. The current recession is unique in many ways, not …
We assume that a slim trade deal will be agreed by the end of this year and that a big step change in the UK-EU relationship will be avoided. But with the chances of a “no extension, no Brexit deal” rising, the risks to the UK’s economic recovery are on …
The potential expiry of the expanded $600 weekly unemployment insurance payments at the end of July could weigh on consumption. But those payments look more likely to see at least a partial extension and, in any case, Congress appears to be united on the …
Industrial output ground to a halt in April but high-frequency indicators including electricity consumption and air pollution levels suggest that activity has edged up since then. However, lasting damage from the lockdown and the threat of further sharp …
The latest IPF Consensus Forecasts revealed sharper than expected downgrades for the next few years, largely based on revisions to retail rents. Our views are now above this consensus, though we don’t see this as good enough cause for a further downgrade. …
12th June 2020
We now expect that the US dollar will depreciate further as risky assets resume their rebound and the global economy recovers from the coronavirus pandemic. At the start of the year, we forecast that the dollar would strengthen further in 2020 as …
Housing starts have remained relatively high in recent months. But given the hit to employment, falling rents and signs many are struggling with mortgage payments, house prices are unlikely to be as resilient. Housing starts dropped by 15% m/m to 167,000 …
To help clients get a better sense of the state of recoveries around the world, we have collated some daily indicators that are available in almost all major economies to construct composite Covid Recovery Trackers . The trackers are now published on our …
Our Taylor Rules suggest that monetary easing cycles have further to run in Brazil, Mexico and Colombia, and we have pencilled in additional interest rate cuts in all three countries. Moreover, monetary policy across the region is likely to be looser than …
11th June 2020
The factors that drove the resurgence in home purchase mortgage demand, including record low mortgage rates, the need for more space and the anticipation of finding a bargain, will not give a similar boost to apartment rental demand. Low interest rates …
The huge amount of borrowing undertaken by firms in the last three months is reassuring in the sense that businesses are getting the cash they need to make ends meet. But some firms won’t be able to cope with the higher debt burden. And those that can …
With monetary policy likely to remain loose for a long time and the world’s largest economies gradually re-opening, our view remains that equity markets will continue to make ground over the coming years. Back in March , when global equities were down by …
Policymakers in the likes of India, much of Latin America and parts of Africa are easing lockdowns even though the coronavirus is still spreading rapidly. This may be less economically damaging than keeping stringent restrictions in place for longer, but …
