We think that the prices of wheat and soybeans will tumble this year on the back of high stocks. However, the outlook is more encouraging for the prices of some of other agricultural commodities, such as corn, which should rise due to a gradual upturn in …
13th January 2020
Despite Spain’s relatively strong economic outlook compared to its European peers, with real prime rents at high levels and the economy losing momentum, we think that prime retail rents will fall in 2020. After growing by around 7% in 2018, there was …
Lower than expected interest rates would do little to boost house prices. After all, a shallower path for Bank Rate would reflect weaker than expected economic conditions. And in any case, there is only limited scope for further rate cuts, while mortgage …
10th January 2020
With mortgage rates set for a period of stability over the next couple of years changes in credit conditions, and in particular debt-to-income ratios, will be an important driver of house prices. Given the GSEs have been instructed to act …
There is no denying that last year was a disappointing one for commercial property, with returns likely to be at a decade low. While we do expect some improvement this year, we believe that the outlook will remain highly uncertain as the market deals with …
We think that oil prices will rise in 2020, as the market moves into a small deficit. In contrast, we expect natural gas prices to fall owing to strong supply growth and for this, in turn, to dampen coal prices . Last year, we forecast that the global …
Corporate bond markets in the US, the UK and the euro-zone have started 2020 on a strong footing, largely reflecting expectations that monetary policy there will remain accommodative for the foreseeable future. While we agree with investors that central …
Our measure of aggregate EM inflation, which hit a four and a half year high last month, should fall over the course of this year as the disruption caused by African Swine Fever fades. But this is largely a China story. For most EMs, higher oil prices and …
9th January 2020
Following the recent rise in US-Iran tensions, we estimate that the risk premium in the oil price briefly turned positive. After all, prices rose without there being any disruption to the physical supply of oil. However, regardless of what happens to the …
The surge in crude oil and natural gas production over the past decade has eliminated the petroleum-related trade deficit, but there is a risk that, echoing what happened in other countries that experienced similar surges, the energy revolution could yet …
The recent rise in inflation to multi-year highs across most of Central Europe has only a little further to run, but it will stay above central banks’ targets across the region this year. Policymakers will probably look through this and keep interest …
Recession risk remains low The chances of a recession in 2020 are still barely higher than the normal background risk. Our composite 12 month ahead probit model – based on the yield curve, financial conditions and various activity indicators – puts the …
Following relatively weak all-property returns last year, we expect that 2020 will see an improvement as the retail downturn bottoms out later in the year. Despite this, even a positive return of around 4% will be well behind what is expected for …
The French economy is likely to continue to perform reasonably well this year as solid consumer spending growth partly offsets fiscal tightening and a slowdown in investment. Moreover, the pensions reforms are likely to be passed, helping to keep …
South Africa’s manufacturing sector was struggling even before December’s power cuts, so production almost certainly fell in Q4. Given weakness in other sectors, we think that South Africa slipped into another technical recession last quarter. Figures …
While corporate earnings in the US will probably recover a bit this year, we think that they will fall short of expectations of a big rebound. And given that we don’t expect valuations to rise anything like as fast as they did last year, we anticipate …
Another surge in headline CPI inflation in December – most likely to a five-year high – would almost certainly bring an end to the RBI’s easing cycle. And a rise in core inflation over the coming quarters should prompt the central bank to switch to …
The continued slide in the ISM manufacturing index is increasingly hard to explain, but the wider evidence suggests the more upbeat Markit manufacturing PMI is providing a more accurate gauge of activity. The further fall in the ISM manufacturing index in …
8th January 2020
The further deterioration in the latest data have caused some to double down on their forecasts that the Bank of Canada will cut interest rates this year. But the weakness in November was mainly due to temporary factors and the business surveys suggest …
With interest rates set to stay lower for longer, we think that property yields will decline further in 2020. The exception is retail where, outside of Emerging Europe, yields are expected to rise in response to the bleak rental outlook. Nonetheless, even …
The deadly bushfires that are ravaging Australia are first and foremost a human tragedy. But there are economic effects to consider, too. We suspect that the impact on consumption and working hours will be negligible, while firefighters working longer …
7th January 2020
Rebranding the West African CFA franc as the “Eco” will have little economic effect; the new currency seems likely to be governed by the same FX regime as its controversial predecessor. The move may, however, scupper plans for a region-wide currency …
We forecast that the prices of base metals will fare better than precious metals in 2020. This view hinges on a modest recovery in the global economy, which should give a lift to metals demand at a time of already strained supply. That said, we think that …
Fears of a direct conflict between the US and Iran have eased over the past day or so, but the risk has not disappeared and the rest of the MENA region is vulnerable to any retaliation by Tehran. Attacks on oil facilities or an attempt to close the Strait …
While we could have been bolder with our forecast for rental growth in Europe, in particular Nordic offices, on the whole our forecasts for 2019 proved to be correct. With 2019 now behind us, it is worth looking back to see how our predictions for the …
We are cautiously optimistic about the outlook for commodities prices this year. While global economic growth will remain subdued, we think it will start to revive over the course of 2020. Therefore, there is now scope for price gains, particularly as the …
The Gulf states are likely to have recorded their second weakest pace of aggregate growth since the global financial crisis in 2019 due to oil output cuts and poor performances from non-oil sectors. While we think there will be a recovery in 2020-21, it …
The direct economic impact of the protests that began in opposition to the citizenship amendment bill is likely to be small. However, the protests have increased the chances of a larger fiscal stimulus in next month’s union budget, which would be positive …
6th January 2020
We forecast that the price of aluminium will rise this year even if, as we expect, the market flips from a deficit to a surplus. This is due to our expectation that investors will focus on a more positive backdrop for aluminium demand, amid low inventory …
3rd January 2020
The oil price has jumped today on the back of the US assassination of a powerful Iranian military leader. Given the backdrop of improved investor sentiment in the oil market, prices could remain elevated. That said, regardless of geopolitical events, we …
The assassination of Qassem Soleimani, a major figure in the Iranian regime, in a US airstrike last night has significantly raised the chances of an outright conflict between the US and Iran. We’ve previously estimated that a US-Iran war could shave …
The PMIs for December suggest that EM manufacturers, barring those in Latin America, ended 2019 on a firmer footing. Nonetheless, the external backdrop will remain challenging in 2020. The EM manufacturing PMI held steady at 51.0 in December for the …
2nd January 2020
Final manufacturing PMIs for December weakened a touch in most major economies, suggesting that global industrial activity ended 2019 on a slightly softer note. The surveys are still consistent with a modest rebound in growth in the manufacturing sector, …
The initial estimate of Q4 GDP suggests Singapore’s economy remains in the doldrums. However, the numbers are based on preliminary data from only the first two months of the quarter and are not normally a good guide to the final reading. According to …
China’s official and unofficial manufacturing PMIs remained strong at the end of 2019, which is positive news for commodities demand. However, we think that the ongoing slowdown in construction activity will constrain economic growth, and will weigh on …
The election of a Conservative government with a large majority is likely to mean a slightly improved commercial property outlook. While we do not expect a post-election rebound, lower interest rates and a slightly better rental outlook will bring less …
24th December 2019
After large gains for both bonds and equities in 2019, we expect that both will fare less well next year. And, in contrast to most other forecasters, we think that the US dollar will rise further in 2020. While we forecast that the global economy will …
23rd December 2019
Despite a weaker lira, Istanbul prime office rents have, perhaps surprisingly, held up in the last two years. We expect them to hold steady over the next two years, but beyond 2021, we forecast positive, but feeble, rental growth. Despite 2018’s recession …
Our big calls for 2020 are that economic growth and inflation will generally be weaker than the consensus expects, and that rates cuts are on the cards in Switzerland and Sweden. The first section of this Update looks at how some of our key forecasts for …
US commercial crude stocks remained high in 2019 owing principally to strong domestic production and increased Strategic Petroleum Reserve (SPR) releases. Looking ahead, we think that a further rise in export growth and higher domestic demand will reduce …
20th December 2019
This Update was originally sent to clients as a Rapid Response immediately after the vote in Parliament on 20 th December on Boris Johnson’s Brexit deal. The ease at which Johnson’s Brexit divorce bill passed through Parliament today illustrates the power …
The planned reforms to France’s retirement schemes that have provoked strikes and protests this month are important to put the country’s pensions and public finances on a more sustainable footing. But in the short term, they have few economic benefits and …
The confirmation that Andrew Bailey will take over from Mark Carney as Governor of the Bank of England on 16 th March 2020 doesn’t change the outlook for monetary policy. But Bailey will face many challenges during his eight-year term, such as navigating …
This Update was originally sent to clients as a Rapid Response immediately after the announcement by the PBOC. The Loan Prime Rate (LPR), the reference point against which banks now price loans, held steady in December. The one-year LPR was unchanged at …
Whatever the Brexit drama delivers in 2020, it seems that uncertainty will continue to hold back GDP growth and keep a lid on the pound, interest rates and gilt yields. But looser fiscal policy should generate at least some improvement in GDP growth and …
19th December 2019
ESG rules won’t significantly deter investment in International Oil Companies (IOCs) or reduce fossil fuels production. Instead, output is likely to be guided by underlying oil prices, which we expect to fall over the medium-term. We suspect that price …
The tone of December’s Monetary Policy Committee (MPC) statement and minutes was barely changed from November, indicating that the MPC is content to sit on its hands for the time being. As a result, we remain comfortable with our view that interest rates …
We think the euro-zone will continue to struggle in the first half of 2020 as Germany and Italy remain close to recession and inflation stays well below target, prompting the ECB to loosen policy further. Things should improve a bit in the second half of …
Despite a rise in oil prices over the past couple of months, the Canadian dollar and the Norwegian krone have underperformed most other G10 currencies. Nonetheless, we expect both to fare better next year. Since the start of October, the price of Brent …
