China’s commodity imports held up rather better than imports of other goods in September. However, we think import volumes will tail off in the months ahead amid faltering economic activity . China’s imports and exports contracted last month. (See the …
14th October 2019
The US is attempting to pluck low-hanging fruit first, rather than hold out for a more complete trade deal with China. But reaching an agreement on the more contentious structural issues remains an uphill battle and it still seems more likely than not …
Recent suggestions that the Bank of Japan will cut its policy rate have fuelled speculation that Japanese banks might be forced to start passing on negative interest rates to savers. But given that Japan’s city and regional banks do not have excess …
The Monetary Authority of Singapore (MAS) loosened policy today and given the current weakness of the economy – GDP figures also published today show growth in year-on-year terms held steady at a ten-year low – monetary policy is likely to remain …
While we broadly agree with the USDA’s latest corn supply forecasts, we are more positive about demand owing to recent changes to US ethanol policy. As a result, we expect corn prices to rise in the year ahead . The October World Agricultural Supply and …
11th October 2019
On the whole, dwindling exchange stocks have had a muted impact on prices this year as global growth has slowed. But as inventories creep towards critical lows, this sets the scene for a sustained recovery in prices in 2020 if, as we expect, global growth …
As the outlook for the global economy continues to worsen, we expect risky assets generally to struggle over coming months and emerging market equities to fall further. East Asian markets are likely to fare worst, in our view, while Indian equities hold …
Demand for Swedish property has been on a tear this year, even as the economy has faltered. This likely reflects investor expectations that growth will be supported by even looser monetary policy over the next few years. In this environment, competition …
The yield of 10-year government bonds in Portugal has fallen below that of their counterparts in Spain this week after Portugal’s Socialist Party retained power in Sunday’s legislative elections. While we think that the yield spread will stay low by past …
The monetary transmission mechanism in Brazil seems to have weakened recently, which is likely to prevent the sharp fall in market interest rates seen since 2017 from feeding through to a significant pick-up in credit growth. The recovery in bank lending …
10th October 2019
Given how much has been said (and leaked) about the ECB’s 12 th September meeting, there was little scope for fresh revelations in today’s account. But the report is consistent with our view that more rate cuts and corporate bond purchases will be easier …
Weak industrial figures for August present the very real risk that South Africa’s economy contracted again in Q3. Even if growth remained positive, the recovery seen in Q2 has clearly faded. Manufacturing production continued to decline in year-on-year …
Although US equity REITs still have comparatively high yields and low valuations, as well as solid fundamentals, we think that their outperformance of US equities will end given the outlook for Treasuries. 2019 has been a bonanza year so far for equity …
9th October 2019
Our GDP Tracker suggests that the intensifying drag from oil production cuts caused the Saudi economy to slow even further at the start of Q3. Things are likely to get even worse in the coming months and our GDP forecast for 2019 as a whole of 0.3% lies …
Both the Liberals and the Conservatives have proposed policies that could boost house prices. The effects would be small but, after a decade of tightening lending restrictions, it is hardly an encouraging sign for financial stability that the main …
We expect that global oil supply will remain constrained in 2020. But we also forecast somewhat stronger growth in demand next year and a pick-up in risk appetite on the back of monetary easing. As a result, we are raising our forecast of the price of …
A hike in the threshold at which mortgages require a home appraisal, from $250,000 to $400,000, is long overdue and has the potential to reduce closing times, raise closing rates and boost house prices. However, with mortgages sold to or guaranteed by the …
The strike at General Motors, together with continued problems at Boeing, means that the incoming manufacturing data over the next month or two will go from bad to terrible . That is another reason to expect economic growth to slow further in the fourth …
At first glance, weak global aluminium output so far this year can be chalked up to the slump in prices. However, lower Chinese production growth has more to do with government-led crackdowns on excess capacity which should continue even if, as we expect, …
Calls for any fiscal stimulus to support the Swedish economy are likely to fall on deaf ears, so the burden will continue to be entirely on the Riksbank. A combination of a dovish shift by the Bank and a further escalation in global trade tensions will …
We expect appetite for risk and monetary policy to continue to be more important factors than commodity prices in determining the direction of the Aussie, Kiwi and Loonie. With that in mind, we think that the relative resilience of the Loonie so far this …
The government’s latest no deal tariff plans released yesterday provide us with some reassurance that although there will be some hit to the economy from higher tariffs it won’t be as big as most feared. Although there’s little the UK can do to prevent …
While Paris prime retail rents rose in 2018, we doubt this marks the start of a prolonged upward trend. With tourist flows set to stagnate due to a weak global economy, rents will not rise by much before 2023, but the continued attraction of Europe’s …
We now expect growth in New Zealand to ease from 2.2% in 2019 to 1.5% in 2020. Along with a rising unemployment rate, weak economic activity will prompt the RBNZ to cut rates twice next year. Growth in New Zealand has gradually eased over 2019 as weak …
In a change to our previous forecast, we now think there’s a fair chance that the Bank of England will cut interest rates if Brexit is delayed. That means interest rate cuts now feature in two of our three Brexit scenarios and would only be avoided if …
8th October 2019
Côte d’Ivoire’s upcoming elections in 2020 raise political risks facing the economy. But our core view is that the vote will pass peacefully, and that looser fiscal policy combined with more favourable external conditions will boost growth to 7.5% next …
The prospect of Turkish military action in Syria has again raised the spectre of US sanctions. While these would probably be on the soft end of the spectrum, Turkey’s poor external position means that the mere threat of more action would weigh on the lira …
Other surveys suggest that the ISM manufacturing index is over-playing the extent of the factory-sector slowdown. But the wider evidence suggests the outlook for manufacturers is still pretty poor. The fall in the ISM manufacturing index to a 10-year low …
7th October 2019
Headline consumer price inflation is likely to have jumped in September on the back of a surge in onion prices. But that’ll hardly bring tears to the eyes of the RBI, as it is likely to have stayed below the 4.0% target. Another rate cut in December seems …
The recent stabilisation in MSCI’s monthly measure of shopping centre rental value growth appears to reflect coverage issues rather than signs that an improvement is on the way. As such, we are comfortable with our forecast that rental value growth will …
Once interest rates approach their lower bound, the RBA could provide long-term loans to banks and link their interest rate to the amount of new lending those banks undertake. However, if the Bank decided more stimulus was needed, we still think that …
As the outlook for the global economy grows gloomier, the US dollar is strengthening towards multi-year highs. We expect it will appreciate further as safe haven demand intensifies over coming months. After rising by 5% in 2018, the US dollar has …
4th October 2019
If faced with a steep downturn, most EM central banks would be able to cut interest rates substantially in order to cushion their economies. Interest rates in a handful of countries are close to the zero bound, but these are typically economies with …
The Reserve Bank reverted back to a 25bp rate cut today and has left the door open for further easing in the near term. But we are firmly non-consensus in expecting modest rate hikes by the end of next year. The MPC’s decision to cut the repo rate for …
Worsening relations between the Brazilian presidency and legislature threaten to delay the much-vaunted pension bill and will keep markets on tenterhooks in the coming weeks. It still looks like the reform will be approved, but the latest events suggest …
3rd October 2019
While the hike to Japan’s sales tax means its economy will probably contract in Q4, we suspect that the impact on bonds and equities there will be fairly small. However, we still think that Japan’s stock market will fall by the end of this year, as waning …
Chile’s economic slowdown this year was mostly due to weaker private consumption, caused by a fall in consumer confidence. But with the labour market strengthening and copper prices likely to rise next year, we expect that consumer spending growth will …
When put on a like-for-like basis, the Bank of England’s assumptions for how weak the economy would be in the 12 months after a no deal Brexit are not that different to our own. And both we and the Bank think that after a no deal economic growth would …
Aggregate emerging market growth is likely to stabilise at close to 4% y/y in the coming quarters, but within this several different economic cycles are playing out. The recent resilience in Central Europe and, importantly, China, is unlikely to last. But …
South Korean capital flows into European commercial property have surged so far this year. Against the backdrop of cheap credit and robust fundamentals in many markets, these flows look set to continue for at least another couple of years. However, …
Kenya’s economy remained weak in Q2, but there are signs that the key agricultural sector has held up pretty well given this year’s drought. With the drag from the sector easing, GDP growth will pick up over the remainder of this year and into 2020, when …
Dubai’s economy slowed in 2018 and the activity data for this year suggest that growth has stayed weak. The 2020 World Expo will provide a fillip to the economy, but a number of other factors mean that GDP will grow at rates of 1-2% over 2019-21, well …
2nd October 2019
Having cut its key interest rate by 25bps this morning, we now expect the Central Bank of Iceland (CBI) to stay in easing mode over the coming months and to reduce rates to 2.75% by year-end. The reduction in the seven-day deposit interest rate in Iceland …
We think that the ECB will increase its monthly bond-buying next year by purchasing more corporate debt. This would lead to a marked pick-up in bond issuance, but only a small increase in investment. The divisions on the ECB’s Governing Council become …
There has been a dramatic expansion in the co-working office sector globally over the last five years. As these operators use a different approach to traditional landlords, this brings new risks to office markets, though we feel it is probably too soon to …
We still believe that the unemployment rate would have to fall to 4.0% to meet the RBA’s definition of full employment. With the actual unemployment rate now at 5.3% and rising, that means that the RBA has more work to do. We reiterate our forecast that …
The rise in the EM manufacturing PMI to a six-month high in September adds to our view that EM growth is stabilising, even as advanced economies continue to lose momentum. The EM manufacturing PMI rose from 50.4 in August to 51.0 in September. While it …
1st October 2019
The Liberals would loosen fiscal policy by more than the Conservatives if they won October’s election, but neither parties’ plans would seriously transform the economic outlook. On Sunday the Liberals released the cost breakdown of their policy proposals, …
