Despite the modest rise in job openings in May, the big picture remains that labour market conditions continue to slowly normalise, and the low quits rate still points to a sharp slowdown in wage growth. After the sharp fall in April, the marginal rise in …
2nd July 2024
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
The consensus is still downbeat on the outlook for retail rents, with growth expected to underperform even the struggling office sector. But with a decent consumer recovery on the horizon we think that pessimism is misplaced. As inflation falls back and …
The latest manufacturing PMIs suggest that the recovery in global industry lost some momentum at the end of Q2. While activity in emerging markets continued to grow strongly, industry was still struggling in some large advanced economies. Nonetheless, …
1st July 2024
The EM manufacturing PMI rose to a three-year high in June, driven by improvements in the surveys in much of Asia which have continued to benefit from strong export demand. Manufacturing recoveries are progressing more slowly in parts of Europe. The PMIs …
Much of the recent focus has been on France’s political turmoil, but Germany has had its own troubles with disagreement over the 2025 budget threatening the survival of the governing coalition. While we think an agreement will eventually be found, budget …
Saudi Arabia’s Crown Prince Mohammed bin Salman’s (MbS) ultimate succession to become king is inevitable and a formality. Having been the de-facto leader of the Kingdom for several years it may not result in much of a deviation in economic policymaking. …
The PMIs from Emerging Asia picked up strongly last month, but we doubt this will last given the subdued outlook for global demand. Meanwhile, the decline in inflation in Indonesia last month supports our view that the central bank will cut interest rates …
Housing market will cool in earnest Australian house price gains softened just a smidge in June as housing demand held up reasonably well. However, as strained affordability takes its toll, we still think that house price growth will ease markedly in the …
Surveys likely understate health of manufacturing sector This report was first published on Monday 1 st July covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd July. …
The slight increase in mortgage rates since the beginning of the year appears to have reached a tipping point for demand. At the same time, the supply of homes being put up for sale has increased. This combination of softening demand and more ample supply …
27th June 2024
News that some top-rated CMBS in both the US and Europe are set to make losses is in line with our previous view that distress will ramp up in 2024. But, to date, the troubled securities have all been backed by some of the worst-performing assets across …
If the polls are correct and Labour wins the election, the policies it implements and when it implements them will depend in part on the ‘headroom’ against the fiscal rules it is given by the Office for Budget Responsibility (OBR). We suspect the next …
Monday marks the 30 th anniversary of the introduction of Brazil’s currency, the real, as part of a stabilisation plan (the Plano Real ) which successfully tamed runaway inflation. For other EMs facing similar problems, most notably Argentina, the key …
CNB cuts by larger-than-expected 50bp, but delivers hawkish guidance The decision by the Czech National Bank (CNB) to deliver another 50bp cut to its policy rate today, to 4.75%, was a dovish surprise to most analysts (although not ourselves). That said, …
The upcoming French election continues to loom over euro-zone financial markets and the euro. We think it would take a worst case scenario in which France’s fiscal outlook worsens materially to generate a sustained fall in the euro. That is a plausible …
May’s data show a continued gradual increase in money and lending growth, though both remain slow. While the ECB’s loosening cycle is now underway, money and lending growth are set to remain subdued. The ECB’s previous monetary tightening caused the …
A soft start to 2024 for office demand and weak jobs outlook in Benelux suggest that recent rental outperformance will not last. With supply also rising, we think prime rental growth will slow to around the euro-zone average in the coming years. Prime …
While the labour market held up initially as job vacancies started to fall, fewer job openings are now pushing up the unemployment rate in earnest and we expect it to rise from 4% now to 5% by 2026. According to data released by the Australian Bureau of …
The escalating protests in Kenya will add to the near-term headwinds facing economic activity as well as raise further question marks over the government’s ability to push through fiscal consolidation measures. That could ultimately cause fears of a …
25th June 2024
Higher costs, lower risk, a better rental growth outlook and competition from less yield-sensitive buyers all help explain why residential yields have been below other commercial property sectors for the last 30 years. While some moderation in buy-to-let …
After a strong recovery post-pandemic, momentum in hotel revenue growth is likely to remain subdued over the next few years. With a stronger US dollar hindering the revival of the tourist industry, we suspect metros such as Austin and Dallas will remain …
We are generally pessimistic about the rental outlook in Germany (see here ), however, this conceals large variance across cities – most notably for offices between leader Munich and laggard Berlin . Munich prime rent growth has been among the strongest …
If the results of France’s election, or actions of the next French government, trigger contagion to other euro-zone countries’ bond markets, the ECB could respond by purchasing their bonds using the Transmission Protection Instrument (TPI). Under some …
Our China Activity Proxy suggests that economic growth weakened in May on the back of a fall in services activity. Industry also slowed, following months of outperformance. We doubt this marks the start of a downturn just yet – fiscal stimulus and strong …
24th June 2024
This Update summarises the answers to some of the questions which clients raised in our recent online briefing about the forthcoming French legislative elections. The questions are divided into three sections: politics, economics, and markets. (The online …
We held an online Drop-In session late last week to discuss the outlook for monetary policy following the June policy meetings of the Bank of England, US Federal Reserve and ECB. (See a recording here .) This Update answers several of the questions that …
The latest flash PMIs suggest that GDP growth in most major advanced economies slowed at the end of Q2. But weaker services activity hasn’t translated to softer price pressures, meaning central banks will take a gradual approach to loosening policy. Our …
21st June 2024
Recent political uncertainty in France has taken a big toll on equities there, but stock markets elsewhere in the euro-zone have generally avoided major selloffs. That’s broadly consistent with past episodes of country-specific flare-ups in the region, …
With all eyes on France, it is easy to forget that the Netherlands has also been experiencing political disruption over the last 12 months. But politics there has proved less disruptive to markets and we expect economic growth in the Netherlands to …
We think the S&P 500 will make further gains over the coming months, even though it’s already fared well this year and is approaching our existing end-year forecast. As such, we’ve revised that forecast up. Meanwhile, we think equities elsewhere will …
With inflation back to target the stage is set for a decline in interest rates. Indeed, we think that the 10-year gilt yield will have dropped to 3% by end-26. But we don’t think that will lead to much in the way of property yield compression. Rather, …
Latin American assets have generally underperformed those elsewhere of late, in part driven by rising risk premia on the region’s assets. We think these risk premia may rise further over the coming year or so, given our downbeat view on economic growth in …
The G7 loan to Ukraine announced last week and the narrowing window to approve a new debt relief package once the payment suspension with private creditors ends in August has shone the spotlight on Ukraine’s large external financing needs. This Update …
20th June 2024
Having cut the policy rate by 25bp at its last meeting, we think the Riksbank will stick with its guidance that it will keep rates on hold next week. But with inflation likely to fall below 2% in the coming months, policymakers will probably cut the …
We see three scenarios for French fiscal policy in the coming months. Even in the best case the spread of French over German bond yields remains higher than before Macron called an early election. In the worst case there is a fully-fledged bond market and …
The outcomes of the EM central bank meetings over the past 48 hours or so underscore the point that, while the EM monetary easing cycle is likely to continue over the coming quarters, it will no longer be led by Central Europe and Latin America. Central …
The proposal to save governments money by ending interest payments on commercial banks’ reserves is a lot more complicated than some of its advocates suggest. The extreme version could either cause central banks to lose control of monetary policy or …
The Bank of England predictably left interest rates unchanged at 5.25% today but continued to give the impression that the pieces of the puzzle are almost in place for it to cut rates. This lends some support to our view that the Bank will first cut rates …
There is a growing chance of a La Niña weather pattern taking hold in the second half of this year. While the economic effects would depend on its severity and length, La Niña events tend to coincide with higher food inflation across Latin America, which …
The SNB’s decision to cut the policy rate from 1.5% to 1.25% was probably more influenced by the appreciation of the franc over the last two months than any perceived easing in domestic inflation pressures. In our view, the SNB is unlikely to cut rates …
Investor concerns about the upcoming snap legislative elections have pushed up French government bond yields and we think they will rise further over the rest of the year. This has worsened the outlook for property valuations and in turn we now expect …
The continued divergence between export values and export volumes of the “New Three” underlines the downward pressure on prices from the rapid expansion in manufacturing capacity in China. Meanwhile, as the EU and US impose greater tariffs on Chinese-made …
The European Commission’s recommendation to open the Excessive Deficit Procedure (EDP) against Poland, Hungary and Slovakia for breaching the EU’s fiscal rules won’t force a drastic change in policymaking, nor will it deal with the structural factors …
19th June 2024
The Monetary Policy Report released by Chile’s central bank today alongside the communications to yesterday’s policy meeting suggest that the easing cycle over the next few quarters will be stop-start. We now expect a pause at the central bank’s next two …
South Africa’s new government of national unity (GNU) will welcome signs that the economy showed signs of perking up at the start of Q2. We think this burst of momentum has further to run, although growth will remain constrained by tight fiscal and …
We expect political uncertainty in France to maintain a floor under government bond spreads in the near term, not only in France but also in other vulnerable euro-zone countries. Further ahead, we see scope for spreads to fall back in Greece, Portugal, …
The gap between downtown and suburban office vacancy rates has widened alarmingly since 2020. This reflects pandemic-driven changes to working patterns, exacerbated by the cyclical slowdown. In our view, this shift cannot last. While any recovery will be …
18th June 2024
Easing cycle slows again, limited room for rate cuts in H2 The communications accompanying the decision by the Hungarian central bank (MNB) to cut its base rate by a smaller 25bp today, to 7.00%, were fairly hawkish and support our view that the base rate …
Data released this morning suggest that May’s surprisingly large jump in euro-zone services inflation may have been due to the most unlikely of culprits: Taylor Swift. So to some extent, the ECB can “shake it off” (apologies). Wage-sensitive inflation …
