The slowdown in Qatar’s economy over the past decade should come to an end in the coming quarters as the start of production at the Barzan gas project boosts growth in the hydrocarbon sector. But tight fiscal policy and a slowdown in credit growth are …
11th September 2019
With job creation driven in part by self-employed workers, the recent resilience of the labour market appears to be less positive for occupier demand. What’s more, the weakness in economic activity and falling job vacancies suggest that office-based …
The impact of the trade war between the US and China on the UK economy has been small, even allowing for the indirect effects on investment and the financial markets. Admittedly, trade tensions will probably intensify further from here. Even so, the …
The trade war has probably lowered Chinese demand for Australian exports by curbing investment in factories and warehouses. But the trade tensions have contributed to the weakening of the Australian dollar, which is boosting net trade. While a further …
The latest NFIB and JOLT surveys point to a drop in business equipment investment over the rest of the year and provide more evidence that labour market conditions are no longer tightening. The small fall in the NFIB index in August suggests that, in …
10th September 2019
When the Brexit process comes to a head in October the economy could shift onto a new trajectory. This Update sets out the key events that could affect which of our forecasts the economy follows. The first thing to point out is that there won’t be an …
Early-warning indicators suggest that Hong Kong’s banking system is primed for a crisis. And banks face multiple shocks from an economic recession, a housing market correction and capital outflows. But conservative lending standards and strong capital …
The usual seasonal uplift in demand should support the price of Pacific coal until end-2019. However, we expect average prices to fall in the years ahead owing in large part to weaker demand prospects . The price of Pacific coal has tumbled over the past …
We doubt that Central and Eastern European (CEE) currencies will be able to regain any of the ground they have lost against the euro over the next year or so. The Hungarian forint is likely to be the worst performing currency in the region, while the …
9th September 2019
The sharp fall in market interest rates over the past 12 months is starting to support the economy, with activity growth in rate-sensitive sectors like durables consumption and housing rebounding in recent months. With income growth slowing and the …
The 2020 budget presented by Mexico’s finance ministry at the weekend suggests that there will be a tilt towards providing modest stimulus to the struggling economy. But the big picture is that the government is continuing to pursue fiscal discipline, …
The change at the helm of the Saudi energy ministry raises the chances that the current OPEC+ output deal is extended beyond its current expiry date of March next year, which would probably require the Kingdom to keep its oil output below its quota. The …
China’s commodity imports ticked up in August, in part due to strong infrastructure spending. But we expect them to weaken in the months ahead as temporary factors fade and construction activity tails off . China’s export growth turned negative in August, …
The recent strong pace of house price gains is unlikely to last as income growth is set to remain subdued. We expect house prices to rise by around 5% next year and in 2021. A rebound in house prices is good news for vehicle and furniture sales, but …
Russian central bank governor, Elvira Nabiullina, used the post-meeting press conference to hint at a possible further rate cut by year-end, supporting our view that the easing cycle has further to run. For our part, we think slow growth and weak …
6th September 2019
The PBOC will release a portion of the reserves commercial banks’ hold at the central bank. While this will pull down interbank rates in the short run, the PBOC will need to cut its policy rate to make the lower interbank rates stick. But even if policy …
After spending much of the last year as an outlier, IHS Markit has fixed the Halifax index. In line with the other main measures, the index is now recording sluggish house price growth. And with the usual month-on-month volatility now greatly reduced, the …
Although we are revising down our once-bullish forecast for the 10-year US Treasury yield, we think that it has fallen too far and will rebound to 1.75% by the end of 2019 and rise significantly next year. Since early October 2018, the yield has fallen …
Headline consumer price inflation is likely to have risen in August, due in large part to a renewed pick up in food inflation. But it will remain comfortably below the RBI’s 4.0% target. And given the weakness of GDP growth in Q2, further rate cuts are …
We expect EM currencies to come under further pressure over the coming quarters, but the falls are unlikely to be on the same scale as the ones which ended previous easing cycles. As a result, most EM central banks are likely to cut interest rates further …
5th September 2019
We continue to expect a modest rebound in coffee prices by end-2019 as currently low prices force many high-cost producers to exit the market altogether . Coffee prices have plunged since July, owing largely to a sharp depreciation of the Brazilian real. …
Yesterday’s announcement by Hong Kong Chief Executive Carrie Lam that the government will withdraw the controversial extradition bill that sparked the current political crisis has raised hopes that tensions in the territory will start to subside. But …
The decision by the Riksbank to leave its repo rate on hold at 0.25% this morning was never really in doubt. However, its hawkish tone and cautious approach to cutting its forecasts for the repo rate poses serious risks to its credibility. Given that all …
This Update was originally sent to clients as a Rapid Response immediately after the vote in Parliament late on Wednesday 4 th September on the Prime Minister’s call for a general election on 15 th October. Tonight was a good night in Parliament for the …
4th September 2019
The Bank of Canada has become more concerned about deteriorating global conditions and, given our view that global growth will slow further, we continue to expect the Bank to cut interest rates in October. Alongside its decision to keep the policy rate …
The fact that investors are now pricing in looser monetary policy in Sweden highlights the extent to which the Riksbank has fallen behind the curve. Anything less than a substantial dovish shift in the Bank’s tone and forecasts tomorrow would be a big …
The formation of a coalition between the Five Star Movement and the Democratic Party reduces the risk of a renewed clash with the EU over fiscal policy, but it does not dramatically alter the economic outlook. We think that the economy will continue to …
While the bulk of the extra spending unveiled today in the 2019 Spending Round had already been announced, its overall stance was a bit looser than had been anticipated. This could raise GDP growth by about 0.2ppts in 2020 and by 0.1ppt in 2021, …
Under any plausible growth scenario Greece’s credit rating is likely to remain well below investment grade over the coming years. Among other things, this means that Greek bonds will not be included in any fresh round of ECB QE, even if, as we suspect, it …
Yesterday’s MPC statement suggested that Chilean policymakers will follow yesterday’s 50bp cut with more easing. The latest growth and inflation data have been weak, and there is a window for further rate reductions. We have now pencilled in an additional …
Following the vote in Parliament to push on with legislation to rule out a no deal Brexit, a general election is on the cards either before or after a delay to Brexit. With the Conservatives ahead in the polls, a no deal Brexit may will remain a strong …
This Update was originally sent to clients as a Rapid Response immediately after the vote in Parliament late on Tuesday 3 rd September on the first step of plans to delay Brexit from 31 st October to 31 st January 2020. Tonight’s decision by Parliament to …
3rd September 2019
The rise in the EM manufacturing PMI for August is further evidence that the slowdown in EM GDP growth has bottomed out. But the surveys remain consistent with sluggish growth, and we continue to expect most EM central banks to loosen policy over the …
The small uptick in the global manufacturing PMI in August offers little comfort about the state of the world economy. The index still points to very weak global production growth, the downturn in the US is deepening and the future output indices have …
We think that low oil prices and a continued slump in the property sector will cause investment growth in Colombia to slow in the coming quarters. This is one reason why our growth forecasts sit at the bottom of the consensus range for this year and next …
The recent sharp rise in Saudi banks’ wholesale borrowing isn’t yet a major cause for concern, but it does mean that credit growth is more vulnerable to a shock that causes external financing conditions to tighten. Saudi bank’s foreign liabilities have …
South Africa’s economy made a surprisingly strong recovery in Q2, growing by 3.1% q/q saar, but growth remained weak at a year-on-year rate. Given soft demand and low petrol prices, we expect that inflation will remain subdued, opening a brief window for …
Indonesia’s announcement of an imminent ban on exports of nickel ore has sent nickel prices to a five-year high. While trending higher initially, we expect prices to slump next year as supply is incentivised . Last Friday, Indonesia - the world’s largest …
Disappointing Q2 GDP figures out today underlined the weakness of Nigeria’s economy. This supported our below-consensus view that growth will remain trapped at around 2% in 2019 and 2020. Figures released this morning showed that economic growth in …
There is a wide range of plausible outcomes for the economy if the Labour Party were to win a general election. But our inkling is that the most likely result would be a moderately weaker economy than otherwise, modestly higher interest rates and bond …
The RBA sounded a little more optimistic when it left interest rates unchanged at today’s meeting. But with external headwinds intensifying and the labour market set to weaken further, we still expect the Bank to cut interest rates to 0.5% over the coming …
The events in Parliament over the next week and a half will be crucial in determining whether Brexit will be delayed beyond 31 st October, whether there’s an election or whether there is a big step up in the chances of a no deal that could hit the …
2nd September 2019
Labour’s proposed Right to Buy scheme for private tenants could have severe unintended consequences. The supply of property available to rent would fall, pushing up rents across the board. Moreover, if rented homes could be bought for a discount, the …
The capital controls introduced by Argentine President Mauricio Macri over the weekend may, in the short term, help to stem capital flight and slow the pace of FX reserve depletion. But their imposition might make it easier for a future left-wing …
China’s official and unofficial PMIs diverged in August. But both remain consistent with slower year-on-year growth in the remainder of 2019, which does not bode well for energy and industrial metals prices . China’s Caixin manufacturing PMI jumped to …
The government’s plan to merge several state-run banks is another step in the right direction towards fixing the beleaguered system. It follows a recent increase in the size of the recapitalisation package and strengthening of the bankruptcy code. But …
The Bank of Korea sounded more bearish on the outlook for the economy even as it left rates on hold today. As such, we continue to expect more easing this year, with another 25bps cut in October. Today’s decision followed the first rate cut in three years …
30th August 2019
Concerns around the economic outlook have encouraged banks to tighten mortgage lending standards, offsetting some of the impact of lower interest rates on home sales. Surveys suggest that tightening will continue. Alongside low inventory, that will act as …
29th August 2019
Measures of covenant strength suggest that retail sector and West End office tenants are most at risk of default. With only a small share of these properties under-rented, this is consistent with our expectation that yields will increase the most for …
The surge and contraction in GDP over the first half of the year can be blamed on the original 29 th March Brexit deadline. While we expect a similar pattern in Q3/Q4 due to the current 31 st October deadline if there isn’t a no deal, we doubt it will be …
