The decision by OPEC+ to keep oil production lower over the rest of this year means that oil sectors in the Gulf will grow more slowly than we had previously anticipated and we have revised down our GDP growth forecasts for this year and next. The …
3rd June 2024
Having lagged behind other emerging market (EM) currencies for most of the post-pandemic period, the Polish zloty has lead the pack over the past six months. While we think that most of this rally has now run its course, we expect the zloty to stay …
With the government debt-to-GDP ratio likely to trend up over the medium term, and the budget deficit set to stay above 3% of GDP, we suspect that France will be subject to further rating downgrades in future. The risks are significantly higher in the …
South Africa’s final election results confirmed that support for the ANC fell far short of a majority, leaving it reliant on a coalition with one of the larger opposition parties to stay in power. The newsflow over the weekend suggests that the chances of …
The manufacturing PMIs for Emerging Asia remained weak in May but have been a poor guide to the hard data on activity over the past year anyway. However, the PMIs have been a decent guide to price pressures and the latest data suggest the risk of a …
This year’s minimum wage increase will be a bit smaller than we had anticipated. And with the looser labour market putting downward pressure on wage growth among workers not covered by the minimum wage and awards, we expect wage growth to slow faster than …
While house price growth accelerated rather sharply in May, stretched affordability points to a renewed slowdown. Indeed, most leading indicators point to a renewed moderation in price growth. Allowing for seasonal swings, house price growth across the …
This report was first published on Friday 31st May covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Monday 3rd June and the Caixin services and composite PMIs on Wednesday 5th June. Recovery still ongoing The PMIs for May …
31st May 2024
The stronger than expected Q1 GDP data in several major economies suggest that the global economy got off to a strong start in 2024. But we expect global growth to fall back to a slightly below-trend pace in the next few quarters, as China’s fiscal …
30th May 2024
During the coming months, we expect falling goods and energy inflation to pull down the headline inflation rate in Sweden. This should encourage policymakers to cut rates from 3.75% currently to 3.00% by the end of the year. However, we are not pencilling …
We suspect that monthly core price growth will accelerate marginally from the very soft rates seen in the first four months of the year but, on the whole, core price pressures should remain muted. That sets the stage for both core and headline inflation …
Sovereign bond yields in Russia have surged to multi-year highs this year as markets have increasingly questioned the trade-off between the war effort on the one hand and policymakers’ ability to maintain fiscal stability and control inflation on the …
29th May 2024
A victory for Claudia Sheinbaum in Mexico’s election on Sunday is likely to see a continuation of Amlo’s generous social policies – which will also make Banxico’s fight against inflation harder. The main points of contrast with Amlo are that she will face …
While German property yields stabilised in Q1, further indications of rising distress give us confidence in our view that property values there have not yet reached the bottom. The stabilisation in German prime all-property yields in Q1 has led some to …
The latest IPF Consensus Survey showed limited change on the previous forecast round in March. There was a small upward revision to all-property rental growth expectations for 2024, but a downgrade to total return expectations, which implies yields are …
While the timing of the sharp hit to UK commercial real estate values owes much to the ill-fated “mini-Budget” of September 2022, we think the UK’s role in leading the valuation downgrades also owes to its relatively insulated lending market in this …
28th May 2024
The debt-to-income restrictions launched by the Reserve Bank of New Zealand today won’t restrict the flow of new mortgage lending. In fact, the concurrent easing of restrictions on loan-to-value restrictions will result in slightly looser lending …
Resolution of China’s property crisis would result in residential sales being substantially higher than today. Sales could rise by a third. But we wouldn’t expect prices to increase by much, if at all. And property construction activity will be weaker in …
24th May 2024
We think the kiwi and the aussie strength will continue over the next couple of years as we expect they will be among the last developed economies to start an easing cycle. The aussie and the kiwi have been among the best performing G10 currencies since …
The sharp drop in frontier market sovereign dollar bond spreads this year has caught many by surprise. We think there’s a case that the bond rally may have gone too far in Argentina, Ecuador and Tunisia. But the decline in spreads in some frontiers, …
Spanish industrial rent growth beat expectations in Q1 this year, outpacing rises elsewhere in the euro-zone. However, this was mainly due to Barcelona, where we have raised our prime rent forecast. Madrid rent gains were more sluggish and this trend is …
The latest flash PMIs suggest that GDP growth in advanced economies has continued to gain momentum in Q2. And central banks may take comfort in the fact that services price pressures seem to be easing. Our estimate of the flash DM composite output PMI …
23rd May 2024
Croatia has established itself as one of the fastest growing economies in the EU and we think that it will maintain GDP growth of around 3% p.a. over 2024-26. Income convergence – which has been rapid in recent years – will continue over the rest of this …
We still think inflation will fall faster than the Bank of England is expecting, but in the light of April’s CPI release we now expect the downward trend to be slower and smaller. As a result, we have shifted back our forecast for the timing of the first …
Putting the politics aside, the high number of migrants coming to the UK for work is the main reason why the number of people willing and able to work isn’t shrinking. The provisional data show that net inward migration to the UK was 685,000 in the year …
Corporate credit spreads have been near historical lows in recent weeks, and we think they will remain close to these levels in the coming months. The first two charts below illustrate how narrow the latest levels of US corporate credit spreads are …
The strength of healthcare employment and spending growth is because the sector is still recovering from the pandemic and also thanks to the jump in Affordable Care Act (ACA) enrolments. Employment and spending have almost caught up with their …
We think equities in the Asia-Pacific (APAC) region may benefit most from improving sentiment towards China in the near term. But we think that economic / market exposures to the AI revolution, not to China, will be the bigger influence on the relative …
Having underperformed most other EMs since the pandemic, we think that returns of financial assets in South Africa will continue to disappoint. The outlook would worsen if the African National Congress (ANC) ends up forming a coalition with radical …
We don’t think the pick-up in euro-zone negotiated wage growth in Q1 will stop the ECB from cutting interest rates in June. But the continued strength of pay pressures reduces the chance of the ECB cutting rates rapidly in the second half of the year. The …
The Bank of Korea left its policy rate on hold today (at 3.5%) and appeared to indicate that interest rates would not be cut until it was confident that inflation would fall back to target. Given our view that price pressures will ease further over the …
India has made impressive progress in raising its share of global high-end electronics exports over the past few years. But, worryingly, it has failed to capture any additional market share in the lower-end manufactured goods which are typically more …
We’ll be discussing what the election means for the economy and financial markets in a 20-minute online briefing at 9.30am BST on Thursday 23rd May. (Register here .) The general election on Thursday 4 th July, which the Prime Minister announced today, …
22nd May 2024
After exiting recession in Q1, Saudi Arabia’s economy should continue to expand over the rest of this year on the back of strong private non-oil growth and higher oil output. But next month’s OPEC meeting is likely to be a close call and if the group (led …
Although it left rates unchanged at its meeting today, the RBNZ indicated that interest rates may have to stay higher for longer. However, we think the Bank is overstating the upside risks to the inflation outlook. Accordingly, we still think there’s a …
The sharp rise in Brazil’s goods exports and the widening of the trade surplus since 2019 have been a point of strength for the economy. But we think these will reverse course before long. This feeds into our below-consensus GDP growth forecasts and our …
21st May 2024
The latest apartment rent data are consistent with our view that rental growth will be sluggish this year. Although single-family rent growth has fared better, we suspect it will soon start to slow again. Zillow reports that apartment rents continued to …
The strong pick-up in Andean economies at the start of this year confirms that their painful rebalancing process has run its course. GDP growth will be stronger this year than last – unlike in Brazil and Mexico. Chile is likely to be a regional …
Some of the structural problems in China’s economy have their roots in its excessively high savings rate (and underconsumption). For many other EMs, savings rates are also a problem but for the opposite reason – they’re too low . This is particularly so …
The political turmoil in Vietnam, which has led to a number of key leaders being sacked from their posts, is undermining the country’s reputation for stability, which until now has been one of its key selling points to foreign investors. The political …
20th May 2024
The death of Iran’s President Ebrahim Raisi yesterday creates greater uncertainty over the succession planning for the next Supreme Leader. But, taking a step back, the balance of political power within Iran means that there is unlikely to be a major …
Having soared to a record high level under the Biden administration, we expect US shale oil output to peak this year before contracting in 2025, driven by a combination of further industry consolidation, productivity improvements running out of steam, and …
Whilst export values of the “New Three” fell for the sixth consecutive month in y/y terms in April, export volumes remained close to their record peak. Meanwhile, the sharp drop-off in China’s exports of solar panels to India following the re-tightening …
The next German federal election will be crucial in determining how Germany will respond to its structural economic challenges. This Update answers some key questions on what to expect from the election and its implications for economic policy and …
At our recent roundtable we shared our view that strong rental prospects mean residential property is likely to outperform other commercial property sectors over the next five years. The slides from the event are available on our website . Across the …
17th May 2024
The recent sharp drop in industrial REIT prices appears to have been tied to Prologis’ Q1 earnings call, which referred to especially weak leasing in Q1 and a cut to expected year-end net operating income. We aren’t too alarmed by either – slow Q1 …
There will be some upward pressure on services inflation in the coming months from tourism-related items and the pass-through of higher oil prices. But we think that this will be more than offset by the impact of lower gas prices and slower wage growth, …
Improving sentiment towards Chinese equities has sparked a further rebound over the past month, with stocks there having generally outperformed those elsewhere over this period. While we continue to see near-term upside, we think they will ultimately …
For much of the past year, the dollar has strengthened against emerging market (EM) currencies even as EM sovereign dollar bond spreads have narrowed. One way or another, that is unlikely to last. One relatively unusual feature of the strengthening of the …
16th May 2024
Financial conditions have loosened somewhat in advanced economies this year, suggesting that the peak drag from monetary tightening is behind us. However, outside Japan, they remain tight by past standards and are likely to contribute to below-trend …
