This publication has been updated with additional analysis from the post-meeting press statement and press conference. CNB in ‘wait and see’ mode The Czech National Bank’s (CNB’s) decision to leave interest rates on hold again today, at 7.00%, was …
2nd November 2023
We’ll be discussing the latest Fed, ECB and Bank of England policy decisions in a 20-minute Drop-In webinar at 3pm GMT today. (Register here .) The Bank’s decision to leave interest rates at 5.25% for the second time in a row and to double down on the …
Although consumer spending has remained remarkably resilient in the US so far this year, it has weakened in other advanced economies. And as the lagged effects of high interest rates filter through to households in an environment of low consumer …
Brazil’s central bank (BCB) cut the Selic rate by 50bp, to 12.25%, at yesterday’s Copom meeting and signalled again that further similar reductions lie in store over the next few meetings. Even so, with strong wage growth set to keep inflation above …
We expect industrial rents in Belgium to outperform the rest of the euro-zone on the back of a brighter economic outlook, very tight supply and a larger rise in e-commerce. We forecast annual average rental growth to reach 3.5% p.a. for the period …
We think that the decision today by Norges Bank to leave its policy rate on hold at 4.25% signals the end of its tightening cycle. Contrary to the Bank’s communication, we do not expect a hike in December given that inflationary pressures should continue …
The government today confirmed that it intends to welcome an increasing number of permanent residents in the next couple of years. Even if the number of permanent residents continues to rise, however, the record number of temporary residents currently in …
1st November 2023
By leaving rates unchanged while continuing to flag the possibility of further tightening to come, the Fed indicated today that it remains in ‘wait and see’ mode. But Chair Jerome Powell appeared to strike a more dovish tone in his press conference and we …
The September JOLTS data suggest that the labour market is loosening at a slightly slower pace, but still point to a sharper fall in wage growth ahead. There is little support for the idea that resilient activity growth in the third quarter will lead to a …
The PMI surveys released so far for China weakened in October with the manufacturing PMIs falling back into contractionary territory. We think China’s demand for commodities will be supported by further fiscal stimulus over the next few months, but a …
One question we have received frequently from clients is what lessons Israel’s previous wars offer when thinking about the effects on its economy from the conflict today. While no two events are the same, one lesson is that the near-term hit to economic …
South Africa’s finance minister reaffirmed his commitment to fiscal consolidation in today’s Medium Term Budget Policy Statement (MTBPS) but, even so, debt is now projected to peak at a much higher level than previously envisaged. A potential new fiscal …
China’s leadership has outlined its wish list for financial sector development. It wants stricter oversight of financial institutions to ensure they serve the interests of the Party and country. This includes providing greater credit support to …
There has been a broad-based fall in foreign direct investment flows into the emerging world that, outside China, is mostly the result of a slowdown in global growth. FDI flows should stabilise over the coming year and, over the medium term, we think they …
The October PMIs for Emerging Asia generally dropped back further inside contractionary territory. The outlook for manufacturing in the region remains bleak in the near term as elevated inventory levels and weaker foreign demand are set to curtail …
An energy shock caused by an escalation of the war between Hamas and Israel would have obvious similarities with that which followed Russia’s invasion of Ukraine. But we think that ECB policymakers would be less worried about the “second-round” effects on …
31st October 2023
Morocco’s automobile sector has gone from strength to strength in the past decade, with production now rivalling some producers in Central and Eastern Europe. With investment from major global automobile firms increasing and supply chains deepening, the …
The Bank of Japan today de facto abolished Yield Curve Control and we think policymakers will call time on negative interest rates as soon as January . A casual reading of today’s statement would suggest that policy settings were left unchanged: the Bank …
This page was first published on Tuesday 31 st October, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Wednesday 1 st November, and the Caixin services and composite PMI on Friday 3 rd November. Note: We discussed h …
On the back of upward adjustments to our 10-Year Treasury yield forecasts, we now expect to see a larger increase in cap rates. This will see office cap rates rise to over 6.5% by end-2024, pushing the peak-to-trough price fall for the sector to more than …
30th October 2023
European investment fell sharply again in Q3 but with interest rates at their peak we think the downturn will soon bottom out. However, our upgraded bond yield forecasts indicate only a limited easing of financing conditions next year, so we think the …
While we think the cyclical forces that have weakened the relationship between commodity prices and “commodity currencies” will fade before long, we suspect some structural factors – namely the US’s ongoing shift to becoming an energy exporter – mean that …
Foreign direct investment into China, as measured by the balance of payments data, has collapsed. It is tempting to pin this on global fragmentation or a loss of confidence in China’s economic prospects. But the key driver appears to be more prosaic: the …
European natural gas prices have fallen a long way from their 2022 peaks and the possibility of another energy crisis this winter now looks remote. However, prices are still much higher than they were before the pandemic and much higher than in the US – …
27th October 2023
The preliminary data for Q3 were sobering, with euro-zone prime yields moving up significantly more than expected. This confirms the 2022-23 real estate contraction as the worst on record and, with offices the key driver, it now looks like the value falls …
Global goods trade rose slightly in August and timelier data point to further gains in September. But we expect global trade to fall again in due course as economic downturns in several advanced economies weigh on their demand for traded goods. According …
In line with our upwardly revised forecasts for the 10-year US Treasury yield, we’ve raised our projections for 10-year government bond yields in most other developed market economies. But we still expect those yields to fall, in general, by the end of …
The Q3 RICS survey indicated occupier and investment sentiment fell further in Q3, with the latter reflected in weak investment volumes throughout the summer months. But tight credit conditions and a slowing economy mean the trough in confidence is …
26th October 2023
Weak demand and investment, but capital values nearing the trough Having started the year on a somewhat promising footing, all-property occupier demand has weakened since and fell further in Q3. The demand balances for offices and retail remained …
Norges Bank is almost certain to leave its policy rate unchanged at 4.25% next week. And we suspect that, given September’s weak inflation data, it will also soften its language about implementing one final rate hike in December. Next year, we think the …
We think the Chilean peso is poised for a rebound in 2024 as the headwinds from the narrowing interest rate differential and the terms of trade deterioration reverse. The Chilean peso has underperformed nearly all other major emerging market currencies …
Although US high-yield (HY) corporate bonds are more attractively valued than at any time since the Global Financial Crisis (GFC), we doubt they will outperform US equities over the next couple of years. The yield of ICE BofA’s index of US HY corporate …
Following today’s decision to leave interest rates on hold, the ECB’s tightening cycle appears to be over. We think that rates will stay at their current levels well into next year. The Governing Council did not discuss accelerating the pace of QT today, …
Our new higher forecasts for US Treasury yields mean that mortgage rates won’t fall as quickly as we previously predicted. While we still expect mortgage rates to decline they are unlikely to fall below 6.0% before end-2025, muting any recovery in house …
We think the cautious oil market reaction to the outbreak of conflict in Israel probably reflects the huge uncertainty about the eventual outcome, but also a somewhat lower “Middle East” risk premium. For context, the Brent crude oil price has risen by …
The -1.4% quarterly return in Q3 meant that there have now been four consecutive negative quarters for all-property total returns. That figure was dragged down by a 5% q/q fall in office values as all-property values fell by 2.4% q/q. That took the …
Higher bond yields will add to fiscal pressures in those EMs with particularly large public debt burdens and weak debt dynamics. Brazil, South Africa as well as Colombia and Mexico are the EMs from our analysis whose fiscal positions are the most …
Continued strong growth in unsecured lending is putting India’s banks at risk of rising defaults, a concern that is exacerbated by their relatively low loan loss absorption capacity. This raises the possibility of the sector entering a slow-burning crisis …
Although the Bank of Canada maintained its tightening bias today, the rest of its communications suggest that the Bank is growing more confident it has done enough to eventually get inflation back to 2%. We continue to expect the Bank to cut interest …
25th October 2023
EU natural gas prices have risen in recent weeks highlighting that a reliance on LNG imports is not without risk. That said, prices should fall back next year as a significant amount of LNG export capacity comes online, first in the US and then in Qatar. …
Argentina’s oil and gas production growth has slowed sharply recently due to pipeline capacity constraints. New projects should ease these bottlenecks, and production should rise from 2024. Admittedly, the expected increases in output are not large enough …
The large falls in Nigeria’s currency will push inflation up even further and is one reason behind our below consensus near-term GDP growth forecasts. But the good news is that the banking sector looks relatively well placed to weather this devaluation …
The proposed extension to the Mortgage Guarantee Scheme could prove a good counter-cyclical policy in areas where house prices are relatively low. But the scheme has far less impact in London and the South where a much bigger deposit than 5% is needed to …
We suspect that more weakness in the housing market will weigh on real GDP by further reducing residential investment and consumer spending. This is one reason why we think the economy is close to a mild recession, if it isn’t already in one. Higher …
The euro-zone money and credit data have been very weak all year and September’s data, released this morning, were more of the same. The activity surveys are now turning downwards too, supporting our below-consensus forecasts that the economy contracted …
The October flash PMI surveys suggest that economic activity got off to a weak start in Q4, especially in Europe. And with weak activity taking some of the steam out of labour markets and inflation, we are growing more confident in our view that the Fed, …
24th October 2023
Active demand for London office space hit a four year high in Q3, but we doubt that will drive a decline in vacancy rates. Most of the rise will reflect churn as firms make moves that had been delayed by the pandemic, including those looking to reduce …
Reforms introduced by President Joko Widodo (commonly known as Jokowi) should enable the economy to continue growing rapidly once he steps down next year. The key question as the election approaches is whether his successor will build on the progress he …
This page has been updated with additional analysis from the post-meeting press statement and press conference. MNB slows the pace of easing, but only slightly The Hungarian central bank’s (MNB’s) larger-than-expected 75bp cut to its base rate, from …
The additional fiscal support approved today is the intervention we had been expecting and that was needed to prevent an abrupt fiscal tightening in China in the closing weeks of the year. Fiscal policy has been a prop to growth in China over the last few …
