The recent strength of net lending to commercial property can’t be explained by a rise in investment. Instead, we suspect some investors are borrowing against older assets to provide additional equity when refinancing newer acquisitions whose loans are …
5th July 2023
Corporate credit spreads have fallen back in the US over the past couple of weeks, while they have risen in the euro-zone and the UK. However, given our pessimistic view of the US economy, we suspect that the divergence will end before long, with US …
Press reports suggest that Department of Finance Secretary Jenny Wilkinson is the front-runner to become the next Governor of the Reserve Bank of Australia, though Treasury Secretary Steven Kennedy and RBA Deputy Governor Michelle Bullock are in the …
Processed food inflation hit a fresh high in May but the recent moderation in food import prices as well as likely declines in domestic fertiliser prices suggest it will soon start to moderate. Food inflation reached an eye-watering 15.5% in the euro-zone …
Further falls in inflation and the weakness of the most recent activity data support our view that the Bank of Korea (BoK) will shift to loosening monetary policy sooner than when others expect. Inflation figures for Korea published earlier today show the …
4th July 2023
The Reserve Bank of Australia’s decision to keep rates unchanged at 4.10% today suggests that interest rates may not rise all the way to 4.85% as we expect, but further tightening still seems likely . Today’s decision was a very close call: 15 economists …
The widespread falls in the EM manufacturing PMIs for June suggest that industry continued to struggle in Q2 and we think further weakness lies in store. Taken together with the easing price pressures shown by the surveys, it looks like an EM monetary …
3rd July 2023
The latest PMIs suggest that not only did global manufacturing activity contract at the end of Q2, but the outlook for the manufacturing sector also seems to have deteriorated further. At least the improved supply-demand imbalance seems to be having an …
We recently held a Drop-in titled “Industry’s decarbonisation challenge – From aviation to property”, which you can view on-demand here . This Update addresses some of the questions we received during the event, including those that we did not have time …
In the 1980s Europe responded to competition from Japanese auto producers with protectionist policies known as Voluntary Export Restraints (VERs). We think its response to competition from China in the 2020s will be different and less effective, …
China’s PMI aren’t consistent with some of the worst fears around China’s reopening recovery and weak commodities demand. But neither are they positive enough to warrant the boost to prices, such as steel, last month. For that, hopes of fiscal stimulus …
Manufacturing sector remains under pressure Manufacturing PMIs declined across most of Emerging Asia and the underlying data point to further weakness ahead. Falling new orders and elevated inventory levels are likely to continue to weigh on manufacturing …
The Bank of Canada’s quarterly business and consumer surveys showed a broad decline in inflation expectations and are consistent with a renewed slowdown in GDP growth. The Bank could use those developments to justify keeping interest rates unchanged at …
30th June 2023
Reconciling the slide in Japan’s currency with big flows into its stock market from abroad and a perception that the appeal of foreign bonds to Japanese investors has waned in response to high hedging costs is easier to do once securities transactions …
The recent fall in commercial property values has not driven a flight to quality in either the retail or industrial sectors. But there has been a sharp rise in the office non-prime/prime spread, as occupiers and investors seek best-in-class assets to …
World trade fell in April and timelier data point to a further fall in May, partly due to a sharp drop in Chinese exports which reversed all of their rebound from earlier this year. And weak demand looks set to weigh on trade in the months ahead. …
29th June 2023
Vietnam’s export-driven economy improved slightly in Q2 but growth was still weak by historical standards. With the external environment likely to remain unfavourable in the second half of the year, we expect the economy to struggle in the coming …
Central bankers have struck a hawkish tone at the ECB’s forum in Sintra this week, suggesting that rates haven’t yet peaked and cuts are not on the cards for some time. But there were some interesting differences in tone. Most notably, the ECB and BoE …
28th June 2023
The sharp narrowing in India’s current account deficit in Q1 was largely due to the strength in services exports. Looking ahead, we think the deficit will narrow to 1.0% of GDP across 2023 as a result of softer domestic demand and as commodity prices …
The effects of tighter monetary policy are very clear in the money and credit data, reinforcing our view that the euro-zone economy will underperform the ECB and consensus forecasts. Data released this morning show that savers continue to tie up their …
The Bundesbank may make large losses in the coming years but these will be paper losses only, will have no impact on the government’s fiscal position, and are likely to fall over time. While the losses may fuel opposition to the ECB in some quarters, this …
26th June 2023
Pakistan’s central bank (SBP) today raised its policy rate by a further 100bps (to 22%) at an unscheduled monetary policy meeting. We think interest rates will need to remain elevated over the coming year as the government seeks to impress the IMF and …
EMs will account for over half of global GDP within the next decade and almost 60% by 2050. India will become the world’s third-largest economy before 2030. More generally, EMs with rapid population growth, with potential to develop into manufacturing …
The armed uprising by Yevgeny Prigozhin’s Wagner mercenary group against the Russian military over the weekend has dealt a heavy blow to President Putin and exposed cracks in the regime. There are a lot of unknowns about how things will play out at this …
After several disruptive quarters, we are making few changes to our near-term euro-zone real estate forecasts. Nonetheless, a higher profile for 10-year rates has led us to push back yield reductions until after 2025 and we have also downgraded our office …
At first glance, there’s little sign of friend-shoring among Japanese firms as they have directed a rising share of their outward foreign direct investment at China. However, this largely reflects China’s rising economic heft and firms are reducing their …
June’s flash PMIs suggest that not only has activity in advanced economies slowed at the end of Q2, but the outlook has also deteriorated further. This is particularly true in the manufacturing sector, where orders have fallen sharply. Meanwhile, …
23rd June 2023
With interest rates now set to be higher for longer, we are sticking with our view the UK will enter a recession later this year. That will hit occupier demand across all property sectors, but industrial should weather the downturn relatively well. After …
Swiss offices have already seen the second sharpest price correction across the major European markets. And with stretched valuations set to face renewed pressure from rising bond yields, we think office yields will edge higher and that sluggish rent …
If the weather forecasters are right, El Niño conditions have arrived in the Pacific and are set to build over the next few months. The negative impact on agricultural production will depend upon the strength and duration of these conditions but sugar, …
The Central Bank of Egypt (CBE) decided to leave interest rates unchanged at 18.25% at Thursday evening’s MPC meeting, but with the lingering threat of another fall in the pound and the slightly more hawkish tone from the accompanying statement, we think …
Near-term risks ease, but still high Easing financial conditions, improving consumer sentiment and the stabilisation in housing suggest that the risks of an imminent recession have eased slightly. Nonetheless, our tracking models still imply that an …
22nd June 2023
The reduction in office demand due to remote work will cause a hit to NOIs on a par with, or worse than, that experienced by malls over the last six years. And in line with the experience of malls, the structural nature of this hit to demand means the 35% …
The rapid depreciation of the Swedish krona has pushed the currency down to its lowest ever level against the euro. Worse still, we do not think the krona is significantly below “fair value”, nor do we expect the headwinds facing it to abide anytime soon. …
Note: We’ll be discussing the UK inflation, growth and policy outlooks after the June CPI release on Wednesday, 19 th July . Register here to join that 20-minute online briefing. The 50 basis point (bps) interest rate rise by the Bank of England today, …
The 650bp interest rate hike by Turkey’s central bank today (to 15.0%) will underwhelm investors that wanted a faster and more aggressive monetary tightening. The currency has come under a bit of pressure since the announcement. But the communications …
Some observers have suggested that the strength of Swedish inflation in May reflected buoyant demand driven by Beyoncé’s Stockholm concerts but the Riksbank is more likely to view it as evidence that underlying price pressures are too high. We expect a …
The 25bp rate hike announced by the SNB this morning was smaller than the 50bp hike we had predicted. But the accompanying statement and upward revision to inflation forecasts for 2024 and 2025 strongly suggest that there will be at least one more hike in …
Today’s 50bp rate hike by the Norges Bank, taking its policy rate to 3.75%, was accompanied by new hawkish guidance and projections. As a result, we have revised up our already above-consensus forecast for the peak in the policy rate to 4.25%. It could …
The somewhat cautious tone of the statement accompanying yesterday’s Brazilian central bank meeting (at which the Selic rate was left at 13.75%) will disappoint those hoping for an interest rate cut at the next meeting in August. But the statement does …
Note: We’re holding a 20-minute briefing on the challenges that aviation and other key industries face in decarbonising at 10:00 EDT/15:00 BST on Thursday, 29th June. Register now . Despite jet fuel being a fairly small share of total oil consumption, …
21st June 2023
Treasury volatility has fallen over recent weeks but remains high by historical standards, and we wouldn’t be surprised if it remained so over the rest of 2023 even after the Fed has concluded its tightening cycle. All else equal that could put upwards …
Our new Dashboard allows clients to track the key housing market indicators that we follow in real time. (See here .) This Update outlines what has driven recent developments in these indicators, and our view for the rest of the year. (See also our US …
Governments in Turkey and Nigeria have started to turn away from unorthodox economic policies in recent weeks, and in both cases currencies have been allowed to move closer to fair value. The key thing to watch next is whether central banks in both …
The Reserve Bank of Australia is considering actively selling its bond holdings rather than merely letting them shrink gradually via bond redemptions. The main motivation seems to be to reduce interest rate risk on its balance sheet rather than to tighten …
Since bottoming out late last year, European and US equities have fared comparably in local-currency terms, and European stocks have even outperformed in dollar terms. Looking ahead, however, we think that the lack of AI (or indeed tech) “champions” in …
20th June 2023
The Monetary Policy Report released by Chile’s central bank today alongside the communications to yesterday’s policy meeting have reinforced our view that the easing cycle will commence in July. We expect a cumulative of 200bp of cuts, to 9.25%, this …
A series of high-level diplomatic meetings this week have raised hopes that strains in US-China relations will start to ease. But the politics of fragmentation was never likely to proceed in a linear direction. And even if there is a thaw in political …
We don’t think growing enthusiasm about AI will be enough to stop the S&P 500 from declining if, as we expect, the US economy falls into recession later this year. Nonetheless, we now think the index will end this year a bit higher than we’d previously …
We think that the lead price will struggle over the next few months as high interest rates weigh on new vehicle (and lead-acid battery) demand growth and new supply comes online in Australia and Germany. Heading into 2024, we think that the shift to …
19th June 2023
