In our Focus of Sept ember 2020, we made some assumptions about how the pandemic would impact working from home in office-based sectors across Europe. Almost three years on, we look back at these to assess how they have held up and analyse the …
15th June 2023
The recent resilience of labour markets partly reflects a lag before higher interest rates feed through fully to economic activity. But employment has also been supported by the industry-led nature of the economic slowdown and by the fact that firms are …
The tightening of labour markets across Latin America in the past year or so has fuelled rapid wage growth in many economies and wage growth is likely to remain uncomfortably high for a while yet. Against this backdrop, even as central banks kick off …
We think the Norges Bank will follow through on its plan to raise its policy rate by 25bp next week, to 3.50%, although there is an outside chance of a 50bp hike. Either way, we think it will push its interest rate forecast up, showing a peak in the …
Taiwan’s central bank (CBC) today kept its main policy rate unchanged (at 1.875%), but with the economy struggling and inflation set to fall further, we expect it to start cutting rates in September. The decision today was correctly predicted by 19 of …
EMs experienced a strong first quarter as GDP growth picked up almost across the board, but growth is likely to have slowed in most major economies in Q2 and we think it will remain soft in Q3. We don’t expect a substantive recovery in EMs until much …
As expected, the Fed held its policy rate unchanged at between 5.00% and 5.25% today, but it made clear in the accompanying statement that pause was only to allow officials to “assess additional information and its implications for monetary policy”. In a …
Florida and other parts of the Sunbelt (notably major cities in Texas) will likely face the most severe physical climate risk over the next 30 years. While this is unlikely to come as a major surprise, we don’t believe that this risk is being consistently …
14th June 2023
While selling its exchange-traded fund (ETF) holdings at book value to the government wouldn’t impair the Bank of Japan’s balance sheet, we don’t think it would provide the boost to fiscal revenue that policymakers seem to be hoping for. And while the …
We think an upcoming shift in emerging market monetary policy towards rate cuts will provide long-dated local-currency government bonds there with a bit of a tailwind. But gains may be limited in the coming months if, as we expect, global appetite for …
13th June 2023
The Polish government’s ambitious plans to raise defence and social spending are unlikely to be achieved without pushing up the public debt-to-GDP ratio later this decade. Imminent risks to the sustainability of the public finances still appear relatively …
One reason for the slump in productivity is that the recent surge in working hours is producing diminishing returns. And we suspect that disruptions caused by the pandemic prevented firms from stepping up business investment in response to record capacity …
Pakistan’s central bank (SBP) left its main policy rate unchanged today at 21%, but we think this represents a pause rather than an end to the SBP’s tightening cycle. With inflation well above target and concerns about the external position unlikely to …
12th June 2023
With less than a year and a half to go until the next general election, calls for the Chancellor, Jeremy Hunt, to cut a range of taxes have been growing. But recent economic developments mean the Chancellor is unlikely to have much fiscal firepower …
Saudi Arabia’s fiscal position has deteriorated over the past few quarters on the back of lower oil prices and production, and officials are increasingly doing all they can to sustain the current loose fiscal stance. But if, as we expect, oil prices fall …
The latest Deloitte Crane Survey showed that legal firms have been an increasingly important sector for London office demand, accounting for a third of all pre-lets since Q3 2022. The rise reflects strong growth in legal jobs over the past year. In turn, …
Having fallen steadily for much of the last year, European natural gas prices surged last week. The catalyst was constrained supply. Given seasonally high stocks and subdued demand, we are not worried yet about another price spike. But Europe has to avoid …
The suspension and potential removal of Godwin Emefiele as Nigeria’s central bank governor raises hopes that there will be a shift away from the current unorthodox and interventionist monetary and exchange rate policies. A large devaluation of the naira …
Although we think that the Fed is set to end its tightening cycle in July, we aren’t convinced that 10-year Treasuries will outperform 2-year Treasuries in the way that they have after recent Fed tightening cycles. We expect the Fed to wrap up its …
9th June 2023
Inflows into EM financial markets have held up well over the past few weeks, with particularly strong inflows into local equities. That said, if we are right that a renewed period of global risk aversion lies in store, we suspect that these inflows will …
While we anticipate that the ECB will deliver more rate hikes this year, we don’t think that this would trigger another leg up in long-term euro-zone government bond yields. In fact, we suspect that yields will fall a bit over the rest of 2023, partly …
8th June 2023
Although a lot of bad news now appears to be priced into US equity office REITS, the sector still faces significant challenges. This suggests to us that a material improvement in its fortunes is not likely soon. US equity REITs in aggregate have …
A handful of EM central banks were quick out of the blocks to tighten monetary policy in 2021 and one of the key lessons of the past year or so is that underlying inflation pressure is still proving incredibly hard to beat. The fight against inflation …
Our updated industrial metros analysis, which now incorporates the current vacancy rate, continues to point to Memphis as having the strongest prospects for rent growth over a three-year horizon. Miami, Orlando, San Diego, LA and Nashville also rank …
Dismal economic growth has established the Korean won as one of the worst-performing emerging market (EM) currencies against the dollar this year. We expect Korea’s bleak growth prospects and unfavourable yield gaps to keep the won weak, though its …
Preventing large-scale leaks of methane from Turkmenistan’s creaking infrastructure would be a welcome sign of emissions-cutting efforts broadening out from carbon dioxide to include other harmful greenhouse gases too. But while Turkmenistan has become …
Refinancing risks increase The recent upward revision to our mortgage rate forecast and the fact that the majority of those that need to refinance this year are on two-year fixes means that we are now more worried about the risk posed by refinancing. …
Recent economic difficulties have forced online retail to tighten their returns policies. At face value, this seems good news for retail property as it may shift demand back to stores for certain categories. However the change is unlikely to be a big …
The RBI’s decision to keep the repo rate on hold (at 6.50%) today comes as no surprise given the recent sharp drop in inflation. The central bank continues to strike a hawkish tone and the door remains ajar for further hikes. But with headline inflation …
Normalising supply could make future drop in demand more damaging The significant improvement in the RICS survey in May echoed the pause in house price falls in the past few months. But the survey also showed an increase in supply, which could …
The Bank of Canada’s 25bp interest rate hike today is unlikely to be the last, with the rapid turnaround in the housing market and concerning underlying inflation dynamics raising the case for at least one more hike in July, to take the policy rate to …
7th June 2023
According to our proprietary interest rate-sensitive indicators, activity in advanced economies has so far proven remarkably resilient to higher interest rates. A lot of this has been due to a rebound in auto sales related to pandemic distortions, whereas …
More than €1trn of TLTROs will be redeemed over the next eighteen months, significantly reducing euro-zone banks’ liquidity and pushing up their funding costs as they adjust their balance sheets. Banks may also increase their holdings of government bonds …
Growth in China’s commodity imports generally was strong in May, with a notable rise in crude oil imports. While the data are consistent with our above-consensus outlook for China’s growth this year, a note of caution needs to be applied. Export demand …
A version of this report was published as an opinion piece in the Financial Times on Wednesday 7 th June Signs that newly re-elected Turkish president Erdogan is willing to move away from unorthodox economic policies has led to an increase in investor …
The latest crane survey reported a surge in new central London office starts in Q1, which seems poorly timed given a large existing pipeline and waning demand. However a closer look shows that West End refurbishments are behind that surge, as this …
In response to the hawkish shift by RBA Governor Lowe and the further acceleration in unit labour cost growth, we now expect the Bank to lift the cash rate to 4.85% by September. That aggressive monetary tightening will push the Australian economy into a …
The resolution of the debt ceiling debate has cleared a cloud that was hanging over the US equity market, but we think a darker one – a growth slowdown – still lingers. That’s why we doubt the rest of the year will be particularly positive for the S&P …
6th June 2023
Many of the factors that explain the UK’s chronically weak GDP growth since the pandemic, such as the shrinking of the UK’s workforce and low export growth, won’t disappear any time soon. This explains why we expect the UK economy’s underperformance to …
The Reserve Bank of Australia lifted the cash rate by 25bp today and the hawkish tone of the statement suggests that the risks to our terminal rate forecast of 4.35% are tilted to the upside. Indeed, we still think that the Bank will cut interest rates …
Early 2023 data revealed that the German industrial market has slowed considerably following the exuberance of a year ago. And looking ahead the outlook is not much brighter. We were already anticipating a significant moderation of rent growth this year …
5th June 2023
Optimism about a shift towards more orthodox economic policymaking in Turkey has taken hold following the appointment of Mehmet Simsek to the cabinet this weekend. Recent developments look encouraging but the next big test will be whether President …
The recent decline in the number of job vacancies suggests that the upward pressure on wage growth from labour shortages is probably past its peak. But it’s still not clear that wage growth will slow fast enough to ease the Bank of England’s concerns over …
Saudi Arabia pushed through another oil production cut at the OPEC+ meeting, but, it will come at the cost of slower economic growth and we now think the economy will contract by 0.5% this year. The one crumb of comfort is that higher oil prices and loose …
Job vacancies haven’t surged in Japan because the participation rate has risen since the start of the pandemic and there hasn’t been a “Great Resignation” amongst Japanese workers. With the labour market set to loosen this year, wage growth will remain …
In a recent Global Markets Update , we analysed the remarkably narrow rally in the S&P 500 so far in 2023. We concluded that recent history supported our forecast that the rally will run out of steam before long, albeit with the largest firms potentially …
2nd June 2023
It comes as no surprise to see a sharp downgrade to consensus forecasts given the combined impact of the regional banking crisis and growing office sector distress. But despite those downgrades, our own forecasts are considerably more downbeat, …
Although activity in the manufacturing sector looks to have improved somewhat in May, that was mainly due to stronger growth in some large emerging markets. The outlook for industry remains bleak, with new export orders in particular falling sharply. The …
1st June 2023
The latest data suggest that Brazil’s labour market isn’t softening as quickly as we and many others (not least the central bank) had anticipated. That’s keeping wage growth high and, while that may help to support growth in Q2, it will probably deter …
The manufacturing PMIs for May suggest that EM industry has, in aggregate, strengthened in Q2. Nonetheless, with the surveys pointing to further weakness in key DM trading partners, EM industry is likely to struggle in the second half of this year. The …