Recent data have reinforced concerns about inflation risks in the UK. We remain of the view that property investments provide only limited long-term protection against higher prices, but of the individual asset types, we think industrial and residential …
14th January 2022
The Bank of Korea (BoK) is far from done, after making its first back-to-back rate hike since 2007 today. We now expect a total of four 25bp hikes in 2022, taking the policy rate to 2.00%. Today’s decision to raise the policy rate from 1.00% to 1.25%, …
China’s currency was remarkably stable against the US dollar in 2021 and appreciated against other major currencies. But we doubt that trend will continue this year: a slowing economy, monetary policy easing, and a gradual normalisation of China’s current …
13th January 2022
We do not think the returns from many financial assets will be as good in 2022 as they were in 2021. For a start, we envisage a sell-off in government bonds in most places, reflecting the outlook for monetary policy. And, in general, we foresee an …
Ahead of publishing our latest Long-Term Outlook next month, this Update sets out the assumptions we have made in our long term forecasts about both climate change and the efforts to prevent it. There is still huge uncertainty about whether countries will …
After a stellar run in 2020-21, we expect the prices of most commodities to ease back this year as economic activity slows, notably in China, and supply bottlenecks start to ease . The macro-economic backdrop for commodities will deteriorate in 2022 . As …
We think that rate differentials and commodity prices will be the key factors driving the relative performance of six “high-beta” DM currencies in 2022, continuing last year’s trend. We expect all these currencies to lose ground against the US dollar this …
While high power prices and low stocks will support prices in the near term, we think that prices will pull back in the second half of 2022 as Chinese economic activity slows further and supply improves . With the exception of iron ore, the prices of most …
We expect policymakers in Denmark and Switzerland to match the 50bps of interest rate hikes that we now forecast in the euro-zone next year. And against the backdrop of rising global interest rates, we now think that the Riksbank will start a tightening …
The amount of residential floor space being built in China hit a record last year. With new project starts dropping sharply recently, the government has now unveiled plans to ramp up construction of low-cost rental housing. But this won’t offset the …
We think that emerging market (EM) equities will continue to underperform their developed market (DM) peers over the next couple of years, even if that underperformance is far less stark than it was in 2021. EM equities underperformed those in the …
In this Update , we take a look at the key political events that are scheduled across the emerging world over the coming year and outline their possible implications for economic policy and growth . Table 1 gives a summary of the major events taking …
Sub-Saharan Africa will remain a laggard in the global recovery. The weak economic backdrop means that South Africa’s government is unlikely to stick to its austerity plans and the debt ratio will rise more quickly than most anticipate. Debt risks are …
12th January 2022
We continue to expect monetary tightening to push up 10-year government bond yields across developed markets (DMs) but we now forecast them to reach a higher level than we had previously anticipated, especially in the US, Germany and the UK . Last year, …
Although the Argentine government and the IMF do not fully see eye-to-eye, there have been signs of progress in negotiations and we think it’s most likely that they will sign a fresh agreement within the next few months. That would probably give some …
While it is very uncertain, we estimate that disruption due to Omicron could knock around 1% off GDP in advanced economies while the outbreak is at its height, mainly due to staff absences. This would be a severe shock by pre-pandemic standards, but …
We expect the Bank of Canada to wait for the coronavirus restrictions to be lifted before starting to raise interest rates, suggesting it is more likely to begin hiking in March or April than at its meeting this month. OIS futures imply a near 50% chance …
The incredibly strong gains in the household survey measure of employment over the final two months of last year, which have come at the same time as the more closely-watched payroll measure showed employment growth slowing, is mainly a catch-up effect. …
We think that GDP growth in the Gulf will be stronger than most expect this year on the back of rising oil output. Elsewhere, we expect a larger depreciation of the Egyptian pound than most anticipate and, if anything, there is a growing risk of an even …
With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise …
While the general perception is that higher inflation is unambiguously good for the public finances, the reality is a bit more nuanced. The Chancellor will almost certainly be gifted with a lower public debt ratio. However, inflation will probably mean …
We see energy prices broadly falling this year as slower global economic growth should cool demand growth, but low stocks of many fuels mean prices will remain historically high and volatile for some time . At the start of last year, we forecast that the …
11th January 2022
Combining the change in leased space with the rise in sublease availability gives a more complete picture of the change in demand across office metros since the onset of the pandemic. This gives a more intuitive match between demand patterns and rental …
In his Senate re-nomination hearing today, Fed Chair Jerome Powell echoed the increasingly hawkish rhetoric coming from other officials. He admitted that "supply side constraints have been very consistent and very durable" and that the Fed was "not seeing …
We doubt that “fiscal dominance” – worries about the impact of higher interest rates on debt sustainability – would stop the ECB from raising interest rates. But it might encourage the Bank to backstop the bond market even after raising rates by …
We think that GDP growth in Australia will surprise to the upside. But with wage growth only approaching the 3% watermark the RBA would like to see by year-end, we expect the Bank to keep rates on hold. By contrast, we expect the RBNZ to hike interest …
Although mid- and large-cap equities have fared better in the US than the rest of the developed world in most years since the Global Financial Crisis (GFC), we think the chances of it happening in 2022 are slim. When it came to the relative performance of …
10th January 2022
We think GDP growth will come in below expectations this year. Even so, inflation will ultimately settle at a higher level than is currently appreciated and this feeds into our hawkish interest rate forecasts. We expect currencies to struggle in an …
We think that Latin American GDP growth will slow by more than most expect in 2022, while inflation will also drop more a bit more quickly than the consensus anticipates. This feeds into our relatively dovish monetary policy views across the region. …
Asia will be – contrary to consensus expectations for widespread hikes – the only EM region in which the median central bank isn’t tightening this year. 2021 was a year of hits and misses in terms of our forecasts . We correctly forecast that most central …
An expected improvement in spending is encouraging for prime high streets this year. Nevertheless, with a growing share of retail turnover made online and city-based retail more vulnerable to remote working, prime high street rental growth is generally …
Korea, the Philippines and India are each holding elections this year that will play a role in setting fiscal and structural reform priorities, including the possible introduction of a universal basic income in Korea. And China looks set to tear up the …
The performance of commercial property exceeded expectations in 2021, with a particularly strong contribution from the industrial sector. But we don’t think that this momentum will last into this year, with high inflation and four interest rate hikes in …
7th January 2022
While we don’t think the stock market’s falls this week mark the start of a sustained rout, we do expect Fed tightening to curb the upside for mid- and large-cap US equities over the next couple of years. And tighter monetary policy might also weigh a bit …
We expect GDP to grow strongly once the current restrictions are eased, but we are sceptical that either GDP growth or inflation will be as high this year as widely anticipated. This leads us to think the Bank of Canada will hike interest rates by 75 bp …
6th January 2022
As hinted at in the December FOMC minutes, we expect the Fed will begin shrinking its balance sheet later in 2022. They would start by allowing maturing assets to run off, but if longer-term bond yields were to remain unusually low, we expect officials …
Omicron will reduce economic activity in the coming weeks due to tighter restrictions, consumer caution and absenteeism. Our best guess is that economic activity in the euro-zone will decline in January but for now we assume it will rebound in February. …
Global coronavirus cases have surged, and pressure is mounting on health systems as hospitalisations rise. Given that Omicron is milder than past variants, governments are typically leaning on booster rollouts and light-touch restrictions rather than …
Although we wouldn’t be surprised if the rally in the US dollar paused in the short term, we still expect the relative strength of the economic recovery in the US and monetary tightening there to push the greenback higher against most currencies in 2022. …
We think that GDP growth in Switzerland and the Nordics will be slower than most anticipate this year, and the boosts to inflation from energy prices will subside over the year. But while the SNB will keep interest rates on hold at a record low, …
The US economy is set to slow this year as elevated inflation and higher interest rates squeeze spending. Nevertheless, at the all-property level, we expect rental growth of around 3% y/y and NOI yields to see another large fall, driving double-digit …
Strong demand will ensure that house prices maintain their momentum in the first half of the year. But rising mortgage rates will weigh on demand further out, causing prices to cool. The three key forces that have driven house prices higher over the past …
Shortages of materials and labour over the past year have not stopped builders from starting a lot more single-family homes. But they do appear to have prevented them from finishing them. That implies a surge of homes will be completed later this year as …
Our new forecasts for 2022 envisage CPI inflation rising further than most expect to a peak of 7% and the Bank of England raising interest rates quicker, from 0.25% now to 1.25% by the end of the year. COVID-19 has the capacity to spring more surprises. …
We don’t expect slower near-term economic growth to derail the property upturn in 2022. Rather, we think that continued falls in property yields and a rebound in all-property rents will support further increases in capital values. That said, the pace of …
The Omicron variant will probably result in a stagnation in consumption this quarter. However, by worsening supply shortages it will only add to the upward pressure on inflation. The upshot is that it won’t necessarily prevent the RBA from ending QE in …
The Omicron variant is less lethal than previous strains but, even if it doesn’t require the reintroduction of restrictions to mitigate the spread, the huge volume of new cases could still deal a significant hit to the economy over the next month or two, …
5th January 2022
The recent sharp fall in virus cases in South Africa provides an early encouraging sign that Omicron-driven outbreaks may run their course relatively quickly. In South Africa’s case, the health system has come under much less pressure than it did during …
2021 proved a challenging year to forecast commercial property markets. Indeed, we underestimated the speed and size of the bounce back in performance, albeit by less than the consensus. But there are lessons to be learned from last year’s experience, so …
We think euro-zone GDP growth will be lower than most anticipate this year, at around 3.5%, while inflation will come down towards 2% by year-end allowing the ECB to leave interest rates unchanged and continue net asset purchases. The big risk is that …
