Today’s Medium Term Budget Policy Statement (MTBPS) in South Africa signalled that the government is broadly sticking with its fiscal consolidation plans. But with growing pressures to ramp up social support just one of the many risks facing the public …
11th November 2021
With speculation rising that the UK will trigger Article 16 of the Northern Ireland Protocol, the big risk is that relations between the UK and the EU sour to such an extent that parts of the whole UK/EU Brexit deal unravel. Even if things do not …
While inflation will stay well above target in both the US and Germany in the months ahead, the detail of the latest inflation prints seems to confirm that price pressures are likely to be much more persistent in the US. Crucially, rents are becoming a …
The pandemic has triggered a three-fold increase in the use of mobile payments in India. It is unclear whether there has been a corresponding broadening in the number of people using cashless payment. Demonetisation, five years ago this week, also …
A healthy occupier backdrop and a shortage of supply should allow prime industrial rents in the Netherlands to continue to grow at a steady pace over the coming years. As a result, after years of underperformance, our forecasts leave Dutch rental growth …
The latest real estate data came in stronger than expected. But while there have been encouraging developments, particularly in the retail sector, we think this signals a short-term boost to prospects rather than a permanent improvement. The further …
The ruling Frente de Todos (FdT) coalition is likely to lose some of its power in congress in Argentina’s midterm elections on Sunday. Policymaking could subsequently go in one of two ways. Our baseline scenario is that, with electoral concerns out of the …
10th November 2021
The Bank of Thailand (BoT) left interest rates on hold today at 0.5%, and the poor outlook for the economy means rates are likely to remain low for some considerable time. Today’s decision was unanimous, and the outcome was correctly predicted by all 21 …
While external risks have subsided across much of Sub-Saharan Africa in recent quarters, pockets of vulnerability remain. External (and, as a result, debt) vulnerabilities look most acute in Ethiopia. Since the height of the pandemic, when external …
9th November 2021
We expect the yen to weaken a bit more against the US dollar as we think that government bond yields in the US will resume their rise before long. Since the start of October, the yen has been the worst performer among G10 currencies . (See Chart 1.) The …
The divergence between the quarterly and the monthly measures of GDP have left it unclear whether the economy is still languishing at about 2.0% below its pre-pandemic level or if it is nearing that milestone. But regardless of how close the economy is to …
The sharp tightening of monetary policy in the region will strengthen the preference for savings, dampen lending growth and raise debt servicing costs next year. It is plausible to think that higher interest rates could trim 0.5-0.8%-pts off GDP growth …
With household saving rates still elevated in most developed economies, “excess savings” have continued to rise. If people were to run down these savings, this would breathe new life into consumer recoveries. Households’ saving rates (showing the …
Rising interest rates will result in the RBA making further losses in the years ahead. The Bank’s existing reserves should be enough to absorb those losses in a benign scenario, but the Bank will stop paying a dividend. And in a worst-case scenario, the …
The faster-than-average recovery in financial sector employment in the Miami metro owes much to new office openings by banking and finance firms in the last 18 months. This has made Miami one of the best-performing office markets since the end of 2019 and …
8th November 2021
China’s imports of iron ore and copper rose in October compared to a month prior (in seasonally adjusted terms). But we doubt this is the start of a renewed upswing, not least as indicators of demand have deteriorated and volumes were still down sharply …
The latest data show that conditions in the German retail sector are improving. Nevertheless, we think vacancy will be slow to reverse as pandemic shifts lead to weakness in in-store demand, particularly in Frankfurt and Munich. Following the pandemic …
There is growing evidence that global goods shortages are weighing on euro-zone activity. We expect this to contribute to a marked slowdown in growth in Q4, and the outlook for early 2022 is no better. What’s more, it looks likely that the shortage-driven …
5th November 2021
The COVID-19 situation in many EMs has improved markedly over the past month or so as new infections have fallen sharply and vaccine rollouts have gathered pace. That said, the recent surge in virus cases in Emerging Europe serves as reminder that the …
While Brazil’s bond and stock markets have struggled lately, we don’t think either are set for a significant rebound any time soon, and suspect both will remain under pressure in the run-up to next year’s election. The falls in Brazil’s financial markets …
Auto producers in Central and Eastern Europe (CEE) have experienced intermittent factory closures in the second half of this year and things may get worse before they get better. Motor vehicles production will remain stop-start until shortages of …
The indication from the Bank of England that Bank Rate of 1.25% would be too high for the economy suggests that the forthcoming rise in interest rates won’t be anywhere near large enough to topple the housing market. Rather, we expect house prices to rise …
We think that the Brazilian real will weaken a bit further against the US dollar over the next year, as fiscal risks and deteriorating terms of trade continue to weigh on the currency. With the exception of the Turkish lira, the real has been the …
4th November 2021
Brazil’s inverted yield curve has raised concerns that the economy may be on the brink of a recession, but it doesn’t have a particularly good track record as a leading indicator for economic downturns in the country. For our part, while downside risks to …
The Czech National Bank (CNB) shocked everyone with a 125bp interest rate hike at today’s meeting and while this was clearly intended to front-load tightening, the hawkish communications suggest that the tightening cycle still has some way to go. We …
REIT pricing appears consistent with our view that retail values are nearing a turning point while office values have a bit further to fall. But a strong recovery in industrial and apartment REITs means that there is some upside risk to our capital value …
By leaving interest rates at 0.10% and continuing its QE asset purchases, the Monetary Policy Committee (MPC) didn’t set off any early fireworks today. But it did throw on the bonfire the markets’ expectations that interest rates will rise to 1.0% by the …
Despite the exodus from cities and booming home sales last year, the homeownership rate in the third quarter was virtually unchanged from its level prior to the arrival of COVID-19. And with soaring house prices and tight credit conditions shutting out …
While attention has been focused on how shortages and surging prices are holding back real consumption, those same factors are weighing even more heavily on business equipment investment. Faced with widespread labour shortages, low borrowing costs and …
While the latest virus outbreak has clouded the near-term outlook, a tight supply picture and steady employment growth mean that prime Moscow office rents should return to growth in 2022. Preliminary data revealed that, following a collapse in occupier …
Spain is a long way behind its euro-zone neighbours in recovering from the pandemic. That is partly because its important tourism sector has been hamstrung by travel restrictions but it also reflects domestic weakness. Some of the shortfall will be …
Saudi Arabia’s economic recovery looks to have picked up speed in Q3 and should remain strong over the rest of this year and 2022, underpinned by rising oil output. Final Q2 GDP figures showed the economy expanded by 0.7% q/q in seasonally-adjusted terms, …
Following yesterday’s taper announcement by the Fed, and ahead of the knife-edge decision by the Bank of England later today (we forecast a 15bp rate hike), this morning’s announcement from the Norges Bank was less eventful. Norwegian policymakers …
One reason to think that the performance of the US stock market will underwhelm, at least in the long run, is that some of the gaps between the valuations of its most highly and lowly valued companies have become even larger than they were on the eve of …
The Fed unveiled its QE taper today, as widely expected, but is still insisting that the surge in inflation is "largely" transitory, which suggests the doves have the upper hand. The Fed announced that it will reduce the pace of its asset purchases …
3rd November 2021
The National Bank of Poland’s (NBP) decision to raise its policy rate by a larger-than-expected 75bp to 1.25% alongside the upwards revision to its inflation forecast suggests to us that the NBP is taking the fight against inflation much more seriously …
Among the major EMs, long-term fiscal problems look most challenging in South Africa and several large Latin American economies. And rising interest rates will make the fiscal squeeze needed to stabilise public debt-to-GDP ratios – and the hit to economic …
While the recent rise in the yields of short-dated developed market (DM) government bonds looks overdone to us, we still think that the yields of long-dated bonds will resume their rise . Charts 1 and 2 show that DM yield curves have flattened …
The ANC’s poor showing in South Africa’s local elections this week may strengthen the hand of factions within the party that want to push back against fiscal consolidation. This tilts the risks towards the public debt ratio continuing to rise and, despite …
The latest survey data suggest that GDP growth held up relatively well in Brazil and picked up slightly in Mexico in Q4. In the meantime, Chile’s red-hot recovery is continuing which will keep the central bank’s aggressive tightening cycle going in the …
The Chancellor’s new fiscal rules could help to convince voters and investors of the Conservative Party’s fiscal discipline. But with eleven rules having come and gone in the past seven years and with no less than nine new fiscal indicators unveiled in …
The recent surge in energy prices and worsening supply chain disruption will keep Germany’s inflation rate higher next year than we had anticipated. However, we still think inflation will fall from a peak of around 5% to 2% or so by end-2022 and beyond …
The economic and political backdrop in Turkey is eerily similar to that which preceded the currency crisis in 2018, although one key difference now is that the lira doesn’t appear to be fundamentally misaligned. The upshot is that, even if the lira were …
The rally in oil prices has opened the door for some of the larger Gulf economies to loosen fiscal policy, but governments in Bahrain and Oman will need to continue tightening to repair their dire balance sheets. Even with further fiscal consolidation, we …
The raft of Q3 data that have been released so far have been the proverbial mixed bag with some countries (e.g. France) reporting surprisingly strong growth and others (e.g. the US) surprising on the downside. However, the big picture that emerges is that …
Continued caution by the elderly is a downside risk to our upbeat forecasts for private consumption, but we’re already assuming that households won’t return to their old ways anytime soon. 90% of Japan’s seniors are now double-jabbed, but recent analysis …
Bank Negara Malaysia (BNM) left its main policy rate unchanged at 1.75% today, and with inflation set to remain subdued, rates are likely to stay on hold at their current all-time low throughout next year. We think financial markets are getting well …
If the RBA hiked rates by nearly 200bp as the financial markets were anticipating until recently, households’ debt servicing burden would hit an all-time high and housing would become the least affordable since the global financial crisis. That would slow …
Recent data releases and surveys show a booming commercial real estate market, particularly in the industrial and apartment sectors. While the level of prices is raising some eyebrows, we don’t see cause for concern yet. Nevertheless, we expect the rate …
2nd November 2021
The October manufacturing PMIs gave us more of the same – evidence that supply disruptions are getting worse, industrial output growth is weakening, and price pressures are intensifying. This fits with our view that the world economy is in for a period of …
