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 …
2nd November 2021
October’s PMIs suggest that manufacturing sectors in Southeast Asia are recovering from recent Covid waves, but supply constraints are taking their toll on industry in China, Brazil and parts of Emerging Europe. With supply shortages set to persist for …
The UN’s annual climate change conference, COP26, has the potential to be an important milestone but it is just one step along the path required to limit global warming. Accordingly, it will not on its own stop climate change from clouding the long-run …
The “fixed-weight” average hourly earnings series that the Bank of Canada is following appear to be understating wage growth, but should provide a more accurate picture over the rest of the year. The shifts in the composition of employment during the …
Asian exports have continued to grow rapidly despite the recent disruption stemming from lockdowns in South East Asia. A huge backlog of orders and low inventory levels in advanced economies mean that exports are likely to continue to climb steadily …
The RBA abandoned its yield target and its pledge that rates will remain low until 2024 today, but still sounded dovish. While the financial markets expect the first rate hike in May next year, we expect the Bank to wait until early-2023. The Bank pinned …
Despite their recent positive correlation, we think that oil and the dollar will go in opposite directions before long: we continue to think that oil prices will fall back as the supply situation improves, while we expect the greenback to stay strong …
1st November 2021
Although the China PMI data were a mixed bag in October, the big picture is that they remain at odds with sky-high industrial metals prices. This adds to our view that prices have quite a long way to fall over the next year or so as constraints on supply …
Relative to budget estimates, the cumulative fiscal deficit in rupee terms is much smaller than normal for this time of year, due in large part to decent tax revenues. We think the Finance Ministry will use the tax windfall to rein in the overall budget …
The supplementary budget that PM Kishida will compile by year-end will probably contain only half as much fiscal support as was provided last year. However, given that government spending will still be significantly larger than it was in 2019 even as …
The Central Bank of Egypt (CBE) kept interest rates unchanged at Thursday’s MPC meeting amid rising price pressures. Against this backdrop, we think that the central bank is likely to delay the resumption of its easing cycle until the middle of next year. …
29th October 2021
Data published this week provide more evidence that the supply of labour has held up fairly well in the euro-zone and that those who have left the labour market have probably not done so permanently. This should help to keep a lid on wage growth at a time …
28th October 2021
The surge in COVID-19 cases and deaths in Eastern Europe has prompted the re-imposition of restrictions and it looks like measures will be stepped up, weighing on recoveries in Q4. Tight restrictions may not remain in place for long across Central Europe, …
The ECB stuck to its script today, arguing that although the increase in inflation now underway will be larger and last longer than previously anticipated, it is still temporary. Meanwhile, confirmation that the PEPP will end in March tells us nothing …
Financial conditions in Latin America have tightened sharply this year, most notably in Brazil and Chile, on the back of aggressive monetary tightening and growing political and/or fiscal risks. With these factors likely to persist, tight financial …
The Q3 investment data indicate that activity could be slightly stronger this year than we had expected. However, with the economic recovery topping out and structural headwinds limiting investment in the office and retail sectors, we think commercial …
Oil, gas and coal prices have reached multi-year highs in recent weeks and this Update takes a look at some of the implications for the region. In short, an improvement in Russia’s terms of trade has boosted its external position, the public finances and …
The Bank of Japan shocked no one in keeping its interest rate targets unchanged today, a status quo we think will last for years. The Bank also revised down its growth forecasts for the current fiscal year and signalled that policy will have to remain …
The Brazilian central bank’s decision to up the pace of tightening to a 150bp rate hike (which took the Selic rate to 7.75%) was a clear response to concerns about a looser fiscal stance. With fiscal risks likely to persist, we now expect a 150bp hike in …
Upgrades across the board in 2021, but increased sector divergence in 2022-23 Consensus forecasts for 2021 have been upgraded in all four major sectors on the back of strong investor demand. But tellingly the picture is more varied for 2022-23, where …
27th October 2021
The Bank of Canada called time on its QE program today and indicated that it could raise interest rates as soon as the second quarter of next year. The Bank’s GDP forecasts still look too upbeat to us, however, so we expect it will wait until the third …
This checklist helps clients keep track of the key economic and public finances forecasts announced during the Chancellor’s Budget speech at 12.30pm on Wednesday 27 th October and to provide some instant context. We will send a Rapid Response and a Focus …
Money growth has slowed this year and is likely to decline further next year. Meanwhile, although the pandemic has resulted in a huge increase in the money supply, we do not think this will cause inflation to rise because the relationship between the …
The recent highs in the zinc price have been driven by fears around supply as sky-rocketing energy prices have undermined smelter profitability. We expect power prices to remain high in the coming months which should constrain zinc supply and boost …
26th October 2021
We expect US crude oil production to rise by the end of next year, but remain well below levels in early 2020. What’s more, with non-US oil production set to grow at a faster pace than US oil production, the Brent-WTI price premium is likely to remain …
Since the start of the pandemic, Italy has experienced a bigger drop in its workforce than other euro-zone countries. But that largely reflects temporary factors, which suggests that the labour force will eventually recover to around its pre-crisis level, …
We think that the recent re-pricing of near-term interest rate expectations across most developed markets is overdone and that several of the “high-beta” G10 currencies will come under renewed pressure. Over the past few weeks, expectations for interest …
The weaker yen and higher energy prices will reduce the purchasing power of households a bit. But with the household savings rate still very high, this won’t prevent a strong rebound in services spending. Some commentators have been arguing that the …
The well-documented shortages of semiconductors have slammed the brakes on global vehicle production. As a result, the near-term prospects for platinum group metals (PGMs) demand in autocatalysts have been dented. It is only once a meaningful recovery in …
25th October 2021
We expect steady French industrial rental growth over the next few years on the back of a solid economic backdrop and more online shopping. That said, if construction costs and land constraints become more acute, there is a risk that rents climb higher …
The minutes of the Reserve Bank’s October policy meeting suggest greater divergence of opinion within the MPC, with two members calling for more definitive steps towards policy normalisation. But most members – including Governor Shaktikanta Das – are …
We don’t have much timely official data on the detailed breakdown of consumption. But the available evidence shows a sharp (albeit uneven) increase in spending on services since the end of Q2. While spending in restaurants has risen above pre-pandemic …
22nd October 2021
The flash PMIs for October brought news of an encouraging start to Q4 for services sector activity, alongside yet more evidence that shortages are holding back growth in industry and stoking even stronger price pressures. If it wasn’t clear already, …
Russia’s central bank (CBR) stepped up the pace of its tightening cycle again at today’s meeting with a larger-than-expected 75bp interest rate hike, to 7.50%, and the hawkish tone of the accompanying communications suggest that further tightening will be …
Increased demand for larger homes to accommodate working from home and continued migration to the sunbelt will support housing demand even as population growth slows. We therefore don’t think the recent surge in housing starts, and rise in the number of …
We expect the Turkish lira to remain among the worst-performing currencies over the next two years, as political pressures, high inflation, and a vulnerable external position continue to weigh on the currency. The lira has been the worst-performing …
A big chunk of the recent rise in headline inflation in EMs has been driven by a jump in energy inflation which will be transitory. But core inflation has also risen in parts of Latin America and Emerging Europe and is likely to prove more persistent. …
The recent upward revision to our oil price forecast does little to alter our view that inflation will fall in 2022. Even if oil prices don’t fall as we expect them to and they stay at their current level, energy inflation would drop back next year, …
21st October 2021
By any standard, retail property has had a torrid time during the pandemic. The latest data on online sales look like further bad news, with the share of spending much higher than expected after lockdowns. But the recovery in consumer demand has also been …
Any remaining confidence in the credibility of Turkey’s central bank (CBRT) was shattered after today’s larger-than-expected 200bp interest rate cut, to 16.00%. The lira hit a fresh record low against the dollar and we think that it will continue to …
After a fall this year, we expect Warsaw retail rents to return to growth in 2022. That said, the city’s reliance on office workers means that the shift to remote working will weigh on retail spending and keep a lid on rental growth. Following …
Although slowing growth in China has probably weighed on US Treasury yields in the past, we don’t expect it to prevent them from rising over the next couple of years. The latest activity data out of China emphasise how much the country’s economy – which …
Despite the improving outlook for the public finances, the rumours that the Chancellor will set himself some fairly stringent fiscal rules suggest that there’s not going to be a net giveaway in the Budget and Spending Review on Wednesday 27 th October. …
Falling oil production has weighed on the Nigerian and Angolan economies, with the latter likely to suffer its sixth consecutive annual decline in GDP this year. While output should rise next year, we doubt that either will be able to meet its OPEC+ …
Shortages of construction materials are unlikely to ease for at least another 6-12 months, restraining activity in the renovation sector and among smaller housebuilders . That is likely to cap housing starts for the next year or so at about 40,000 per …
Prime office rental growth in Germany is on track to be stronger than forecast in the near term. However, we think rental growth will slow in the coming years as the supply of modern space is expected to continue to outpace demand, even accounting for a …
20th October 2021
Higher oil and gas revenues are likely to prompt a modest shift to looser fiscal policy in the large Gulf economies, although Bahrain and Oman will still need to stick to austerity. Meanwhile, if OPEC+ were to raise production quotas more quickly in …
Taiwan export orders rose in September, indicating that demand for Asian electronics remains strong. We expect final demand to weaken over the coming months, but shortages are likely to persist for some time to come. Taiwan’s export orders deserve close …
The Loan Prime Rate (LPR) remained on hold for the 18th straight month today. And investors have recently pared back their expectations for monetary easing. But given growing economic strains, especially in the property sector, we still think the PBOC …
