Before the global financial crisis, 50bp interest rate cuts by the ECB were more common than 25bp reductions. Circumstances today are different, but if ECB policymakers are convinced that they need to keep cutting, we think they would not shy away from a …
17th October 2024
Christine Lagarde’s message in today’s ECB press conference was distinctly dovish and supports our view that the ECB will cut interest rates by 25bp at each of the next few meetings, at the very least. It wouldn’t be surprising if the Bank opted for a …
Dutch prime logistics rent growth is set to be among the highest in the region over the next few years. That reflects both strong prospects for leasing, thanks to a bright economic outlook and greater e-commerce penetration, and relatively tight supply. …
The detailed breakdown of September’s inflation data, published this morning, showed that underlying price pressures softened slightly. We think that core inflation – and services inflation in particular – will keep falling over the rest of this year and …
We may learn more about the size and structure of China’s fiscal package over the next couple of weeks, but based on what we know the impact on advanced economies will probably be small. The bigger global story is that even if the package is much bigger …
16th October 2024
Supply continues to outpace demand Lower mortgage rates have provided a small boost to demand but, with new listings outpacing sales again in September, the sales-to-new listing ratio suggests that house prices will soon fall. Meanwhile, developers seem …
South Africa’s economy continued to pick-up in the middle of Q3 but the recovery is taking place at different speeds across sectors; lower inflation is supporting consumer-facing sectors but industry is lagging behind. As the drag from supply-side …
We are nudging down our forecast for economic growth in France next year from 1.0% to 0.7% because of the government’s plan to tighten fiscal policy. That said, we think the deficit will come down much less than the government plans, from 6.1% of GDP this …
Surveys of banks, developers and surveyors all point to a recovery in capital values over the next few months. As does the behaviour of investors. The strength of that recovery is more uncertain, with the indicators pointing to annual price growth …
Israel’s economy is under strain from the conflicts in Gaza and Lebanon, with supply constraints both holding back growth and causing inflation concerns to build. The softer-than-expected inflation figures for September released today will provide some …
15th October 2024
Italy’s 2025 budget, set to be approved by cabinet today, suggests Italy will bring its deficit below the 3% of GDP limit imposed by EU fiscal rules much sooner than France. But Italy’s debt-to-GDP ratio is still likely to remain much higher than …
Industrial’s shift toward logistics means consumer-focused economic variables have become important drivers of rental growth. Admittedly, employment growth is set to slow. But a combination of relatively solid consumer spending growth, rising online sales …
We held an online Drop-In session last week to discuss progress on Saudi Arabia’s Vision 2030 reform programme and the implications for the Kingdom’s economic outlook. (An on-demand recording is available here and an in-depth Focus here .) This Update …
The BRICS+ summit in Russia next week is likely to see another push on expansion, mainly to close allies of China and Russia. But limited economic benefits for potential new members, divisions among existing members, and concerns (for some) about …
Latin America has played an important role in absorbing China’s export surge, which is generating concern among local policymakers. But the response is likely to vary across the region. Governments in Mexico and some smaller Central American countries …
Having stormed to victory in February’s presidential election, Prabowo Subianto, a former army general and the current defence minister, will take over from Joko Widodo on Sunday (20 th October). Since his election victory, Prabowo has made a number of …
The ECB’s latest Bank Lending Survey suggests that demand for credit is recovering, but the rebound in housing loans is much stronger than in consumer or enterprise loans. The Bank Lending Survey for Q3 provides grounds for optimism that the housing …
South Africa’s Finance Minister Enoch Godongwana will be in the unusual position of presenting the Medium-Term Budget Policy Statement (MTBPS) later this month against the backdrop of a sharp improvement in the public finances. And he is likely to use the …
Contrary to many expectations in the aftermath of the BJP’s humbling in the general election, there is little evidence so far of Prime Minister Modi’s party shifting to more populist policymaking. And the risk of fiscal slippage has eased following …
The pledge at this weekend’s press conference to increase fiscal expenditure could support China’s commodity demand over the first half of 2025. But at this stage, none of the fiscal or monetary policy announcements over the past month suggest that …
14th October 2024
Evidence of residual seasonality in the core PCE deflator means there is a risk that core price pressures will rebound in the new year. That said, the residual seasonality is concentrated in core goods, which have been falling in price this year, …
Although the focus in the oil market has shifted to geopolitical risks and potential short-term supply disruptions, just as importantly, we think the possibility that Saudi Arabia could open the floodgates has increased in recent weeks alongside reports …
China’s Finance Ministry has pledged to significantly increase government debt, as well as ensure that RMB2.3trn in unused funds (equivalent to 1.6% of GDP) are spent by year-end. The latter should ensure that GDP growth ticks up in Q4 and that the annual …
12th October 2024
The key activity and labour market indicators in the Bank of Canada’s surveys did not deteriorate last quarter, but they remain consistent with weak GDP growth, rather than the pick-up the Bank is looking for. The weak results mean that, despite the …
11th October 2024
We expect sterling to weaken by ~4% against the euro and ~1% against the dollar by end-2025 . This reflects our view that the Bank of England will loosen monetary policy by more than what investors are anticipating, GBP’s high valuation and stretched …
A year ago, we developed our proprietary AI Economic Impact Index, which ranks major economies according to their ability to realise the benefits of AI. (See our CE Spotlight on the economic and market impact of AI here .) We have updated that index, and …
The Bank of Korea today cut interest rates by 25bps (to 3.25%), but tried to dampen speculation that it would cut rates at its final meeting of the year in November. With growth struggling and inflation low, we think it is too early to rule out another …
A further decoupling of trade ties between the US and China or a sharp rise in Cross-Strait tensions, even if a full-blown conflict is avoided, are two big geopolitical events that we think present a big risk to the health of the “AI bubble” in the US …
The bond market sell-off over recent weeks has taken the 10-year Treasury yield to around our long-held end-2024 forecast of 4.00%. (See Chart 1.) Although significant economic, political, and geopolitical risks loom large over the coming months, we …
10th October 2024
China’s policy stimulus measures have generated large market moves but it is the fiscal element, which hasn’t been detailed yet, that has the potential to lift the economy. We’re not expecting a huge fiscal package and it may be less commodity-intensive …
The Bank of England’s Q3 Credit Conditions Survey suggests house prices will rise further in Q4 and supports our view that a mild slowdown in GDP growth this year is more likely than another recession. Despite the fall in the average quoted mortgage …
Prime high street rental growth in Barcelona has outpaced Madrid since late 2022. However, we think rental growth will converge in the coming years as tourism numbers fall back to pre-pandemic levels in Barcelona and stronger domestic spending prospects …
In contrast to offices, there is less evidence of a ‘flight to quality’ in the overall retail sector. Shopping centres are the exception, where the spread between both prime and non-prime yields, and floorspace and financial vacancy rates has widened in …
Surge in supply ahead of Budget may temporarily dampen prices A leap in the number of homes being put up for sale in September, perhaps due to fears of second-homes and rented properties being subject to higher capital gains tax after the Budget, may …
China’s economy has some cyclical spare capacity that could be filled with fiscal stimulus. But its troubles are mostly structural. The finance ministry won’t solve them on Saturday. China’s finance minister is a long way down the pecking order of Party …
9th October 2024
Sweden’s economy is likely to see a strong rebound next year as consumption will benefit from fiscal stimulus and lower household interest expenditure. We think that the recovery will encourage the Riksbank to only cut its policy rate from 3.25% to 2.5% …
While electric vehicle (EV) rollouts in Europe and the US have stalled and are set to remain sluggish over the next few years, the uptake of EVs in China has surged beyond expectations. So, for all the focus on the near-term supply risks to oil, the …
The Reserve Bank of India’s new-look MPC voted to keep the repo rate unchanged at 6.50% today as expected but struck a less hawkish tone in its communications, which included a change in the official policy stance to more neutral language. This …
Despite the surge in foreign visitors, Japan’s tourism industry is still struggling as domestic tourists have slashed holiday spending in the face of plunging real incomes. One of the sectors where the pandemic is still having a visible impact on Japan’s …
With the inflation battle seemingly won, the Bank of Canada has indicated that it is prepared to cut interest rates more quickly if warranted, with that decision hinging on developments in business hiring, investment and consumption. While the focus on …
8th October 2024
Saudi Arabia’s 2025 Pre-Budget statement provided the first clear signs that officials are accepting that they need to pare back on some of their ambitious spending goals, which supports our view that non-oil GDP growth is likely to slow over the next few …
With the price of crude oil continuing to climb higher, we could soon see a resurgence in fuel inflation in both Australia and New Zealand. However, if we’re right that any pickup in oil prices will prove short-lived and that second-round effects will be …
The unexpectedly strong 254,000 gain in payroll employment in September was a welcome surprise, but the deterioration in most other labour market indicators suggests this was a one-off rather than the start of a genuine renaissance. Survey-based hiring …
7th October 2024
Wage growth remains strong across much of Latin America and Central Europe (CEE), and that has stalled the disinflation process in services in particular. This supports our view that, in general, central banks in these regions will keep policy tighter …
On the back of client questions, we have put together this short primer on the potential impact of a second Trump term on commercial real estate markets, both in the US and elsewhere. The key takeaway is that if Trump were to follow through on his mooted …
GDP growth in Vietnam rebounded strongly in the third quarter of the year and we expect growth to remain robust in the near term, helped by strong export demand. Data published over the weekend showed that GDP growth accelerated in the third quarter to …
Data published today show that the euro-zone’s household saving rate rose even further in Q2 this year. The increase since late 2022 can be attributed to low consumer confidence and high interest rates, but the extent of the rise and the fact that it has …
4th October 2024
We’re cautiously optimistic that China’s equity market will hold on to its recent gains, and perhaps even extend upon them in the near term. But we still think its long-run prospects are poor. China’s stock market has made enormous gains over the past …
We continue to believe that core PCE inflation will return to the 2%target on a sustained basis early next year, as labour market conditions gradually ease. Up until recently we would also have argued that the risks to that view lay mostly on the …
3rd October 2024
The 2025 draft budget recently outlined by Russia’s finance ministry shows that, rather than falling next year as initially planned, defence spending will rise by more than 20% to hit 6.2% of GDP. While personal income and corporate tax hikes will help to …
