While it may take years or decades before the evidence is clear, there are tentative signs that the pandemic has accelerated a shift towards a bigger role for the state in advanced economies. In our “ Economies after COVID ” series last year, we explained …
24th September 2021
Taiwan export orders dipped back again in August, suggesting that demand for Asian electronics goods may have peaked. However, with demand still running well ahead of supply, shortages are likely to remain a constraint on global manufacturing for some …
The Evergrande crisis has made waves in financial markets this week. But, while the developed property markets we cover may see some short-term upheaval, we think the impacts outside of China are unlikely to be severe or lasting. For property investors, …
23rd September 2021
Several EM central banks have raised interest rates in the past couple of months on the back of growing inflation concerns (including many in Latin America) and/or strong economic recoveries (parts of Central Europe, Korea). Hiking cycles look set to …
Although a messy collapse of Evergrande is a downside risk to our near-term price forecasts, it adds weight to our view that China’s construction sector is in structural decline. In turn, this underpins our view that industrial metals prices will be on …
Policymakers in South Africa kept their benchmark rate unchanged at 3.50% today and concerns about lasting economic damage from the pandemic and recent unrest appear to be growing. Against a backdrop of a sluggish recovery and weak inflation, we think the …
The flash PMIs for September show that the pace of growth slowed across developed economies towards the end of Q3, suggesting that the boost to activity from reopening is fading. But inflationary pressures show no signs of abating, with indicators of …
While rates were left at +0.10% in an 9-0 vote and the Bank of England’s target stock of purchased assets at £895bn, today’s Monetary Policy Committee (MPC) policy statement suggests that the Bank is moving closer to raising interest rates. As such, we …
The federal election in Germany on Sunday will result in a new chancellor for the first time since 2005 and opinion polls suggest that the result will be extremely close with potentially months of coalition talks ahead. In this Update , we answer five key …
Turkey’s central bank (CBRT) unexpectedly cut its one-week repo rate by 100bp to 18.00% today, despite the further rise in inflation in August, and we now think that further aggressive easing is likely over the coming year. But this could ultimately sow …
Taiwan’s central bank (CBC) today left interest rates unchanged at 1.125%, and we think policymakers will be in little rush to start tightening policy despite the strong economy. Today’s decision was unanimous and was correctly predicted by all 25 …
The long-awaited World Expo in Dubai will get underway next Friday and while there is likely to be some boost to the economy, this will be short lived. What’s more, as we have long warned, the Expo could leave high rates of overcapacity in Dubai’s real …
This morning’s policy decision double-header played out as planned, with the Swiss National Bank maintaining the status quo and the Norges Bank finally pulling the trigger on its tightening cycle. But while rate hikes in Switzerland are many years away, …
The fact that the central bank in the Philippines (BSP) left its main policy rate on hold at 2.00% today, despite the very weak state of the economy, suggests further easing is unlikely. While we are now taking out the cuts we had pencilled into our …
The statement from yesterday’s Brazilian central bank meeting, at which the Selic rate was raised by 100bp (to 6.25%), made clear that Copom is on the warpath to stop inflation expectations rising. With the inflation outlook worsening, we now think that …
High and rising household debt in Australia and New Zealand will limit central banks’ scope to hike interest rates. The upshot is that we expect the RBNZ to hike rates by a modest 125bp in the tightening cycle set to start next month, while the RBA’s …
Fed officials gave a heavy hint today that the QE taper will be formally announced in November and, presumably in response to concerns that the surge in inflation won't be as transitory as they originally hoped, there were notable increases in the median …
22nd September 2021
If, contrary to our opinion and the consensus, a collapse of Evergrande ends up having a significant impact on the rest of the world, it will be because it first causes either major financial dislocation within China or a property-led slump in China’s …
With a couple of exceptions, most major developers are in a much stronger financial position than Evergrande and should be able to weather a temporary spike in their borrowing costs amid contagion fears. Successfully navigating the structural decline in …
Countries across Emerging Asia are making renewed efforts to reopen their borders to boost flagging tourism sectors. However, ongoing travel restrictions and the spread of the more infectious Delta variant mean that tourism will continue to struggle. This …
Japan’s reliance on fixed, long-term contracts for its natural gas supply should limit the impact on consumers of the recent surge in gas spot prices currently being felt most acutely across parts of Europe. Japanese liquefied natural gas (LNG) importers …
If Evergrande were to cause a financial or economic shock it would either be because policymakers failed to contain financial contagion or because the company’s collapse precipitated a much bigger decline in construction activity than most investors …
The Bank of Japan left policy settings unchanged today and while a new Prime Minister could appoint a more hawkish BoJ Governor, we expect the Bank to keep interest rates unchanged for years. As universally anticipated, the Bank of Japan kept its interest …
Commercial banks left the Loan Prime Rate (LPR) on hold for a 17th consecutive month today. But with the economy losing steam and concerns around the property sector growing, we think policy rate cuts by the PBOC could come as soon as next month. The …
In this Update , we answer six key questions about the surge in natural gas prices. The key point is that it will keep inflation in DMs and many EMs above central bank targets for a few months longer than we had previously assumed. Governments are already …
21st September 2021
Hungary’s central bank (MNB) slowed the pace of its tightening cycle today, raising its base rate by a smaller-than-expected 15bp to 1.65%, and the post-meeting communications signalled that future rate hikes will remain at the smaller end of the …
There has been almost no change in the distribution of seats in Parliament following the election, but it seems likely that the minority Liberal government will press on with a modest loosening of fiscal policy. With 98% of the votes counted, Prime …
Bank Indonesia today left its policy rate unchanged at 3.5% and signalled that it is likely to leave rates on hold for a prolonged period of time. With the economy rebounding on the back of a fall in virus cases but the rupiah holding up well, we think …
The Riksbank stuck firmly to “Plan A” this morning by maintaining the status quo for the repo rate and its asset purchase programme. However, the slight tweak to the Bank’s language on the outlook for the balance sheet lends support to our view that …
The low use of gas, and a reliance on nuclear and renewables for electricity generation, means that Switzerland and the Nordics are less exposed to the recent surge in gas prices than other parts of Europe – particularly Spain. While Switzerland and the …
20th September 2021
The upward pressure on euro-zone headline inflation from the surge in natural gas prices will not be felt evenly throughout the region, with Spain looking most vulnerable. Governments are stepping in to cushion the blow, but higher energy bills are a …
The State Bank of Pakistan (SBP) today raised interest rates by 25bp and made clear further tightening is likely as the central bank shifts its focus away from supporting the recovery and towards boosting the currency. We expect more rate hikes over the …
Soaring shipping costs will exacerbate the impact of the weaker exchange rate on import price inflation. Indeed, we expect underlying inflation to return into the RBA’s 2-3% target next year. “Core” consumer goods prices rose by a subdued 0.3% q/q in Q2, …
Policymakers in Nigeria kept their benchmark rate on hold at 11.50% at today’s MPC meeting and will probably continue to do so over 2021-23. And the central bank’s insistence on maintaining a strong currency using disruptive foreign exchange rules is …
17th September 2021
After beginning to slow at the turn of the year, house price growth has since got a second wind. We suspect the key driver behind that resurgence was the arrival of the third round of stimulus cheques, which drove up the saving rate and helped boost …
While we expect the yields of long-dated sovereign bonds to increase further across developed markets over the next two years, we think they will rise by more in the US than in the euro-zone and the UK. This is based on our view that inflation will prove …
Chicago’s office market will not escape the gloomy outlook caused by the shift to remote working. But we expect the low level of rents, the small share of jobs in the information sector, and a dwindling supply pipeline to limit rental declines over the …
Despite the fall in oil prices that we expect over the coming years, we forecast the MSCI Emerging Markets (EM) EMEA Index to make further gains and continue to outperform the broader MSCI EM Index. The recent strong performance of equities in EMEA adds …
One feature of the COVID-19 era has been persistent non-payment of rents, particularly in the retail and leisure sectors. But we don’t think this will come to a head next year once the eviction ban lifts, as by then the economy should be in better shape …
Given the recent surge in wholesale gas and electricity prices to record highs, it looks likely that Ofgem will opt for another chunky hike to the price cap on households’ utility bills next April. While this will hit household real incomes, it doesn’t …
We doubt that the outcome of next week’s federal election in Canada will have much bearing on the economy and the loonie. Instead, we still think that bond yield differentials and oil prices will be the main drivers of the Canadian dollar, and will push …
The Central Bank of Egypt (CBE) kept interest rates unchanged at Thursday’s MPC meeting amid rising price pressures. However, we still think that inflation will slow in the final months of this year and re-open the door for the CBE to resume its easing …
We think that the ‘China’s Lehman moment’ narrative is wide of the mark. On its own, a managed default or even messy collapse of Evergrande would have little global impact beyond some market turbulence. Even if it were the first of many property …
16th September 2021
The spread of the Delta variant domestically has triggered a temporary reversal in the reopening inflation in high contact services, but its spread across other parts of the world will intensify supply shortages and drive goods prices higher. At the same …
Recent developments have prompted us to revise up our inflation forecasts for the coming few quarters, although we still expect inflation to decline to less than 2% in the second half of next year. The key reason why we are increasing our forecasts is …
The growing risks associated with the property sector in China underscore our view that the renminbi will weaken against the US dollar before long, even if financial stability risks do not escalate much further. We think the currencies of some economies …
The end of the stamp duty holiday may do little to dampen demand and homes for sale are in short supply. The upshot is that house price growth will remain strong into next year, so we have revised up our forecast for house price growth in 2022 from 3% to …
Falling foreign exchange reserves, a declining currency and a high level of foreign currency debt mean the risk of a sovereign default in Sri Lanka is growing. While the country should be able to muddle through for the next few months, it faces a crunch …
The most recent commercial property data have been surprisingly upbeat and have raised the possibility that the recovery could be stronger than expected. But we think investors may have run ahead of themselves and this trend is unlikely to be sustained …
A deeper dive into the CPI figures supports our initial analysis that the bulk of the jump in inflation from 2.0% in July to 3.2% in August is due to base effects linked to falling consumer prices in August last year rather than a widespread and …
15th September 2021
