Reports that shortages of heavy good vehicles (HGV) drivers have become more acute and have raised drivers’ pay will do little to ease fears that higher wage growth could persistently lift CPI inflation next year. But unless labour shortages spread to …
3rd September 2021
We think that the prospects for monetary tightening point to an appreciation of the Swedish krona relative to the UK pound over the next 6-18 months. This year, sterling has been one of only two G10 currencies to strengthen against the US dollar, while …
2nd September 2021
While the furlough scheme was critical in preventing the COVID-19 recession from dragging down house prices, we don’t think that the withdrawal of the scheme poses much of a risk. Meanwhile, the latest data show the end of the repossessions ban and …
With external positions in decent shape in most major EMs, the macroeconomic fallout from any tightening of external financing conditions should be limited. But there are a handful of EMs which look vulnerable. Turkey remains the key one, but risks are …
The recent fall in aggregate new daily Covid cases in the euro-zone, largely due to the success of the vaccination programme, means that governments in the region should be able to avoid re-imposing significant new restrictions in the coming months. After …
Morocco’s strong vaccine rollout and a rebound in the agricultural sector will support a robust recovery over the coming quarters. Although a slow return of tourists and fiscal consolidation will act as headwinds, we still think that GDP growth will be …
The data released over the northern hemisphere summer break have suggested that economic recoveries in most countries have started to lose some steam. At the same time, while inflation is generally higher now that at the start of the summer, there are …
The EM manufacturing PMIs for August suggest that virus disruptions and supply chain constraints held back output in much of Emerging Asia. Manufacturing slowed in most other EMs too, although there were at least early signs in Emerging Europe that …
1st September 2021
Brazil’s drought is getting worse and the impact on hydropower production and electricity tariffs will result in higher inflation than we’d previously thought. Fiscal risks could also intensify if the government seeks to cushion the blow to households. …
The latest data show that growth in the main monetary aggregates is slowing even before the Fed starts tapering its monthly asset purchases, although it remains strong by historic standards. (See Chart 1.) With the Fed likely to begin reducing its monthly …
August’s global manufacturing PMIs brought more evidence of a slowdown in the sector. Growth was always going to fall back as activity approached more normal levels, but supply shortages are also playing a role. There is early evidence that the adverse …
The economic damage from the latest COVID-19 waves across Sub-Saharan Africa appears to be smaller compared to previous waves, but low vaccination rates mean that officials will have to keep containment measures in place for longer than elsewhere. This …
Aluminium prices have recently been boosted by a series of supply outages in China. But unlike Chinese steel production, where declines have been driven largely by government policy which looks here to stay, we suspect that the falls in aluminium output …
The China PMI data for August continue to suggest that commodity demand in the world’s largest consumer is coming off the boil. As a result, the wedge between industrial metals prices and the China activity data has continued to grow, which underpins our …
The surprise 75bp interest rate hike by Chile’s central bank late on Tuesday (which took the policy rate to 1.50%) underscores policymakers’ concerns about the inflation outlook. Our forecasts for the policy rate had in any case been on the hawkish side, …
Data released today confirmed that the Italian economy grew strongly in Q2, supporting our above-consensus forecast for the year as a whole. Timelier data suggest that concerns about the Delta variant have not crimped the services recovery, but supply …
31st August 2021
We expect a recovery in domestic and foreign spending along with online penetration rates below most other euro-zone markets to support moderate growth in Spanish prime retail rents over the 2022-25 period, though this is not enough to reverse the decline …
Although the US stock market’s valuation is nearly as high now as it was at the height of dot com mania, we don’t expect the return from it to be as bad in the next decade as it was in the 2000s. To re-cap, the return from a stock market index is …
Despite a higher construction pipeline for distribution warehouses, we think that a high share of pre-let space, coupled with strong demand, means vacancy will only be 20bps higher over the next few years as a result. In turn, we don’t expect it to have a …
27th August 2021
Although we forecast the greenback will rise further over the next year or two, we think that it will face growing headwinds over the longer term. As we set out in our first FX Markets Valuation Monitor , we think that the dollar is somewhat overvalued …
26th August 2021
Our forecast for mortgage rates to rise to 4.2% by end-2023 will help slow house price gains, but we don’t think that increase will be enough to cause an outright fall in values. And with homes not particularly overvalued, inventory close to record lows …
We estimate that Brazilian households have ‘excess’ savings worth around 6% of GDP resulting from the pandemic. These should help to cushion consumer spending in the face of headwinds caused by rising inflation and unwinding fiscal support, but we think …
With the Delta-linked resurgence in coronavirus infections adding to the downside risks to economic growth and officials still split on exactly what qualifies as “substantial further progress” toward meeting the full employment goal, we don’t expect Chair …
The account of the ECB’s July meeting confirms that a minority of Governing Council members objected to the dovish shift in the Bank’s interest rate guidance. Partly because of this, we now think the Bank is more likely to take until December to agree …
We are not convinced by the Bank of Canada’s recent claim that CPI-trim and CPI-median are currently overstating underlying inflation, although their elevated level compared to CPI-common is mainly due to external factors that should prove at least partly …
Year-on-year money and lending growth has fallen sharply this year and we think it will decline further. With the subdued level of economic activity also weighing on consumer prices, we don’t think that money growth poses a significant upside risk to …
We were among the first forecasters to call that the Bank of Korea (BoK) would begin tightening monetary policy this year and it duly delivered today, raising the policy rate by 25bps to 0.75%. Given the hawkish comments in the press conference, we now …
The latest high-frequency data point to the relentless surge in new coronavirus cases starting to weigh heavily on consumer activity this month. And with full-blown emergency declarations to be expanded to cover around 80% of Japan’s economy from Friday, …
Business surveys suggest that global supply problems are becoming a drag on euro-zone investment, but these problems should fade going into 2022. As long as the Delta variant doesn’t halt the economic recovery in its tracks, investment should make a …
25th August 2021
Revisions to South Africa’s historic GDP data show that the economy is more than 10% larger than previously estimated. But this doesn’t alter the headwinds facing the economic recovery and, while the government debt-to-GDP ratio may now be lower, …
The bipartisan infrastructure deal, which could be passed by end-September, would provide no meaningful boost to the economy over the next couple of years. The $3.5trn spending package that Democrats aim to pass via reconciliation later this year could …
Intermediate goods shortages and pandemic-related supply constraints across Central and Eastern Europe (CEE) are not going to disappear overnight and may hold back the pace of recovery in certain sectors. But they should eventually ease and we remain …
The inflation expectations of households, businesses and the financial markets will probably rise in the coming months as actual CPI inflation jumps to over 4.0% later this year. But as the rises are most likely to be confined to measures that capture …
Data published today show that the weakness in German GDP in Q2 was due to the low level of household spending. Consumption should increase sharply in Q3. But with manufacturers struggling, the economy will probably not regain its pre-pandemic size until …
24th August 2021
Hungary’s central bank (MNB) raised its base rate by another 30bp, to 1.50%, as expected today but also dropped its commitment to raise interest rates on a monthly basis which suggests that the tightening cycle will probably slow after September’s …
After a sharp rise in support for the SDP the election result looks set to be very close. Whatever the outcome, economic policy will not change very much, but fiscal policy may be slightly less conservative, and Germany may be more open to European …
The flash PMIs for August confirm that growth in developed economies is slowing from a strong pace. This normalisation was always to be expected after the rapid post-pandemic revival, but the renewed rise in virus numbers and staff and materials shortages …
23rd August 2021
Israel’s central bank (BoI) sounded more cautious about the outlook at today’s MPC meeting given the rise in virus cases and tightening of containment measures. Provided the third booster jab is effective and restrictions are not tightened significantly, …
Some of our forecasts for commodity prices this year have been blown off course by extreme weather events. As economists we cannot pretend to have insight into future weather patterns, but we can share some thoughts on what more frequent adverse weather …
The past month has seen a growing divergence in COVID-19 outbreaks across the region, with cases still very low in Central Europe but surging in Israel and Turkey. Either way, it appears that restrictions will remain light touch and economic recoveries …
The minutes of the Reserve Bank’s August policy meeting show the first signs of dissent as MPC member Jayanth Varma argued that a hike in the reverse repo rate and a change in policy stance would be prudent to show that the committee remains committed to …
Progress made by countries in dealing with COVID-19 still seems to have had little bearing, in general, on the relative performance of their stock markets. Instead, swings in sentiment about the virus at a global level appear to have continued to exert a …
20th August 2021
There are growing signs that global demand for Asian consumer goods has peaked. Despite this, supply shortages look set to persist for some time amid growing evidence that surging virus cases across South East Asia are causing disruption to the region’s …
Malaysia’s new prime minister, Ismail Sabri Yaakob, takes over an economy poised to rebound strongly from the COVID-19 pandemic. But the new government looks ill-equipped to deal with the many long-term challenges facing the country. Ismail was today …
Net capital out flows from major emerging markets have picked up sharply over the past couple of weeks, driven by virus concerns, growing expectations that the Fed will begin tapering asset purchases this year as well as falls in commodity prices. But …
The recent reimposition of the strictest level of lockdown in New Zealand was enough to prevent the RBNZ from hiking rates in August. And our assumption that restrictions will now remain in place until near the end of this year means we now expect the …
Commercial banks left the Loan Prime Rate (LPR) on hold for a 16th straight month today. But with the economy losing momentum, we think it won’t be long before the PBOC is guiding rates lower. Even so, another round of large-scale credit-led stimulus …
We don’t expect emerging market (EM) equities, as a whole, to rack up big gains over the next few years thanks in part to the spillovers of lower growth in China. The latest tumble in EM equities, following the tapering discussion in yesterday’s FOMC …
19th August 2021
Market-based measures of inflation expectations have risen during the past few months, but they are still consistent with our view that inflation will remain well below target over the medium term. And while firms expect to raise prices in the near …
