It is inevitable that transactions will drop sharply after setting a record high in June. But the stamp duty holiday is just one of several factors behind the housing market boom, so house prices should prove resilient to the end of the tax break. The …
21st July 2021
We think a reversal of the factors that have fuelled the recent surge in European natural gas prices, namely high LNG prices, constrained supply and depleted stocks, will bring prices back down to earth by early 2022. However, a strong economic rebound …
20th July 2021
The spread of the Delta variant of COVID-19 poses a much bigger risk to economic recoveries in emerging markets than in developed markets. India, South Africa, and South East Asia have suffered already or are suffering. And limited vaccine coverage in …
In this Update we identify five things that we have learned from reopening so far. Some we anticipated, including the rapid rebound in activity once restrictions were removed and an easing of trade growth as output in advanced economies resumed. But …
While longer-term drivers are supportive of flexible offices, we think demand for space will be held back by the slow return of workers to the office, by more competition from home offices and by high levels of cheap, vacant traditional space. A year ago, …
Russian inflation shows no sign of letting up and looks set to remain above the central bank’s 4% target until at least the end of next year. With households’ inflation expectations also rising, we think the central bank will feel the need to step up the …
19th July 2021
With Sydney tightening its lockdown and the one in Victoria set to be extended, we now expect GDP to shrink by 0.5% q/q in Q3. The vaccine rollout isn’t advanced enough yet to ease the medical situation meaningfully, but it is set to keep accelerating and …
We have pulled back our expectations for Treasury yield rises this year and, to a lesser extent, next year. At the margin, this is positive for real estate pricing as it means that the property to bond yield gap will stay wider for longer. However, with …
16th July 2021
The disruption to economic activity from the unrest and violence in South Africa, which now appears to be dissipating, will probably prove to be limited, but the impact on the public finances is likely to be more significant. In particular, there is a …
The slow economic recovery, more remote working and a high supply pipeline are key reasons for our below-consensus forecasts for prime office rental growth in Lisbon in the coming years. As highlighted in a recent Update , we expect weaker growth in …
Although we expect a significant fall in the price of oil to put some pressure on the energy sector of the US corporate bond market, we expect spreads more generally to remain quite low in the next few years. Since their sharp rise at the onset of the …
After reaching an all-time high in May, the price of copper has since come off the boil. And we think it will fall further over the next eighteen months or so, as a combination of weaker economic growth in China and a greater availability of both ore and …
The Bank of Japan today unveiled the details of its green lending facility, underlining that its focus is now moving away from addressing the pandemic towards longer-term structural issues . As universally anticipated, the Bank of Japan kept its interest …
The widening in India’s goods trade deficit in June came on the back of a rebound in imports amid the lifting of containment measures and the recent rally in global oil prices. But while the economic recovery has further to run, we think that oil prices …
Chile’s central bank fired the starting gun on a gradual tightening cycle yesterday as it hiked its policy rate by 25bp, to 0.75%. While it signalled that monetary policy will remain accommodative over the next two years, we think that Chile’s strong …
15th July 2021
The Bank of Korea (BoK) left its main policy rate on hold at 0.50% today and signalled that a rate hike is still very much on the table this year. While the worsening virus situation has made things more uncertain, comments from the press conference …
The Bank of Canada’s decision to continue tapering its asset purchases today came as little surprise and we continue to expect the Bank to bring the QE program to a close by the end of this year. With the Bank’s new GDP forecasts looking too optimistic to …
14th July 2021
The recent surge in house price growth to record highs does not automatically mean rental growth is also set to take off. But a strong recovery in rental demand as cities reopen and households make delayed moves, coupled with low vacancy rates, mean …
South Africa’s hard activity data for May painted a picture of a bumpy recovery in Q2, as retail sales grew strongly but industrial sectors showed signs of weakness. With tighter virus containment measures and, more recently, violent unrest, the economy …
The apparent success of vaccines at preventing severe illness and death from the Delta coronavirus variant should mean that it does not pose a major threat to recoveries in most advanced economies. However, the rapid spread of the Delta variant poses a …
Net capital outflows from emerging markets have picked up over the past month following the Fed’s more hawkish turn at the FOMC meeting in early June. Outflows may intensify over the coming months, but the macroeconomic fallout in the major EMs should be …
With price pressures in the construction sector likely to prove transitory, we think that the hit to activity will be small. That said, we expect construction activity to slow over the coming years on account of lower office completions as the sector …
Recent methodological changes by the UK statistics body highlight the difficulties of capturing productivity improvements in official economic data. Although the revisions will make only a small improvement to the UK’s productivity picture, they support …
The RBNZ today sent a hawkish signal by announcing the end of its bond purchases. While we currently expect the Bank to start hiking rates in May next year, the risk is that it will happen earlier . The Bank’s asset purchases have fallen very sharply in …
The muted reaction in the markets so far to today’s above-consensus surge in US inflation presumably reflects a view that it won’t have as much of a bearing on economic growth or monetary policy as periods of high inflation have sometimes had in the past. …
13th July 2021
The US dollar has risen significantly since the June FOMC meeting, with another surge after today’s strong inflation data , and we think the greenback will make further headway in the second half of the year. Since the start of 2021, the dollar has gone …
There is clearly a lot of uncertainty over how the unrest in South Africa in recent days will develop but there are reasons to think that the impact on economic activity will be towards the milder end of the spectrum. Perhaps a bigger risk is that the …
China’s imports of most industrial commodities continued to fall in June. We expect import volumes of near all commodities, but especially the industrial metals, to ease further in the months ahead as economic growth slows and activity in industry and …
While London rents are set to reverse some of the fall of the past year, we doubt the premium of rents in the capital over the national average will return to its pre-virus level. But outside London rental growth is set to accelerate sharply. London …
With the virus outbreak in New South Wales going from bad to worse we’re pencilling in a marked slowdown in Q3 GDP growth. However, given that deliveries of the Pfizer vaccine have been brought forward and more people are now encouraged to take the …
12th July 2021
While new infections in Tokyo have picked up, the fourth state of emergency in the capital is partly a political move designed to placate fears that the Tokyo Olympics will trigger yet another virus wave. With the health situation in other prefectures …
There is mounting evidence that the exodus from cities is winding down. As economies reopen, we think that cities will come back to life, bringing a wave of new demand for high-rise apartments. But once the dust settles, the shift to working from home …
9th July 2021
The People’s Bank (PBOC) has just announced a 50 basis point cut to the required reserve ratio (RRR) for most banks. This is less of a lurch towards monetary easing than it might seem at first glance – it is partly intended to offset tightening elsewhere. …
We don’t expect the latest tumble in long-dated US Treasury yields to continue, and still think yields will rise significantly over the next few years. But given developments over the past couple of months, we have pared back our expectations for …
Poland’s central bank left interest rates on hold today and, while it revised up its GDP growth and inflation forecasts, there was little sign in the accompanying press statement that the balance on the MPC has shifted further away from the ultra-dovish …
8th July 2021
The pandemic has accelerated growth in scientific research and development, prompting a boost to demand in key R&D clusters. While we don’t expect the current rates of growth to be sustained, we think the outperformance of this sector could persist for …
The details of the monetary strategy review were slightly less radical than had been suggested in parts of the financial media. But the changes announced today still amount to a historic shift away from Bundesbank orthodoxy and towards the mainstream. We …
Budget deficits have narrowed from their 2020 peaks across the emerging world. The improvements in Brazil and Argentina – where deficits appear to be narrower than their pre-pandemic levels – provide welcome relief given both countries’ debt troubles, but …
If confirmed, the ECB’s decision to adopt a 2% inflation target and allow room to overshoot it if needed would mark a historic shift towards the mainstream for the ECB. It would have no immediate implications for monetary policy, but in the longer run may …
The fact that Bank Negara Malaysia (BNM) left its policy rate on hold at 1.75% today despite the poor economic outlook means any further loosening is unlikely. But with the recovery set to be slow and fitful, we think BNM will leave interest rates at …
Despite poor employment prospects, we are cautiously optimistic on the outlook for CEE leasing activity as the economic recovery gets underway. However, large supply pipelines mean that improving occupier demand will not be enough to prevent further …
It has become harder to make the case that the stock market in the US will fare worse than those in the rest of the developed world, now that the “rotation” trade has fizzled out. Nonetheless, we still think there are other reasons to expect the …
7th July 2021
In contrast to the stronger payrolls figures released last week, the latest survey data suggest that labour shortages remain acute. That supports our view that the acceleration in employment growth in June probably wasn’t a sign of things to come and …
Turkish inflation hit a two-year high in June and recent domestic energy price hikes will cause it to rise even further over the next couple of months. High inflation and signs of a quick recovery from May’s lockdown mean that the central bank will …
The government’s latest vaccine supply projections suggest that India could fully vaccinate all adults by year end. But that hinges on optimistic assumptions about production and distribution. Unless supply and logistical issues constraining the rollout …
Although we expect the economic outlook will continue to improve, we think that South East office rents will still edge lower this year. What’s more, we don’t expect much of a rebound in 2022, as a shift to remote working will continue to weigh on demand. …
While the shift towards rate hikes in several key emerging markets has provided a boost to their currencies, we doubt that the carry trade will fare as well in the second half of the year. In 2020 interest rates fell sharply almost everywhere as central …
6th July 2021
The failure of OPEC+ to agree to new production quotas has created considerable uncertainty about the group’s oil production going forward. In this Update , we lay out three possible scenarios for OPEC+ output in the coming months and what they would mean …
Bigger rises in commodity and component costs than we had expected mean that we now think CPI inflation will rise from 2.1% in May to a peak of about 4.0% around the turn of the year. But we still think this will be a short, sharp spike in inflation that …
With the (usual) exception of Turkey, the strong rates of credit growth seen in some EMs including Brazil and Korea are unlikely to be sustained as policymakers have already started (or will soon turn to) tightening policy. The bigger concern is the …
