The entrenched positions of both sides suggest the deal to suspend the debt ceiling until December may only delay rather than avert a crisis. And in that scenario, we doubt that the Treasury minting a $1trn platinum coin would offer the easy way out. The …
7th October 2021
The Bank of Israel revised up its forecast for GDP growth at today’s meeting and struck a more hawkish tone on inflation as it announced that it will end its asset purchase programme later this year. This was in line with expectations, but Governor Yaron …
Sales of condos have been on tear in recent months, with their share in total existing home sales reaching a 14-year high in June. The reopening of cities helps explain that development, and condo sales have also benefitted from comparatively favourable …
The account of September’s ECB meeting revealed many policymakers believed that inflation may stay higher for longer than the Bank’s projections show. Recent developments have added to the upside risks. As a recap, at its September meeting the ECB …
The threat of energy shortages looms over Brazil once again. The country’s experience with electricity rationing in 2001/02 offers a useful guide about how the situation may pan out. We estimate that this episode knocked about 1%-pt off GDP growth, added …
The extraordinary rise in European gas prices in recent weeks has raised the possibility that, as a last resort, European governments may need to ration the supply of electricity to businesses or households. The economic impact of rationing would depend …
We think that weaker physical demand, higher real US Treasury yields and a stronger dollar will mean that the recent poor performance of the silver price is set to continue over the next couple of years . After a brief spell of volatility in the price of …
UK employment has recovered strongly in recent quarters and is set to see further growth into 2022. This will be good news for UK offices, especially in regional cities. But with occupiers set to look beyond headcount when making their space decisions, we …
Irrespective of how the current problems in China’s property sector are resolved, property construction there is entering a period of structural decline. Among other EMs, the main effects will be felt in metals producers in Latin America and Africa, …
The pandemic and widespread use of remote working appeared to entice some Europeans to leave cities last year. However, the recent improvement in city mobility adds evidence to our view that this would prove short-lived, as cities remain attractive for a …
We expect the yields of 10-year emerging market (EM) local-currency (LC) government bonds to rise over the coming years. But, in most EMs, we think yields will rise by less than the 10-year US Treasury yield. While EM LC government bond yields have …
6th October 2021
The price of European natural gas (TTF) surged by around 35% this morning, before crashing back down on Putin’s reassuring comments about Russian supply. The latest price moves appear speculative, and we retain our view that it is just a matter of time …
The National Bank of Poland (NBP) unexpectedly hiked its policy rate by 40bp to 0.50% at today’s MPC meeting, but the accompanying communications were underwhelming and suggest that the rate hike was not as hawkish a move as might have been first …
The sharp slowdown in economic growth in the past couple of quarters suggests that the probability of the Bank of Canada following other central banks in becoming more hawkish is low. The risk will rise, however, if the September Labour Force Survey shows …
While the large fiscal stimulus passed in the US in the first quarter of this year appears to have been a key reason why equities there outperformed Treasuries at the time, we think that the infrastructure and reconciliation bills currently making their …
The eye-watering decline in Swedish GDP in August suggests that supply shortages and weakening global growth will continue to take the shine off the impressive rebound in the Swedish economy in late 2021. The 3.8% m/m plunge in Statistics Sweden’s GDP …
Egypt’s economy has emerged from the COVID-19 crisis relatively well, but the country’s lagging vaccine rollout, a slow return of international tourists and tight fiscal policy mean that the recovery from here is likely to be slow-going. GDP is likely to …
A likely flood of exports from India and China, as well as a ramping up of donations from the US, should help to significantly boost vaccine supply for the many poor EMs in Africa and South and South East Asia whose vaccine rollouts lag behind. That said, …
The RBNZ’s decision to begin its hiking cycle while Auckland is still in lockdown highlights that the New Zealand economy is on the brink of overheating. And as restrictions ease, we think the Bank will continue hiking rates in the months ahead. Today’s …
Korean consumer prices saw another strong m/m rise last month, and while we don’t think this is a major cause for concern it still adds weight to our view that the central bank will hike rates again later this year. Data released today show that while the …
The recent sharp rise in public and market-based measures of inflation expectations has worried the Bank of England. Inflation expectations will probably rise further as actual inflation continues to climb. And if they rise by more than the increase in …
5th October 2021
There are five key headwinds to Mexico’s economy, including high inflation and shortages in the auto sector, which suggest to us that the recovery will disappoint expectations from here. We now forecast below-consensus GDP growth of 6.0% in 2021 and 2.8% …
Changes to the weights applied to the goods and services in the inflation basket pushed inflation up in January, but since April the new weights have kept the headline rate lower than it would otherwise have been. The impact of next year’s changes in …
The National Bank of Romania (NBR) raised its policy rate by 25bp to 1.50% at today’s meeting, and the backdrop of rising inflation, large twin deficits and currency weakness means that further rate hikes are likely to be delivered over the next 12 …
Local governments in China are far less reliant on land sales as a source of revenue than is often claimed. While slowing real estate development will create a funding gap, it could be more than offset with a modest property tax. It’s a common refrain …
With cases of COVID-19 in Vietnam falling sharply and the government easing restrictions, factories are starting to reopen, and the latest data suggest the worst is now over for the country’s manufacturing sector. However, with backlogs of work mounting …
The RBA today stuck to its guns by predicting that rates won't rise until 2024, but our view that inflation will remain higher for longer means it will happen in early-2023 already . As universally anticipated, the Bank kept its interest rate and asset …
Households continued to accumulate “excess” savings in Q2 this year, with those held as cash and bank deposits equivalent to about 4% of GDP. We do not expect all of this to be spent, but some of it will. And it should also provide a small indirect …
4th October 2021
We expect a gradual normalisation in demand growth and a rebound in supply will start to weigh on oil prices from the fourth quarter. So far this year, growth in demand has outpaced supply, helping prices to hit multi-year highs, but we expect this …
In-migration to southern metros with relatively low living costs and high desirability will be positive for office demand in those same metros. We think firms will be encouraged to set up offices in those locations given the growth in their skilled labour …
Although the pull-back in the S&P 500 last month was probably influenced by a sell-off in Treasuries (see here ), we don’t subscribe to the view that stocks are in a big bubble that bonds are bound to burst soon. We have long made the case that higher …
1st October 2021
Although the emerging market manufacturing PMI ticked up last month, EM industry has been undergoing a slowdown for some time. And the surveys show that supply constraints are mounting, which is likely to weigh on manufacturers’ output in the months …
The key message from today’s batch of PMIs for September is that supply constraints are still limiting growth in industry, and there is little to suggest they will ease materially any time soon. So, manufacturers and wholesalers will continue to face …
We think that the ongoing slowdown in global economic growth points to continued dollar strength, which suggests to us that there is significant upside risk to our already-bullish dollar forecast. Historically, the US dollar has tended to appreciate in …
We doubt that a larger rise in Bank Rate over the next two years than we previously expected will put much upward pressure on mortgage rates. Low interest rates and increased spending on housing costs will continue to provide a supportive environment for …
While the announcement of a 10bp interest rate cut by Denmark’s Nationalbank this afternoon seemingly goes against the grain of the recent hawkish shifts by the US Fed and Bank of England, it is the logical culmination of sustained upward pressure on the …
30th September 2021
The ECB is likely to argue that the increase in inflation to above its 2% target is “transient” even if it continues for much longer than currently expected. The key question is not how long inflation has been above target but whether it is expected to …
The Czech National Bank (CNB) stepped up the pace of its tightening cycle with a 75bp interest rate hike, to 1.50%, at today’s meeting and its hawkish communications signalled that further aggressive hikes will be delivered in the coming months to tackle …
Euro-zone governments’ reduction in support for jobs will not cause unemployment in the region to jump, since there are now relatively few workers benefiting, and hiring activity is strong. But lingering spare capacity in the labour market means worker …
The impact on the labour market of the end of the furlough scheme could ultimately determine whether an interest rate hike comes in the next few months, or not until mid-2022. Our view remains that its expiry will help to ease the existing shortages and …
Due to the still high household saving rate, we have so far been sanguine about the risks posed by the winding down of benefit payments to households. But with goods shortages limiting the scope for other consumers to pick up the slack, there is a clear …
With UK policy rates now set to rise as early as next spring, this has tipped the risks to our commercial property outlook to the downside. But we don’t think the change is significant enough to make a wholesale downgrade to our view. Recent developments …
China’s manufacturing PMIs for September diverged, but both still point to subdued commodities demand. What’s more, the surveys were conducted before power shortages started to constrain activity. Weaker industrial activity should put downward pressure on …
Rising government bond yields are set to squeeze valuations, resulting in increases in Oslo all-property yields after 2022. This will weigh on returns for Oslo property in the coming years, with structural headwinds limiting the extent to which rental …
While financials and real estate have been among the worst-performing sectors in the MSCI China Index this year we think that there may be scope for them, as well as the energy sector, to outperform the materials and health care sectors and “technology” …
29th September 2021
We doubt ‘tapering’ of the Fed’s asset purchases over the next year or so would weigh heavily on the US stock market, and forecast that it will make small gains over the next couple of years. At last week’s FOMC meeting, Fed officials gave, among other …
Soaring house prices and tight credit conditions have pushed the first-time buyer share to a joint six-year low which, alongside strong housing starts, has arrested the decline in the for-sale home inventory. With foreclosures also resuming, we expect …
The Bank of Thailand (BoT) left interest rates on hold today at 0.5%, and we have taken out the rate cut we originally had pencilled in for this year. However, rate hikes are still a long way off. Unlike the central bank’s August meeting when two of the …
Incoming PM Kishida has provided mixed signals on fiscal policy, pledging a large near-term stimulus while retaining ambitious medium-term consolidation plans. Given that he blamed deregulation for widening inequality, structural reforms will move further …
China’s power shortages are a reflection of the global strain in energy markets and won’t be resolved overnight. Power rationing will constrain industrial activity until demand weakens enough to bring the domestic electricity market back into equilibrium. …
