This page has been updated with additional analysis since first publication. Lingering price pressures may continue to concern the BoE The small rise in the composite activity PMI, from 52.9 in January to 53.3 in February (CE forecast 53.0, consensus …
22nd February 2024
Domestic demand to drive the recovery Poland’s activity data for January suggest that the reacceleration in wage growth at the start of this year supported domestic demand, while the export-orientated industrial sector struggled. We think that a further …
PMIs point to stagnation, stubborn price pressures The flash PMIs for February suggest that the economy is still struggling and that price pressures are, if anything, intensifying. This does not dramatically change the picture for the ECB, but it does …
The Bank of Korea left its policy rate on hold today (at 3.5%) and attempted to push back against expectations for an early rate cut. However, with inflation likely to be back to target soon and domestic demand struggling, we expect easing to begin in …
This page has been updated with additional analysis since first publication. Manufacturing and services activity likely to remain robust The flash composite PMI reading for February suggests that the economy continues to perform exceptionally well. …
The Bank of Japan has succeeded in creating tight labour market conditions through ultra-loose monetary policy and is now reaping the benefits in the form of stronger wage growth. The upshot is that we expect the Bank to end negative interest rates at its …
Central banks in both Australia and New Zealand are likely to remain in “wait and watch” mode in the near term, given lingering risks to the inflation outlook. However, we think concerns about inflation persistence are overdone. Goods inflation is already …
On hold again, easing coming soon The Bank of Korea (BoK) kept its main policy rate unchanged today (at 3.5%), but with inflation cooling and growth set to struggle, we don’t think cuts are far away. The decision was correctly predicted by all 38 …
This page has been updated with additional analysis since first publication. The recovery in activity this quarter will be modest February’s PMI readings saw a drop almost across the board with the composite PMI, manufacturing PMI, services PMI and new …
Minutes lean a little hawkish, but don’t rule out May rate cut The minutes of the Fed’s late January policy meeting included support for both hawks and doves although, somewhat disappointingly, there was no attempt to quantify what gaining “greater …
21st February 2024
So far this year, the US dollar has moved in tandem with the relative performance of US equities. While that may continue over short time horizons, we doubt the rally in US equities we anticipate over the next couple of years will be a significant …
How strong was Chinese commodities demand at the start of 2024? What do official growth and spending targets signal about demand over the coming year? Where will demand be strongest in commodities markets this year? Economists from our Commodities and …
The economy continues to appear impervious to higher interest rates and, although we expect growth to slow over the first half of this year, that slowdown is likely to be modest. But we don’t expect continued economic resilience to prevent inflation from …
Almost all major emerging market (EM) currencies have fallen against the US dollar so far this year, and we think they will remain under pressure until interest rate expectations in the US shift lower again. EM currencies have been no exception to the …
The fiscal restraint shown by South Africa’s finance minister in today’s Budget was received positively in local financial markets, but the reality is that the government will struggle to meet its goals (indeed, it’s already doing so). And pressure on the …
An AI productivity boom. A Chinese structural slowdown. Aging workforces. In the coming decades, the global economy will be shaped by forces that will dictate which countries will make strides and which will stumble. Our Long Run Economic Outlook presents …
The S&P Global PMI surveys have not been fully reliable guides to activity in major advanced economies over the past few years. But their relationship with GDP outside the US is still fairly strong and the detail in the surveys offers useful information …
Europe Commercial Property Valuation Monitor (Q1 2024) …
The outcome of Russia’s presidential election is a forgone conclusion. But there are big questions about what will happen in Vladimir Putin’s fifth term to the course of the war in Ukraine, to Russia’s commodity exports and to its economy. Economists from …
Rise in core inflation will give cause for concern to the SARB South Africa’s headline inflation rate picked up to 5.3% y/y in January and the rise in core inflation is likely to spook an already-hawkish SARB, possibly pushing the start of an easing cycle …
Bank Indonesia left its policy rate on hold at 6.00% at its meeting today, and once again reiterated its plans to start loosening policy later in the year. We expect the central bank to start cutting rates in Q2. Today’s decision was correctly predicted …
This page has been updated with additional analysis since first publication. Chancellor won’t have huge amounts of cash to splash We will be discussing what the policies announced in the Budget mean for the economy and the financial markets in a 20-minute …
This page has been updated with additional analysis since first publication. Wage pressures will gradually ease over 2024 The pickup in wage growth in Q4 was driven by larger pay packets for public-sector employees. By contrast, private-sector wage growth …
This page has been updated with additional analysis since first publication. Export growth will still drive GDP growth this year The trade balance turned positive in January, mainly a result of a large fall in imports. Net exports contributed roughly half …
Unlike most bubbles, this one hasn’t been accompanied, at least so far, by obvious signs of high and rising leverage. On the other hand, the share of funds invested in ‘passive’ products is now much higher than in prior bubbles. This Update considers how …
20th February 2024
EM sovereigns have issued a record amount of FX debt at the start of this year, capitalising on a window created by the decline in US Treasury yields since October. The issuance has been concentrated among highly rated sovereigns and borrowing does not …
We will be discussing what the policies announced in the Budget mean for the economy and the financial markets in a 20-minute online briefing shortly after the Budget at 3pm GMT on Wednesday 6 th March. (Register here .) Using most of the fiscal headroom …
We expect China’s bonds, currency and equities to rally over the rest of this year. After declining to cut its benchmark MLF rate on the weekend, the PBOC restarted its easing today with a larger-than-expected reduction in its 5-year Loan Prime Rate. (See …
All-property values are down by 15% since mid-2022. But, with cap rates set to climb toward 5.5% by the end of the forecast period, we think capital value falls have some way to go still, with the total decline set to reach 26%. For offices, the …
The UK Chancellor may use his 6 th March Spring Budget to splash the cash and try to win voter support for the beleaguered Conservative party ahead of an expected election this year. But will his spending plans make much difference to the British economy …
Nigeria saw sluggish growth over the second half of last year, and the latest falls in the naira mean inflation is set to rise even further over the coming months, which should prompt the central bank to finally spring to action with large interest rate …
Headline inflation in Brazil has declined in recent months, but a deeper dig into the data shows that underlying price pressures are starting to build again. Although another 50bp cut in the Selic rate at the next central bank meeting in March is nailed …
After a couple of years in the doldrums, property construction in Korea is rebounding. The recovery in the sector should provide an important prop to economic growth this year. There are encouraging signs that the worst is over for Korea’s property …
The AI revolution should deliver substantial productivity gains in the coming decade, particularly in advanced economies. But with working age populations falling in key areas and China’s economy in structural decline, we expect global growth to slow …
Better news on core inflation While the larger-than-expected drop in headline inflation in January was partly driven by weaker than expected energy inflation, the Bank of Canada will be pleased to see the more marked easing in its measures of core …
Production growth to remain subdued in 2024 Global aluminium production was unchanged in January compared to December. This reinforces our view that production growth will soften this year. According to the International Aluminium Institute, global …
The main spillover to the global economy, so far, from the Israel-Hamas conflict has been major disruptions to shipping, but there has been a bigger and broader economic impact in the MENA region. While the effects on the Gulf economies has been and will …
Capital Economics is 25 years old. Founded by Roger Bootle in 1999, the company has grown from a handful of employees (and clients) to a global enterprise which today provides macro and market insight to tens of thousands of decision-makers across …
14th February 2024
Euro-zone construction output picked up in December, but remained well below last year’s peak. We expect it to drop again in 2024, in part due to a continued dismal performance by the sector in Germany. Data released today showed that euro-zone …
Data published today show that negotiated wage growth in the euro-zone remained strong at the end of last year. But these data won’t stop the ECB from cutting interest rates in April – as we are forecasting – as long as other indicators continue to point …
GDP has fallen for two consecutive quarters but we don’t think the economy is in recession and should return to growth this year. While the gap between nominal wages and inflation is closing fast, the wage-price virtuous cycle will receive a boost when …
This page has been updated with additional analysis since first publication . PBOC eschews broad-based cuts, steps up property support Today’s 25bp cut to the 5-year LPR is clearly aimed at supporting the housing market. On its own it will not revive new …
RBA’s talk of tightening is just bluster The minutes of the RBA’s February meeting showed that uncertainty remains the name of the game. However, we think that the incoming data should give the Board greater conviction that it has done enough to subdue …
Following the huge fall in multi-family starts in January, we suspect the apartment sector will continue to be a drag on new development this year. But construction of single-family dwellings will remain strong. In January, housing starts suffered their …
19th February 2024
We think that corporate credit spreads will narrow a bit more in the US and Europe. Along with lower “risk-free” rates, this will in our view contribute to pushing yields down this year. Credit spreads in the US and Europe have generally fallen since 19 …
The decline in mortgage rates since last summer will allow more first-time buyers to enter the market and lead to a further pick up in mortgage lending. With supply still tight, we think that will cause a 3% increase in prices this year. The large rise in …
Deep contraction highlights the extent of the conflict damage The 19.4% q/q annualised contraction in Israeli GDP in Q4 was much worse than had been expected and highlights the extent of the hit from the Hamas attacks and the war in Gaza. While a recovery …
The 2024 National People’s Congress (NPC) will take place against a backdrop of acute concern about the Chinese economic outlook. This annual legislative session is the moment the government unveils the year’s policy priorities, including official growth …
Fall in Swedish core inflation supports case for May rate cut The underlying measure of inflation fell further in January and supports the case for the Riksbank to ease monetary policy soon. We expect the first rate cut in May. Data released by the …
