This report was first published on Wednesday 31st January covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Thursday 1st February and the Caixin services and composite PMIs on Monday 5th February. Surveys starting to …
31st January 2024
This page has been updated with additional analysis since first publication. With disinflation gathering pace, rate cuts are now in sight The weaker-than-expected Q4 inflation reading paves the way for the RBA to cut interest rates sooner than most are …
This page has been updated with additional analysis since first publication. GDP growth will be positive in Q4 Though retail sales was very weak in December, strong industrial production data to close out the quarter reinforces our view that Q4 GDP growth …
After its sharp fall at the end of 2023, the US dollar has risen against most major currencies so far this year. Interest rate expectations have rebounded a bit in the US and in most places outside Asia, weighing particularly on the region's currencies. …
30th January 2024
Typically, US REIT price indices have been a good indicator of the growth path for capital values in the direct market. That said, even though REIT prices rebounded in Q4 2023, we don’t expect the direct market to follow any time soon as the property …
The December JOLTS data show a continued painless normalisation in the labour market – with job openings on a downward trend, layoffs unusually low and wage growth set for a sharp slowdown. Job openings have rebounded over the past couple of months …
We expect “safe” assets to rally a bit more over the next couple of years, largely informed by our belief that investors are still underestimating how quickly and/or how far many central banks will cut interest rates over 2024-2025. That backdrop of …
The US Treasury’s latest borrowing estimates pushed long-dated yields down, and the Quarterly Refunding Announcement (QRA) on Wednesday may add to positive sentiment. But we think that a poor fiscal outlook in the US and more price-sensitive buyers will …
Our latest Global Markets Chart Pack is embedded below. We think that the Fed and several other DM central banks will deliver more policy rate cuts this year and next than investors currently anticipate. As a result, we forecast that Treasury yields will …
Economic growth in the Middle East and North Africa will strengthen a little in 2024 but is likely to come in well below consensus expectations. OPEC+’s cautious approach to oil policy will keep a lid on economic growth in the Gulf over the first half of …
Our forecast that CPI inflation will fall below 1.0% later this year suggests that Bank Rate will be cut from 5.25% now to 3.00% rather than the low of 3.50-3.75% priced into the market, 10-year gilt yields will decline from 3.90% now to around 3.25% by …
Surprise slowdown in house prices in November The marked slowdown in house price growth in November was the first sign of a response in prices to the spike in mortgage rates a month earlier. The 0.2% m/m rise in the seasonally adjusted national …
MNB errs on the side of caution The Hungarian central bank’s (MNB’s) communications following its meeting today confirm that the decision not to accelerate the pace of its easing cycle was due to the recent ratcheting up of tensions between the government …
January’s European Commission business and consumer survey, released this morning, supports our view that the euro-zone economy will stagnate in Q1. But recent increases in services firms’ price expectations could prompt policymakers to wait a little …
Sharp slowdown increases chances of Banxico cut next week The sharper-than-expected slowdown in Mexico’s GDP growth, to just 0.1% q/q in Q4, is likely to be followed by continued sluggish growth over the coming quarters. At the margin, the data increase …
Saudi Arabia has cut oil output significantly over the past year or so but that hasn’t prevented global oil prices from falling. Despite Aramco’s announcement today that it is postponing plans to raise production capacity to 13mn bpd, we think looming …
This page has been updated with additional analysis since first publication. Regional recovery continues The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) were a mixed bag in January, but our regional measure …
This page has been updated with additional analysis since first publication. Economy to remain stagnant The euro-zone economy stagnated in Q4 and we think that it will flat-line in the first half of this year too as the effects of past monetary tightening …
This page has been updated with additional analysis since first publication. A turning point in credit December’s money and credit figures suggest the transition from interest rates being a drag on activity to being a boost is beginning. This lends some …
Resilient lending in December, but anaemic investment volumes Net lending to commercial property increased for the tenth consecutive month in December, but investment sentiment remained downbeat. Looking ahead, we expect investment to slowly recover over …
The Reserve Bank of New Zealand launched a consultation on changes to its macroprudential framework last week. In our view, the proposed tweaks are unlikely to have a meaningful impact on the housing market one way or the other. The big picture continues …
The start of a slow recovery The meagre 0.2% q/q expansion in Czech GDP in Q4 confirms that the economy contracted over 2023 as a whole, and we think that this is likely to be followed by tepid growth this year. We maintain our below consensus GDP …
Euro-zone in or close to recession Fourth quarter GDP data published for for France and Spain this morning were a little better than we had anticipated. However, provided there is no revision to the “very preliminary” estimate that the German economy …
This page has been updated with additional analysis since first publication. RBA’s concerns about weak household spending will rise The sharp fall in retail sales in December adds to the case for the Reserve Bank of Australia to loosen policy settings …
We think the best days for US investment-grade (IG) corporate bonds will soon be over. One reason is that credit spreads are now already very low. The option-adjusted spread (OAS) of ICE BofA’s index of US IG corporate bonds, for example, dipped below …
29th January 2024
The worsening in total returns to -3.0% q/q in Q4 was consistent with our expectations of bigger-than-average year-end markdowns. But the major takeaway was that the data and NCREIF’s release notes support our view that there will be growing distress and …
Do maritime disruptions threaten a repeat of pandemic-era supply shocks? Should investors brace for an inflationary resurgence? Amid Houthi attacks on shipping and fears of escalating conflict in the Middle East, a team of senior economists from our …
We think the recent falls in long-dated government bond yields across developed market (DM) economies will extend over the remainder of this year, as central banks generally cut by more than investors currently expect. We project most of those yields to …
The EM monetary easing cycle began to broaden out late last year. Mexico’s central bank will probably be the next to cut rates later this quarter, and many Asian central banks will join the fray in April and May, which is sooner than most expect. India is …
JODI data on global oil and natural gas consumption paint a nuanced picture of global energy demand. While oil demand growth slowed towards the end of last year, consumption of natural gas was recovering from the worst of the energy price crisis. We …
Inflation: Mission accomplished? We maintain a high conviction that core PCE inflation will be back to the 2% target by mid-2024. Despite claims that “the last mile will be the hardest”, core PCE prices have already been running at a 2% annualised pace or …
Bank of Ghana starts its easing cycle The Bank of Ghana kicked off its easing cycle with a 100bp cut, to 29.00%, today and an improving balance of payments position alongside further falls in inflation mean that more cuts are on the cards over the coming …
Were the EU to block Hungary’s access to funds (if it vetoes financing for Ukraine at this week’s summit), as reports on Sunday suggested, this would probably have a smaller direct impact on Hungary’s economy and financial markets than most would think. …
As the 2024 central bank calendar gets properly underway, debate is centering on the related questions of how hard it will be to get inflation back to target (the “last mile”) and the timing of when policymakers will begin cutting interest rates. After …
The Monetary Authority of Singapore (MAS) kept monetary policy settings unchanged today but weaker growth and easing concerns about inflation are likely to prompt the central bank to loosen policy in April. The decision to remain on hold today, for the …
MAS keeps policy unchanged but loosening likely in April. The Monetary Authority of Singapore (MAS) kept monetary policy settings unchanged today which was in line with expectations, but we think weaker incoming activity data and easing concerns about …
Post-ECB and pre-Fed and Bank of England, Group Chief Economist Neil Shearing explains what data dependency means for central banks as they try to gauge when to begin rate cuts – and manage the market’s expectations about when those cuts will start. …
26th January 2024
Takeaways from the SARB meeting The South African MPC’s fears expressed at this week’s meeting about an inflation resurgence look overdone. Even so, with fiscal risks high ahead of the election, officials will continue to tread cautiously. At the …
The US dollar seems set to remain within a tight range against most major currencies this week. At face value, the stronger-than-expected GDP data out of the US might point to a return to “higher for longer”, but the growing evidence of disinflationary …
Similar to the late 1990s, we think the economic backdrop in the US won’t stand in the way of a bubble inflating in the S&P 500. But unlike then, we doubt it will help the dollar much. US equities have rallied since GDP data revealed yesterday that growth …
It was generally a positive week for commodity prices and particularly for industrial metals prices. (See Chart 1.) All major industrial metals finished the week higher, with gains in the region of ~5% for some such as tin and zinc. Chart 1: S&P GSCI …
Lula: looking to the past The Brazilian government’s announcement of a new industrial plan this week points to greater state intervention in the economy that will do little to alleviate the country’s productivity problem. The plan involves c. 300bn reais …
Korean consumers suffering from tight policy Korea’s GDP figures published this week show that, although the economy held up relatively well last quarter, the recovery is becoming increasingly lopsided. Whereas exports grew by 2.6% q/q last quarter and …
It is hard to say which is more remarkable: that GDP growth accelerated last year following the Fed’s most aggressive tightening campaign in decades, or that core inflation nevertheless fell back to the 2% target in annualised terms over the second half …
Hungary skating on thin ice with new rate proposal The proposal by the Hungarian government this week to change the reference rate used to price bank loans risks undermining the central bank’s (MNB’s) independence and presents a further upside threat to …
PBOC is pushing on a string The 50bp cut to banks’ required reserve ratio (RRR) announced this week is the largest since 2021 and will free up around RMB1trn of liquidity when it comes into force on 5 th February. The move has improved investor sentiment …
The outlook for monetary policy all depends on whether the Bank of Canada is willing to act based on where it thinks shelter inflation is heading, rather than its current rate. The Bank’s communications suggest it is starting to move in that direction, …
