Yet another upside surprise to UK inflation today has put the spotlight squarely back on Gilts and sterling, both of which have come under pressure ahead of tomorrow’s Bank of England policy announcement. There are four key points to consider for the …
21st June 2023
Click here to read the full report. Overview – Downturns in activity are bottoming out in Emerging Europe, current account deficits are narrowing and disinflation has taken hold across the region. But the road ahead still looks challenging. We expect GDP …
Overview – Economic growth across the region will be much weaker this year than last and our forecasts are generally below the consensus. We think regional growth will come in at just 1.4%, one of the weakest rates in the past two decades. The latest …
Note: We’re holding a 20-minute briefing on the challenges that aviation and other key industries face in decarbonising at 10:00 EDT/15:00 BST on Thursday, 29th June. Register now . Despite jet fuel being a fairly small share of total oil consumption, …
In this special episode of the Capital Economics Weekly Briefing, our team of property economists explain how commercial and housing markets are faring in a world of rapid and large increases in interest rates. Taking in everything from the crisis in …
Overview – We expect the mild recession in the euro-zone to drag on for the rest of the year. The drop-back in energy prices will provide some relief for households and companies but will be partly offset by governments withdrawing policy support. …
Treasury volatility has fallen over recent weeks but remains high by historical standards, and we wouldn’t be surprised if it remained so over the rest of 2023 even after the Fed has concluded its tightening cycle. All else equal that could put upwards …
This page has been updated with additional analysis since first publication. Broad-based resilience in spending The stronger-than-expected rise in retail sales in April suggests that household spending was resilient going into the second quarter. Both the …
Our new Dashboard allows clients to track the key housing market indicators that we follow in real time. (See here .) This Update outlines what has driven recent developments in these indicators, and our view for the rest of the year. (See also our US …
This page has been updated with additional analysis since the post-meeting statement and press conference. Hawkish CNB will turn dovish by year-end The Czech National Bank (CNB) left its main policy rate on hold again today, at 7.00%, and the hawkish …
Steel mills slamming the brakes on production Global steel production fell sharply in y/y terms in May. Against the backdrop of subdued demand and stringent supply caps in China, the supply outlook over the next few months appears bleak. According to the …
Governments in Turkey and Nigeria have started to turn away from unorthodox economic policies in recent weeks, and in both cases currencies have been allowed to move closer to fair value. The key thing to watch next is whether central banks in both …
This webpage has been updated with a table and chart of key data. Weaker inflation probably means tightening cycle is over The larger-than-expected decline in South Africa’s headline inflation rate, to 6.3% y/y, reinforces our view that the tightening …
Ugly inflation print tips balance to 50bp hike tomorrow In response to May’s inflation data , released earlier today, we now expect the MPC to raise interest rates by 50bps to 5.00% at tomorrow’s meeting. A lot of attention has focussed on the fact that …
This page has been updated with additional analysis since first publication. Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST. …
This page has been updated with additional analysis since first publication. Public finances limits the Chancellor’s room for manoeuvre Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision …
The Reserve Bank of Australia is considering actively selling its bond holdings rather than merely letting them shrink gradually via bond redemptions. The main motivation seems to be to reduce interest rate risk on its balance sheet rather than to tighten …
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . A return to mortgage rates of around 6% for the first time …
20th June 2023
The Monetary Policy Report released by Chile’s central bank today alongside the communications to yesterday’s policy meeting have reinforced our view that the easing cycle will commence in July. We expect a cumulative of 200bp of cuts, to 9.25%, this …
While the AI revolution has prompted us to revise up our forecasts for US equities today, we don’t think it changes the outlook for US corporate credit spreads much. We think spreads still look too low. Much has been written about the fact that the …
This new Chart Pack has been designed to replace our Chart Book in response to client feedback to make our insights more accessible, and with more options to incorporate them into your workflow. Use the menu at the top of the viewer to navigate around the …
A series of high-level diplomatic meetings this week have raised hopes that strains in US-China relations will start to ease. But the politics of fragmentation was never likely to proceed in a linear direction. And even if there is a thaw in political …
Since bottoming out late last year, European and US equities have fared comparably in local-currency terms, and European stocks have even outperformed in dollar terms. Looking ahead, however, we think that the lack of AI (or indeed tech) “champions” in …
Strongest monthly rise in single-family starts for nearly three years Single-family starts saw the largest monthly increase in nearly three years in May, suggesting homebuilders have been responding to the recent rises in new home sales. We still expect a …
The investment boom in new hi-tech manufacturing plants is unprecedented, but that boom still hasn’t fed through into higher output or employment in hi-tech manufacturing and investment in IT equipment has been muted in recent quarters. Software …
We don’t think growing enthusiasm about AI will be enough to stop the S&P 500 from declining if, as we expect, the US economy falls into recession later this year. Nonetheless, we now think the index will end this year a bit higher than we’d previously …
Aluminium production growth could start to pick up soon If reports of a forthcoming easing of output restrictions in Yunnan province are accurate, then the ongoing slowdown in China’s aluminium production growth could come to an end soon. Much will also …
This page has been updated with additional analysis since first publication. MNB leading the EM cutting cycle Hungary’s central bank (MNB) announced a cut to its one-day quick deposit rate (the key policy rate at the moment) by 100bp, to 16.00%, today. We …
As governments scramble to meet climate goals, the transport and property industries are facing mounting regulatory and consumer pressure to achieve net zero targets. How far can these key emitters go towards decarbonisation while continuing to expand? In …
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22 nd June. Register now . Overview – With inflation remaining very sticky, we now expect the RBA to lift the cash rate to a …
RBA will keep hiking to 4.85% The minutes of the RBA’s June meeting largely reaffirmed the Bank’s pivot to a more hawkish stance. To be sure, the Board did discuss the option of leaving rates unchanged, given the ongoing fall in households’ real …
We think that the lead price will struggle over the next few months as high interest rates weigh on new vehicle (and lead-acid battery) demand growth and new supply comes online in Australia and Germany. Heading into 2024, we think that the shift to …
19th June 2023
The greater inversion of yield curves, in response to the prospect of higher-for-longer interest rates, suggests to us the strength of equities won’t last. To re-cap, yield curves have recently tended to become more inverted on both sides of the Atlantic. …
Housing continues to shrug off high interest rates The recovery in house prices continued in May, with the sales-to-new listing ratio pointing to further gains ahead. Rising interest rates will have a more limited impact on home purchases than existing …
Note: We’ll be discussing the UK’s economic, housing market and policy outlook in light of the BoE’s June rate decision in an online briefing on 22nd June at 10:00 EDT/15:00 BST . Register now . Overview – As the UK’s recent problem of higher inflation …
A cartoon doing the rounds during the early days of the pandemic showed a series of waves poised to hit a city. The first, and smallest, was marked ‘COVID-19’, while the last – and much larger wave – was labelled ‘climate change’. This was a neat way of …
Note: We’re talking inflation and the BOJ, slowing Indian growth, and regional monetary easing in our Asia Drop-In on Thursday, 22 nd June. Register now . The female participation rate has surged over the past decade but more favourable attitudes among …
China data for May fell short of expectations and Capital Economics clients want to know what the government’s going to do about it. Our China Drop-In was one of two online briefings we held for them last week, along with our post-Fed, post-ECB, pre-Bank …
18th June 2023
We think the Bank of England will hike its policy rate by another 25bp, to 4.75%... (Thu.) …while Turkey’s new central bank governor will kickstart a rapid tightening cycle (Thu.) The euro-zone composite PMI probably ticked down in June but remained above …
16th June 2023
The US dollar has fallen for a third week in a row, with the DXY closing in on its weakest level so far this year. But, although it is increasingly challenged by the current “risk-on” environment, we are sticking to the view that the greenback will …
At face value, the recent improvement in market sentiment indicators supports the view that the worst may be past for housing. But looking deeper, we think this largely reflects supply-side improvements and will not be enough to prevent further weakness …
Most prices rose this week (1) , helped by a weaker dollar, stronger-than expected US retail sales in May and interest rate cuts by the People’s Bank of China. Natural gas prices rose particularly sharply due to a number of unrelated disruptions to …
We now suspect growing euphoria over AI will drive the S&P 500 to a significantly higher level than we had previously forecast by the end of next year. In the meantime, though, we still think a mild economic downturn may take some heat out of the stock …
This week’s plunge in the Nigerian naira marked the latest positive step by President Bola Tinubu as he seeks to overhaul the economy, but there are still plenty of reasons to be cautious that this policy shift marks a clean break from the Buhari-era. A …
Brazil: shifting towards rate cuts? Expectations for interest rate cuts in Brazil have grown in light of recent developments, but, for now, we’re sticking with our view that Copom will hold off on lowering interest rates until November. The arguments in …
The latest MSCI data indicate that values in western European office markets have held up better since the start of the pandemic when compared with the US and UK. But given these cities face similar long-term problems, we remain downbeat about the …
PiS adding further fuel to the inflation fire The Polish government set out plans this week to increase the national minimum wage by around 20% again next year. With the labour market still very tight and further pre-election fiscal stimulus likely to be …
Households feeling the pinch from higher rates Heavily indebted households are still being sheltered from the full impact of the surge in interest rates over the past 18 months, but their finances look ever-more perilous. The household debt to …
