The decision today by the Bank of Korea to leave the policy rate unchanged (at 3.5%) for a fifth consecutive meeting came as no surprise. However, comments by the central bank governor at the press conference contained the first signs of a looming dovish …
24th August 2023
On hold again but rate cuts likely in the coming months The decision today by the Bank of Korea to leave the policy rate unchanged (at 3.5%) for a fifth consecutive meeting came as no surprise. The central bank is due to hold a press conference and …
All-property values are down by 10% from their mid-2022 peaks, but we think there is still another 15% to come by the end of 2024. Much of that price fall will be driven by a rise in cap rates in response to higher interest rates. But, due to the …
23rd August 2023
GDP in those sectors normally most sensitive to interest rates has weakened over the past year and is now well below the pre-pandemic trend. The resilience of overall economic growth to higher interest rates is mainly due to ongoing recoveries elsewhere. …
Brazil's and Mexico's economies are likely to outperform others in the region in 2023, but this is likely to go into reverse in 2024. And our growth forecasts for most countries in the region are below the consensus. Inflation in most parts of Latin …
The weaker-than-expected PMI data from European economies is consistent with our view that the euro and sterling will fall further against the dollar over the next couple of months. Earlier today, PMI data for August out of the euro-zone and UK came in …
August’s flash PMIs support our view that both the euro-zone and UK will slip into recession in Q3 and imply that the US is now barely growing. And with output prices still easing gradually, the surveys strongly suggest that we are at or close to the peak …
We think the 10-year Treasury yield will end the year well below its current level. The sell-off in Treasuries seems to have abated somewhat today. But they haven’t had too much relief: the 10-year yield still isn’t that far below the fresh cycle peak it …
Limited existing home supply supports new sales New home sales rose by 4.4% m/m in July, reaching 714,000 annualised. Despite a slight fall in June, new home sales have seen sustained strength over the last year, with July’s increase leaving them over 30% …
The increase in the spot and particularly futures prices of European natural gas in the past few weeks suggests that there is an upside risk to our forecast for euro-zone inflation next year. However, prices would need to rise much further to …
Survey consistent with economic stagnation The slump in the S&P Global composite PMI to a six-month low in August casts further doubt on the idea that the economy is accelerating, with the index consistent on past form with GDP growth of close to zero. …
Retail sales still struggling as higher interest rates feed through Retail sales volumes broadly stagnated over June and July and would have performed much worse were it not for the improving supply of motor vehicles. While the ongoing wildfires across …
Market concerns about sovereign debt risks across frontier markets have eased a touch in recent months. For our part, while we think that Egypt and Nigeria should be able to avoid default, Kenya faces a more challenging path to do so. And in the cases of …
Our latest Europe commercial property valuation monitor is embedded below: Property yields rose across all sectors and markets in Q2. However, this was somewhat offset by rises in bond yields in most countries. As a result, valuations remain stretched in …
This page has been updated with additional analysis since first publication. Higher interest rates dragging the economy into recession The fall in the activity PMI to below the boom-bust level of 50.0 in August supports our long-held view that the economy …
In an environment in which firms feel able to pass on higher energy costs in their selling prices, the latest leap in wholesale gas prices poses an upside risk to our forecast for core CPI inflation to fall to 2.0% by the start of 2025 and to our forecast …
This page has been updated with additional analysis since first publication. Germany leading euro-zone into recession August’s flash PMIs were worse than expected, particularly in Germany, and are consistent with our view that the euro-zone economy will …
Further fall in inflation takes additional rate hikes off the table The larger-than-expected fall in South Africa’s headline inflation rate to 4.7% y/y in July leaves it within touching distance of the mid-point of the Reserve Bank’s 3-6% target range and …
This page has been updated with additional analysis since first publication. Inflationary pressures in Singapore eased in July but despite the good news on inflation we now think the central bank will keep policy on hold at its October meeting. Higher …
The government’s ambition of developing a globally-competitive manufacturing sector, combined with relatively slow progress on shifting away from using coal for electricity production, means India will become the world’s biggest polluter in the …
This page has been updated with additional analysis since first publication. PMIs point to continued strength in economic activity The composite PMI remained high in August which points to continued strength in GDP growth, but a slowdown from the bumper …
A mild winter 2022/23 helped Europe dodge a bullet of high gas prices. Will the economy’s luck run out this winter, driving up demand and prices, or have the ripple effects of Russia's invasion of Ukraine changed the game? Our Commodities and Europe teams …
22nd August 2023
While difficult to quantify, we estimate that the growth of tourism added around 0.3% to euro-zone GDP growth in the first half of 2023. However, we think growth will be much slower in the second half of the year as the sector has now broadly regained its …
Although the 10-year JGB yield has gradually been creeping up towards the new 1% ceiling tolerated by the BoJ, this is no surprise given a broad-based rise in 10-year sovereign yields elsewhere. Indeed, if it weren’t for the BoJ’s ongoing Yield Curve …
Russia, Turkey and Israel had a strong first half to the year, but growth across Central and Eastern Europe (CEE) remained depressed and we don’t expect a meaningful recovery until 2024. Inflation pressures are building in Russia and Turkey on the back of …
The more we read about AI’s potential economic consequences, the more it becomes clear that the current research fails to provide a coherent and consistent framework for understanding its whole impact. To that end, we are excited to be able to provide our …
26th September 2023
Global steel production continues to stagnate Global steel production will probably continue to edge lower in the next few months, following the latest month-on-month decline revealed by the WSA today. Crucially, we think that steel demand will soften as …
Somewhat paradoxically, climate-driven shifts in tourist patterns could help to smooth the seasonal peaks seen in summer destinations, and some countries – particularly in northern Europe – will become more attractive places to visit. However, there is a …
Equities in Latin America have generally returned more than those in the rest of the world so far this year for US dollar-based investors willing to shoulder the currency risk. We think that is set to change. The total return in US dollars from the MSCI …
This page has been updated with additional analysis since first publication. Economy lacked momentum in July Poland’s industrial production and retail sales figures for July came in weaker than expected and suggest that the downturn in the economy …
This page has been updated with additional analysis since first publication. Limited scope for pre-election splurge despite borrowing undershoot July’s public finances figures continued the recent run of better-than-expected news on the fiscal position. …
We estimate that firms have now passed on all of the increase in import costs to consumer prices which suggests that inflation will slow sharply over the coming months. Japan’s import prices have fallen sharply in recent months. However, goods inflation …
Global aluminium supply slides into contraction Global aluminium production growth slowed for the seventh consecutive month and dipped into contractionary territory in July on the back of weakness in China. We think production growth will stagnate as …
21st August 2023
We think global credit spreads will rise further by end-2023 in the face of disappointing growth. Having generally fallen since mid-March, credit spreads have been on the rise recently. Over the past week, for example, both the option-adjusted spread …
Overview – After a brief respite earlier this year, property yields are once again on the rise, driven by a further increase in gilt yields. We don’t expect a repeat of the surge seen last year, but we also think any compression beyond this year will be …
China’s push to develop the BRICS bloc into a geo-political counterweight to the G7 is likely to be thwarted by the competing interests and priorities of other member states. Nonetheless, positioning ahead of this week’s BRICS summit will provide some …
Price volatility in the wake of news of possible strike action at Australian LNG export terminals serves as a reminder that natural gas markets are still carrying the scars of Russia’s invasion of Ukraine. High volatility is likely to remain until …
The Dominican Republic recorded an impressive post-pandemic recovery, but we think that a combination of a fading boost from tourism, weakness in the US and tight fiscal policy will cause growth to slow by more than most expect this year and next. The …
Oil output cuts are driving a sharp slowdown in economic growth across the Gulf. The hit to volumes will more than offset the rebound in oil prices but, for now at least, fiscal policy is being kept loose and this will continue to support strong …
In August 2015, a botched change to the way that Beijing managed the renminbi triggered global panic amid worries that a hard landing in China would take the world economy down with it. Crisis was averted, thanks to yet another round of stimulus and a …
This page has been updated with additional analysis since first publication. Economic growth slowed sharply in Thailand during Q2 and we are revising down our full-year GDP forecast for 2023. With inflation likely to remain low and the economic recovery …
With inflation cooling, the government may soon become more willing to support the economy, but we doubt it will provide as much support as it did during the global financial crisis. However, net trade may not provide as much support as during previous …
The US dollar has continued to grind higher, with the DXY index on track for a fifth consecutive weekly gain on the back of more bad news out of China , continued pressure on risk sentiment, and a new cycle high in long-term US Treasury yields. In light …
18th August 2023
While the renewed rise in headline inflation in July seems concerning, a closer look shows disinflationary pressures are still building in key areas. Together with easing demand, that should give the Bank of Canada enough reason to leave rates on hold in …
Nigeria resorts to sticking plasters Continued naira weakness and fuel price concerns have prompted Nigeria’s government to undertake some short-term fixes that threaten to result in renewed vulnerabilities further down the line. This week, Nigeria’s …
Commodity prices generally fell this week, dragged down by a surging dollar and data that showed China’s economy struggled in July. Asia LNG and EU natural gas prices were the exception, rising as the spectre of strikes at several LNG facilities in …
Although the US stock market has started to come under pressure from rising Treasury yields, the valuation of equities relative to government bonds is still a long way from being as stretched as it was before the dot com bubble burst and on the eve of the …
