Despite only being three months old, 2023 has already seen several macro narratives play out in markets. “Soft landing” optimism in January was followed by a “no landing” narrative in February which has given way to concerns about a banking crisis in …
31st March 2023
Despite making up some ground today, the dollar seems set to end the week somewhat lower against nearly all major currencies. Banking turmoil in the US and elsewhere appears to be receding (for now), with the latest Fed data confirming emergency …
The strength of GDP growth at the start of the year reflected several temporary factors. The Bank of Canada’s latest quarterly surveys, released next week, will provide a better guide to how firms and consumers are coping with higher interest rates. GDP …
Overview – Homegrown problems in Sub-Saharan African economies exacerbated by external headwinds are likely to curtail growth this year. We think that regional GDP will expand by 2.3%, which is well below the consensus. Public debt problems will remain …
Overview – Emerging Europe has seen less steep falls in values than elsewhere so far, but will not be immune in 2023. Higher interest rates and economic weakness mean these markets will have a challenging year and recent financial disruption only …
Copom’s minutes will leave a sour taste for Lula The minutes from last week’s Copom meeting , released on Tuesday, will have dashed any hopes (not least in the government) that policymakers might turn to interest rate cuts any time soon. Three points …
We expect the RBA to pause its tightening cycle next week (Tue.) The National Bank of Poland will probably also keep rates on hold (Wed.) We think the US labour market cooled in March (Fri.) Key Market Themes Although a “narrowing” of the stock market …
With the latest shudders in financial markets seemingly contained, most commodity prices ground steadily upward over the week. Oil prices did receive a boost from supply disruptions in Iraqi Kurdistan but, on the whole, a greater appetite for risk drove …
Strong start to the year begins to flag After an unexpectedly strong start to the year in January, which was mostly maintained in February, the March data will tell us whether that early strength was a temporary weather-related spike or a genuine pick-up …
Israel’s legal reforms spark constitutional crisis Israel’s political crisis that flared up earlier this week has since calmed down after PM Netanyahu paused the government’s controversial judicial reforms. While tensions may flare up again and Israel’s …
While there are downside risks from hidden exposures or a sudden loss of confidence and deposits, our sense is that the banking issues won’t escalate significantly further, or spread to UK banks. (See here .) The broad message from this week’s …
The strength of GDP growth in January, and probably February too, suggests the Bank of Canada will use its April meeting to reiterate that, despite the recent banking turmoil, it is still prepared to raise interest rates again if needed. The 0.5% m/m rise …
Note: Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . Central banks re-upping the pace of tightening Central banks in South Africa, Kenya and Ghana all delivered more aggressive interest rate hikes this …
A strong start to the year GDP rose strongly in January and the preliminary estimate points to another healthy gain in February. That strength suggests the Bank of Canada will use its April meeting to reiterate that, despite the recent issues in the US …
This time last week the markets and financial media were worrying about the future of Deutsche Bank. German Chancellor Olaf Scholz publicly stated that the bank was “very profitable” and President Macron declared that the European banking sector as a …
The “ Powering up Britain ” plan presented by the UK government this week highlights the benefits and limitations of official involvement in reducing emissions. On the one hand, the plans to reduce the price of electricity relative to gas will help to …
The recent turmoil in the global banking sector have sent ripples through financial markets. So far, a full-blown financial crisis doesn’t seem likely to us, although clearly any escalation would add to risky assets’ worries. But even if that is avoided, …
Real spending drops back; core inflation still elevated Although real consumption declined by 0.1% m/m in February, that reversed only a small fraction of the upwardly revised 1.5% surge in January (previously estimated to be 1.1%). Even allowing for …
Less than two weeks have passed since the demise of Credit Suisse so it is too early to draw many lessons about the implications (if any) for the global banking sector. But the speed of the collapse of a bank which had passed the key financial health …
Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . The broad message from the recent spate of EM central bank meetings is that policymakers are still focussed on reining in inflation even as the global …
Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . Korea’s economic outlook remains bleak The latest activity data from Korea were a mixed bag but the economy is likely to feature among the worst …
Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . China and Brazil are taking steps to allow bilateral trade to be settled in renminbi rather than US dollars. The Brazilian branch of ICBC will …
Central banks in Mexico and Colombia both delivered 25bp hikes yesterday, and hinted that these could be the end of their cycles. But, on balance, we think that the strength of inflation will prompt policymakers in both countries to deliver a final 25bp …
Headline rate falling but strength of core inflation will keep ECB hawkish Policymakers at the ECB won’t read too much into the drop in headline inflation in March and will be more concerned that the core rate hit a new record high. So March’s consumer …
Headline rate falling but strength of core inflation will keep ECB hawkish Policymakers at the ECB won’t read too much into the drop in headline inflation in March and will be more concerned that the core rate hit a new record high. Overall, March’s …
Recession still to come this year as resilience recedes The final Q4 2022 GDP data suggested the economy was even more resilient in 2022 than we previously thought, as the government absorbed some of the hit to households from high inflation. But we …
Synthesising the Synthesis Report The main climate-related event of the month – other than the publication of our inaugural Climate Economics Outlook , of course – was the release of the Intergovernmental Panel on Climate Change’s (IPCC) sixth Synthesis …
Wage-price spiral still looking unlikely Ahead of today’s deadline for initial submissions to the 2022-23 Annual Wage Review, stakeholders have been haggling over increases to the minimum wage this year. The Australian Council of Trade Unions has backed a …
Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . Rosneft, IOC deal will keep Russian oil flowing We’ve made the case in much of our research that, in an increasingly fractured global economy that …
Adjustment to higher mortgage rates continues House prices fell for a seventh consecutive month in February, taking the total fall from their peak in August to 4.6%. With house prices still significantly overvalued in today’s higher mortgage rate …
Households have a slightly larger savings buffer The upward revision to real GDP growth in Q3 and Q4 of last year suggests that high inflation took a slightly smaller toll on the economy than we previously thought. But with around two-thirds of the drag …
BoJ facing dilemma The economic data released this week underline the dilemma facing incoming Bank of Japan Governor Ueda. On the one hand, price pressures continue to strengthen. Inflation excluding fresh food and energy rose from 3.1% to 3.4% in the …
Note: Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . Still going strong The official PMIs suggest that China’s rapid reopening recovery remained robust this month. The weak global backdrop weighed on …
Still going strong The official PMIs suggest that China’s rapid reopening recovery remained robust this month. The weak global backdrop weighed on manufacturing but services continued to benefit from a resurgence in consumer spending and construction was …
Economy still headed for recession While industrial production bounced back and retail sales recorded a strong increase in February, we still think that the economy entered a recession this quarter . The 4.5% m/m rebound in industrial output was much …
Labour market conditions starting to loosen, upside risks to inflation Labour market conditions loosened in February and should continue to do so over coming months due to a recession. Meanwhile, Tokyo CPI data showed a large increase in underlying …
Rebound in industrial output won’t prevent recession While industrial production bounced back and retail sales recorded a strong increase in February, we still think that the economy entered a recession this quarter. The 4.5% m/m rebound in industrial …
Note: Join our 6th April online briefing all about the risks to EMs from banking turmoil. Register now . CBE delivers, but more tightening still needed The Central Bank of Egypt (CBE) announced that it raised interest rates by 200bp, taking the overnight …
30th March 2023
Even though equity prices in the UK have fallen further than in the US and the euro-zone since the US bank SVB failed and the European bank Credit Swisse was taken over, the pound has strengthened from $1.20 to $1.23. That is probably partly because of …
Click here to read the full report Overview – GDP growth in Latin America will be among the weakest of any EM region this year and next, and is likely to disappoint consensus expectations. Persistently high inflation has prompted us to push back our …
The new fiscal rule proposed today by Brazil’s finance minister would, if implemented in full, go some way towards stabilising the public debt ratio. But the government has a lot to do convince investors that it can credibly commit to the fiscal …
The latest mortgage market data show that the banking crisis has, so far, had a minimal impact on the housing market. While spreads have increased, overall mortgage rates have dropped and applications for home purchase have increased since SVB collapsed. …
The ongoing rally in the US steel price appears supply-driven and will, most likely, be short-lived. We expect the rally to fizzle out and go into reverse as the US economy slides into recession. The US steel price has continued to climb in recent days, …
The dollar’s February rebound has been cut short by turmoil in the US regional banking sector, but we continue to think the greenback will make one final push higher as advanced economies fall into recession and risk sentiment deteriorates. Although the …
Table of Key Forecasts Global Overview – The strongest headwind for the global economy has shifted from an energy crisis and the related squeeze on real incomes to a potential banking crisis and associated drag on credit. Since banks are relatively …
Note: Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . H2-oh… Droughts in the Middle East and North Africa are becoming more frequent and more severe, with Morocco and Tunisia experiencing them right now. …
China’s official PMIs are likely to show economic momentum fading in March (02.30 BST) We think euro-zone headline inflation fell in March, while core remained strong (10.00 BST) Real consumption in the US probably changed little in February (13.30 BST) …
The South African Reserve Bank (SARB) delivered a more-aggressive-than-expected 50bp interest rate hike, to 7.75%, today as hawks returned to the majority with a bang. But while the probability of another hike in May has increased, we think that easing …
Overview – There are encouraging signs that the energy crisis is receding, the worst of the downturn is passing and that inflation has peaked across the region, but this year will still be challenging. We expect below-consensus GDP growth in most …
