Further improvement, but headwinds still strong The further rise in the Ifo in February confirms that the German economy may have been a bit more resilient than we had expected in Q1. But with the index still in recessionary territory and the drag from …
22nd February 2023
With Hong Kong’s economy on the mend, the budget unveiled today curtailed some of last year’s emergency spending. But it still signals a supportive fiscal stance, particularly in areas hardest hit by COVID. Together with the reopening of Hong Kong’s …
Even though the Reserve Bank of New Zealand slowed the pace of tightening at today’s meeting, it still signalled a peak in the overnight cash rate of 5.50% by the middle of this year. Our more pessimistic forecasts for economic activity and wage growth …
Wage growth will peak at just below 4% With the risk of a wage-price spiral contained, we expect the RBA to start cutting interest rates by year-end. The 0.8% q/q rise in hourly wages excluding bonuses was below the analyst consensus of 1% and our own …
The higher bond yields that would follow abandonment of Yield Curve Control would make it more difficult to stabilise Japan’s public finances. But the long maturity of government debt means that the government’s interest rate bill would only creep up …
Bank will lift rates to 5.25% The RBNZ slowed the pace of tightening this month and we suspect it will now only lift the overnight cash rate to 5.25% instead of our previous forecast of 5.5%. The Bank’s decision to slow the pace of tightening from the …
Wage growth will peak around 4% Wage growth was weaker than the RBA had expected last quarter and we think it won’t accelerate as rapidly as the RBA anticipates. The 0.8% q/q rise in hourly wages excluding bonuses was weaker than the analyst consensus of …
The big sell-off in both equities and bonds that was a feature of 2022 has arguably created scope for them to fare a bit better in the coming years by reducing their valuations. Nonetheless, we don’t think they will provide spectacular returns over the …
21st February 2023
We think the RBNZ will hike rates by an above-consensus 75bp (01.00 GMT) Final German HICP data will offer more clarity on inflation’s drivers there (07.00 GMT) February FOMC minutes may give more insight into the Fed’s thinking (19.00 GMT) Key Market …
The euro-zone’s Composite PMI was much stronger than expected in February, but it excludes the construction sector where prospects are weaker. Tighter financial conditions and softer demand in the region as a whole, together with the removal of generous …
Sales fall, but at much slower pace The marginal decline in existing home sales in January supports our view that housing market activity is reaching a trough. But growing economic headwinds and stretched affordability mean sales will recover only …
The flash PMIs for February provided more evidence that advanced economies have remained more resilient than expected so far this year. Both the manufacturing and services sectors contributed to this strength, with improved sentiment and easing supply …
Swedish house prices have fallen 18% from their peak and could drop by a further 5% or so from here. This should not cause significant financial stability problems but will be a major drag on economic activity and is a key reason why we expect Sweden to …
The resurgence in activity and employment in January means that there is little chance of the economy falling into recession in the first quarter and we now expect GDP growth of 1.5% annualised. That said, the retail sales data in particular appear to …
In a crowded field given the FY23/24 Union Budget and the RBI’s more-hawkish-than-expected policy announcement, the Adani short-selling crisis has been the main story over the past month. So far at least, there are few signs of broader contagion. Foreign …
Core prices rise at slowest pace in two years The much smaller rise in core prices in January suggests that headline inflation will fall faster than the Bank of Canada expects, reinforcing our view that the Bank is unlikely to resume raising interest …
Core prices rise at slowest pace since early 2021 Core prices only inched up in January, which contributed to a larger-than-expected fall in headline inflation. That reinforces our view that the Bank of Canada is unlikely to follow the Federal Reserve in …
Russia’s budget deficit has widened sharply in recent months and is likely to remain under pressure amid lower oil prices and rising military spending. The government is unlikely to experience severe fiscal strains this year, but the public finances are …
Nigeria’s presidential election this weekend could be one of several EM elections this year (including Turkey and Argentina) that see opposition victories and a turn away from unorthodox policymaking. The experience from elsewhere in the emerging world is …
Sentiment continues to improve The ZEW indicators point to a further improvement in sentiment towards Germany and, along with other recent surveys, suggest that the economy is holding up better than we had anticipated. The rise in the ZEW economic …
PMIs suggest activity rebounded in February, but we doubt it will last The sharp rebound in the flash UK composite PMI in February suggests that the economy remained resilient to the dual drags from high inflation and high interest rates at the start of …
Economy growing, price pressures remain strong February’s chunky rise in the euro-zone Composite PMI suggests that the economy will grow in Q1. With the labour market still very tight and price pressures strong, the survey will reinforce ECB …
A weak start to 2023 Poland’s softer-than-expected activity data for January suggest that the economy started 2023 on weak footing and we expect it to struggle for momentum over the first half of the year as high inflation and tight monetary conditions …
Economy growing, price pressures remain strong February’s chunky increase in the flash euro-zone Composite PMI highlights the continued resilience of activity and suggests that the economy will grow in Q1. With the labour market still very tight and price …
Tighter fiscal policy probably still on its way despite borrowing undershoot January’s public finances figures suggest the Chancellor will have scope for some giveaways in his Budget on 15 th March. But with the OBR poised to slash its medium-term GDP …
Tighter fiscal policy probably still on its way despite big borrowing undershoot January’s public finances figures suggest the Chancellor may have scope for some giveaways in his Budget on 15 th March. But with the OBR poised to slash its medium-term …
The near-term economic outlook for Korea is very poor, with falling real incomes, problems in the housing market and weak global demand all set to weigh on prospects this year. Our forecast is that the economy will grow by a below-consensus and …
February readings reinforce dim economic outlook in Q1 February’s flash PMIs are broadly consistent with our downbeat narrative of the economy in 2023. The manufacturing PMI fell further due largely to a plunge in export orders, while a further rise in …
RBA isn’t done tightening just yet The minutes of the RBA’s February meeting, where policymakers lifted the cash rate by 25bp to 3.35%, confirmed the Bank’s pivot to a slightly more hawkish stance. In contrast to its December meeting, the Bank didn't …
PMIs suggest activity rebounded in February, but we doubt it will last The sharp rebound in the flash UK composite PMI in February suggests the economy continued to remain resilient to the dual drags from high inflation and high interest rates. But we …
20th February 2023
After being named the number one UK economy forecaster by the Sunday Times for a third time , Capital Economics explained why we think the Bank of England will raise interest rates by more than the consensus expects, causing a deeper recession this year …
The February composite PMI probably rose further above 50 in the euro-zone… (09.00 GMT) … and remained below 50 in the UK and the US We think CPI inflation was unchanged at 6.3% in Canada in January (13.30 GMT) Key Market Themes Those hoping for stellar …
This interactive dashboard allows you to explore our long-term macroeconomic forecasts for the world's largest economies, including GDP growth, inflation and policy rates. If you have subscriber access to the data underlying this dashboard, you can …
Shallower contraction in GDP as sanctions hit fades The 2.1% contraction in Russian GDP in 2022 was smaller than expected and is consistent with an expansion in Q4, providing further evidence to suggest that the economy stabilised after the initial hit …
Being ranked by the Sunday Times as the top UK economic forecaster for 2022 is a great accolade and has generated a lot of interest in what we expect to happen next. Our forecasts for 2023 imply a tougher year than the consensus, with higher inflation …
The Bank of Israel (BoI) hiked interest rates by another 50bp, to 4.25%, today and while it continued to point to signs of slower growth, it sounded more concerned about the strength of inflation than it did at its last meeting. It now looks likely that …
Q uantitative tightening and the repayment of TLTROs mean that the ECB’s assets are likely to decline by around one quarter by the end of 2024. We expect the repayment of TLTROs to have a negligible macroeconomic impact. QT should also proceed smoothly, …
Aluminium production to slowly increase this year Global aluminium production fell slightly in January compared to December, although the bigger picture is one of fairly steady production since the middle of last year. We expect production to respond to …
The minutes of the Riksbank’s latest policy meeting show that the previously dovish Executive Board members have become less so, and that the new members are on the hawkish side. That reinforces our view that the Bank will raise rates by 50bp in April …
EM investment surged far above pre-pandemic levels last year, but there was a clear divergence across countries and we think investment growth will slow in 2023. One worrying development is that investment has continued to lag behind in countries where it …
Yogi Berra is often quoted as saying “it’s tough to make predictions, especially about the future”. Long-term forecasting is especially tough. This is a problem of time frames: forecasting what will happen to economies over the next month is easier than …
Bank deposits held by Chinese households have soared over the past year. But that mostly reflects a shift out of riskier assets rather than a surge in savings. In fact, our calculations show that household wealth declined in 2022 for the first time in at …
Rent inflation is set to approach 10% as the surge in net migration coupled with lower home completions has pushed rental vacancy rates to record low. But that rise will be overwhelmed by the slowdown in new dwellings purchases, underlining that the …
This dashboard brings together our MSCI-basis commercial real estate forecasts for the euro-zone, UK and US and also compares the global commercial real estate outlook with our forecasts for the other major asset classes across developed markets. If you …
This dashboard contains our forecasts for the US housing market and key macro indicators. If you have subscriber access to the data underlying this redesigned dashboard, you can download it via the menu options in the top right of each chart or table. If …
Yet another increase in core inflation The fall in the Riksbank’s target measure of inflation was largely due to a huge one-off drop in electricity prices but policymakers will focus more on the big increase in core inflation. This vindicates their recent …
Manufacturing downturn gathering speed According to today’s flash estimate, the manufacturing PMI fell deeper into contraction from 48.9 in January to 47.4 in February. The output sub-index fell to 44.9, the weakest reading since July 2020. Firms are …
Russia invaded Ukraine a year ago this week, prompting a torrent of prediction about how much this singular moment would change Europe’s economy forever. 12 months later, David Wilder talks to Andrew Kenningham, our Chief Euro-zone Economist, and Liam …
19th February 2023
