Governor Tiff Macklem stressed on Wednesday that the pause in the Bank of Canada’s tightening cycle is conditional on looser conditions in the labour market and a fall in inflation expectations. The CFIB Business Barometer showed evidence of both a day …
27th January 2023
Turkish policymakers deepen de-dollarisation Turkish policymakers deepened their “lira-isation” drive this week by increasing the incentive for firms to convert their FX into lira, but we’re not convinced that the policy changes will be successful and …
More encouraging than it looks This week’s headlines suggest that Pakistan is in the midst of a full-blown crisis. On Monday the central bank hiked its main policy rate by a further 100bps. Two days later the cap limiting daily moves in the rupee was …
Slump in spending suggests recession could have already started The monthly income and spending figures reveal that, despite the apparent resilience of fourth-quarter GDP growth, the economy was on the precipice of a recession, and may already have fallen …
Yields have continued to surprise on the upside, with the all-property equivalent yield rising by 106bps in the three months to December. That matches the worst months of the GFC, and even though rental growth has held up capital values ended the year …
China under fire for delays to Zambia’s debt deal Delays to Zambia’s debt restructuring threaten to hold up the country’s IMF deal and add to the signs that the Common Framework isn’t fit for purpose. Officials in Zambia had hoped that a sovereign debt …
Outlook better, but still bad There has been a marked improvement in sentiment towards the euro-zone recently as activity indicators have come in stronger than expected. Euro-zone GDP now looks likely to have flat-lined in the fourth quarter and January’s …
Whither the Norwegian krone? Norway’s position as a major oil and gas exporter means that movements in its currency are typically correlated with moves in energy prices. But since the start of 2021, the krone has failed to keep pace with the rise in oil …
The recent persistence of inflation leads us to think that the Bank of England will proceed with another 50 basis point (bps) rise in Bank Rate, from 3.50% now to 4.00% next Thursday. (See here .) We will be discussing the policy outlooks for the BoE, the …
Demand growth for industrial metals slowed sharply late last year. But attention is now geared towards the rebound in China’s metal demand. We think there is a good chance that the rebound disappoints. The CE Demand Proxies are our attempt to gauge the …
PM Kishida, demographic doomsayer In his speech on Monday kicking off the first Diet session of the year, PM Kishida proclaimed that it is “now or never” when it comes to addressing Japan’s demographic decline. To that end, he pledged to double spending …
The reversal of temporary subsidies and changes to weightings will probably push headline German HICP inflation back up in January. But the bigger picture remains that the headline rate will fall sharply this year and that the ECB will continue to focus …
Euro-zone investment contracted sharply in Q4 2022 and we think further interest rate rises will prolong this weakness throughout much of this year. But we expect a recovery in transactions towards the end of the year, when economic activity should be …
Consumer spending in emerging markets initially recovered quickly from the pandemic, but it looks like high interest rates and inflation caused spending growth to slow sharply over the second half of last year. And we think consumer spending is likely to …
December’s euro-zone money and credit data show that the effects of rising interest rates were starting to be felt. Households and firms shifted their money into longer-term deposits which are less likely to be spent, and lending growth slowed. Overall, …
China has made an abrupt shift away from zero-COVID, prompting a wave of market euphoria – and some anxiety – about a surge in demand. But what does the economy’s reopening really mean for emerging markets? Our latest dive into the big stories in EM macro …
For watchers of India’s economy, next week is one of the most significant of the year as Finance Minister Nirmala Sitharaman delivers the Union Budget for FY23/24 on Wednesday. Ahead of the announcement, the fiscal position looks pretty healthy. The …
Policy shifts pave the way for a cyclical recovery New home sales ended 2022 46% below their spring 2021 peak. But this could mark the bottom for China’s housing market. Daily data suggest that sales have rebounded strongly in recent weeks – they are …
GDP up in Q4, but still struggling to reach past peaks Spain’s GDP increased in Q4 and is performing better than we expected only a couple of months ago. But Spain is still a laggard in Europe, with the economy smaller than it was before Covid. We think …
Balanced risks to our 2023 inflation view Tokyo inflation rose to 4.4% in January as fresh food and services inflation rose. But with the boost from the weaker yen fading and lower commodity prices due to feedthrough, inflation should fall this year. …
January print likely the peak for inflation Tokyo inflation rose to 4.4% in January as fresh food and services inflation rose, signalling a similar jump at the national level. But due to the government’s energy subsidies we expect it to fall below the …
26th January 2023
Optimism around China’s rapid re-opening and stronger-than-expected data out of Europe have put continued pressure on the US dollar over the past month or so. In turn, we have revised down our forecasts for the greenback against major currencies. But we …
We expect Chile's central bank to leave its policy rate on hold at 11.25% (Thu.) Spain’s economy probably stagnated in the fourth quarter of last year (Fri.) We think US real consumption declined in December (Fri.) Key Market Themes “High-beta” …
We held a Drop-In today to discuss the big economic and financial market development across Emerging Asia. (You can see an on-demand recording here .) This Update answers several of the questions that we received, some of which we couldn’t answer during …
Resilient new home sales set for gradual recovery The small rise in new home sales in December confirmed that the new build sector is holding up better than the wider market. This likely reflects builders offering generous incentives to attract buyers as …
Although we think there is still a decent case for UK equities to continue outperforming those in the US over the next few years, we don’t expect the UK’s stock market to perform significantly better than stock markets in the euro-zone over that period, …
World trade has fallen in recent months on the back of slowing global growth. COVID-related weakness in Chinese activity in Q4 weighed notably on China’s exports, and while its seemingly rapid recovery has somewhat improved the global picture, weak …
Market sentiment declined further in Q4 as the outlook deteriorated The latest RICS Survey conveyed a further decline in confidence following a turning point in the previous quarter. Comments from surveyors point to high interest rates as the main …
The South African Reserve Bank’s (SARB’s) smaller-than-expected 25bp interest rate hike today and large cuts to its growth forecast make clear that its focus is pivoting to concerns about activity rather than inflation. The next meeting will be a close …
We expect a more modest 150,000 gain in non-farm payrolls in January. The annual benchmark revisions may also show a sharper slowdown in employment growth over the second half of last year than previously reported. Payrolls on borrowed time The labour …
Underlying pace of growth weakens The 2.9% annualised rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter went on. We …
China’s rapid move away from zero-Covid and the resulting rally in commodity prices present upside risks to our GDP forecasts, but we remain of the view that 2023 will be a challenging year for Latin American economies and that growth will slow sharply. …
Underlying pace of growth already much weaker The 2.9% annualised rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter …
Overview – 2023 will be the most difficult year for the housing market since 2008. Mortgage rates remain very high by the standards of recent years and can’t drop materially until the Bank of England shifts from raising interest rates to cutting them. …
A 50bp rate hike next week seems to be literally a done deal. The recent strength of the economy means ECB will hike further. Quantitative tightening looks set to accelerate from June. With a 50bp rate hike at next week’s ECB meeting seemingly a done …
OPEC+ cuts to dampen Gulf growth in early 2023 OPEC+ is widely expected to agree to continue with its existing oil output quotas next week, although this means that oil sectors will act as a drag on the Gulf economies over the early part of this year. …
We forecast the 10-year Treasury yield to decline between now and the end of the year, as inflation eases further and the Fed transitions to monetary loosening. A key risk to this projection, in our view, is the weak outlook for demand for Treasuries, …
Despite some good news, another 50bps rate hike is most likely Next phase will be MPC pausing to assess influence of higher rates, but we’re not there yet Next big surprise may be that rates are cut by more than investors expect in 2024 Another 50 basis …
The growth outlook for 2023 across Central and Eastern Europe has brightened a bit over the past month. Wholesale European natural gas prices have continued to fall sharply and survey measures of activity have generally improved. The outlook for external …
Central bankers let their hair down Climate change was front and centre of the discussions earlier this month when a host of heavy-hitters from the world of central banking descended on Stockholm for an International Symposium on Central Bank …
As the world’s biggest polluter and its biggest investor in renewable energy, China is a study in contradiction on the climate question. The government’s success in reining in emissions and its industry’s growing dominance of green technology supply will …
Occupier demand contracts further as the economy slows The slowing economy led to a further fall in occupier demand in Q4, with retail seeing the largest contraction. So far, the fall in rental expectations has been relatively modest and surveyors expect …
Inflation looks to have peaked across Emerging Asia, and is likely to fall back more sharply than most analysts expect over the coming year as fuel price inflation drops, the disruption from the pandemic eases and economic growth slows. With inflation …
Growth slowed in Q4 and we expect the economy to weaken further over the coming quarters against a backdrop of weak global demand, high interest rates and elevated inflation. According to the advanced estimate published today, GDP rose by 2.4% q/q in Q4 …
Growth set to weaken in 2023 Growth slowed in Q4, and we expect the economy to weaken further over the coming quarters against a backdrop of weak global demand, high interest rates and elevated inflation. According to the advanced estimate published …
Economic output fell in the final quarter of 2022, and we think the economy will continue to struggle over the coming year as high interest rates and weak overseas demand weigh on prospects. Our 2023 growth forecasts are well below the consensus. …
25th January 2023
Difficult year ahead Economic output fell in the final quarter of 2022, and we think the economy will continue to struggle over the coming year as high interest rates and weak overseas demand weigh on prospects. Our 2023 growth forecasts are well below …
Sharper markdowns mean worst quarter for total returns since Q2 2009 The 4.45% hit to all-property capital values in Q4 was more substantial than our end-2022 forecasts implied, although recent news of bigger valuation markdowns in December made this less …
China’s statutory retirement ages for men and women are low. But raising them would not make a big difference to the size of the workforce since most workers today keep working once they have passed retirement age. Only a quarter of men drop out of the …
