Despite Q2 upside surprise, data raise chance of a 50bp cut next week Although second-quarter GDP growth surprised to the upside, the downgrade to GDP in June and preliminary estimate that GDP was unchanged again in July imply that third-quarter growth …
30th August 2024
Price pressures well behaved despite strength of real economy The July income and spending report shows price pressures remaining muted despite the strength of real consumption. The latter suggests that third-quarter consumption growth will be 3.7%. Even …
Weaker-than-expected US data and a dovish shift from the FOMC have led to a sharp fall in interest rate expectations in the US, driving the dollar down as the market turmoil at the start of August has largely unwound. The yen has continued to rally, as …
Further signs of fiscal complacency in Poland The Polish government’s draft budget for 2025 announced this week suggests that fiscal policy will be more expansionary than we had previously expected next year. While that poses an upside risk to our …
Traditional gold drivers pick up the reins Much of the chatter in the gold market this year has been about the role of non-traditional drivers – particularly demand from China – in propelling the gold price higher. (Our latest Commodities Focus , …
Falling fertility bodes poorly for long-run outlook Data released this week showed that Korea's fertility rate (the average number of children a woman is expected to have over her lifetime) dropped further to 0.72 last year (see Chart 1), the lowest of …
This page has been updated with additional analysis since first publication. Services inflation remains sticky We doubt that August’s unexpected increase in services inflation will stop the ECB from cutting interest rates at its next meeting in September …
Net lending continues to recover gradually Net lending to commercial property was positive for the fourth consecutive month in July, albeit by a smaller £520mn. With development lending still negative, this was driven entirely by a rise in lending …
This page has been updated with additional analysis since first publication. Steady improvement in credit is supporting the economy July’s money and lending data provide further evidence that a steady improvement in the flow and demand of credit is …
MPC dissenters Varma and Goyal to step down As was widely expected, it was confirmed this week that the MPC’s three “external” members (who have careers outside the RBI and are selected by the government) will step down when their current terms expire on …
This page has been updated with additional analysis since first publication. Lower mortgage rates may soon help house prices regain momentum Despite the recent declines in mortgage rates, the small fall in the Nationwide house price index in August …
A solution in search of a problem The Australian government’s migration policy is in the spotlight once again as the Senate deliberates over legislation aimed at capping international student commencements in the country. The proposal put forward by …
Activity rebounding, inflation levelling off at 2% The activity and inflation data released today increase our conviction that the Bank of Japan will press ahead with another rate hike. The rebound in industrial production and the rise in retail sales in …
We think the rally in developed market government bonds has gone a bit too far and that yields will rise a little despite (further) rate cuts by the major central banks. One exception is the UK where we still think investors are expecting an excessively …
This page has been updated with additional analysis since first publication. Consumption rebound likely to be gradual The softness in retail sales last month suggests that household consumption growth will remain muted this quarter. Insofar as spending …
Economic recovery lost some steam in Q3 The July activity data suggest that the economic recovery continued in Q3 but shifted down at least one gear. The 2.8% m/m rise in industrial production in July was a touch weaker than the analyst consensus of 3.3% …
This page has been updated with additional analysis since first publication. Underlying inflation seems to settle around 2% The jump in the unemployment rate in July should reverse before long as economic activity rebounds. Meanwhile, the renewed pick-up …
Our China Activity Proxy suggests that activity growth edged up in July thanks to a ramp-up in fiscal spending. Policy support will continue to drive a cyclical recovery over the coming months. But once support starts to fade and export growth weakens, …
29th August 2024
We think enthusiasm around AI will return before long and inflate the stock market bubble further over the next year or so, supported by a backdrop of resilient economic growth and monetary easing cycles. In turn, we expect the “big-tech” sectors to …
The slide in Nvidia’s shares after the release of its latest consensus-beating results bolsters the argument that it was priced for perfection. But that doesn’t mean its party is over, or that the AI bubble is bursting. To re-cap, Nvidia’s share price …
We forecast a healthier 170,000 gain in non-farm payrolls in August, alongside a small fall in the unemployment rate to 4.2%. Wage growth should remain at 3.6%. Together, that would be consistent with a 25bp rate cut by the Fed next month. Beryl impact on …
Against the backdrop of central bank buying, strong physical gold demand, and a surge in ETF holdings, China appears to have been a key driver of the rally in gold prices earlier this year. Looking ahead, we think that China’s appetite for gold will grow …
Road cleared for ECB cut in September Inflation figures for Germany and Spain suggest that euro-zone headline inflation may have fallen to the ECB’s 2% target in August and that the core rate edged down. That paves the way for a September rate cut, but …
Libya’s oil shutdown could influence OPEC+ The oil market was rocked by two political shocks in the past week: an exchange of missiles between Israel and Hezbollah and a crisis in Libya, which led to cuts to its oil output. At the margin, the loss of …
The PBOC has just revealed that it purchased RMB400bn of government bonds from primary dealers today. This might seem like an odd move given that the central bank has spent recent months trying to prevent yields from falling. But most signs suggest that …
The PBOC appears poised to step up its efforts to prevent bond yields from falling, even though lower borrowing costs would help the economy right now. The inconsistencies in its policy approach are linked to the shifting whims of the Party leadership, …
EM recoveries are beginning to slow and should continue to do so over the coming quarters. Within this there will be regional variation, with Asia the outperformer and Latin America the laggard. Headline inflation rates will end the year above target in …
Prime office rents look set to rise by more than we had previously expected over the next few years given still low CBD vacancy, preferences for prime space and cuts to the supply pipeline in 2025-26. While we still expect rental growth to slow, our …
Modest increase in sentiment The European Commission's Economic Sentiment Indicators for Central and Eastern Europe (CEE) generally edged higher in August, which suggests that the regional economic recovery has continued, albeit at a moderate pace, this …
This page has been updated with additional analysis since first publication. EC Survey suggests economy stagnant The increase in the EC’s economic sentiment indicator for August was largely due to a jump in the measure for France. It still suggests that …
We think the AI rally has further to run, despite investors’ apparent disappointment with Nvidia’s rapid profit growth. The sag in Nvidia’s share price in after-hours trade, despite seemingly barnstorming profit results , naturally raises the question of …
Growth steadies at the start of Q3 The latest Russian industrial production and retail sales figures for July were a mixed bag and suggest that the economy maintained a steady pace of growth at the start of this quarter. But we still think GDP growth will …
28th August 2024
The ongoing reassessment of the monetary policy outlook in the US and Europe has (again) made the UK look like an outlier. We doubt that will last. Since the start of the summer, expected interest rates have fallen significantly in most major economies, …
City offices have underperformed their West End neighbours by a wide margin since 2022. More encouraging recent data have led us to revise up our City rental projections, but we still expect stronger gains in the West End over the forecast horizon. …
Core inflation to come in lower than Bank’s forecast Economic growth remains below potential Bank to cut interest rates by 25bp at each meeting until 2.50% The dovish communication following the last meeting and the encouraging July CPI report leave …
Rates on hold while geopolitical uncertainty remains The decision by the Bank of Israel (BoI) to leave its policy rate on hold again today (at 4.50%) rather than resume the easing cycle, reflects policymakers’ concerns with supply-side constraints in the …
Most Latin American economies appear to have headed into Q3 with little momentum and regional growth is likely to remain sub-2% this year and next. With inflation set to remain above target for a while yet, easing cycles in many countries will be …
Capital Markets Union (CMU) is regarded by many European policymakers as one of the key reforms needed to close the gap between EU and US productivity. But a full CMU is a long way off, and in any case fragmented capital markets are just one source of …
For all the talk about AI, equities in Europe have delivered nearly as much as those in the US over the past few years. But we think that US equities will take the lead more clearly over the next year or so. Only the eventual bursting of an AI bubble …
The pick-up in Nigerian GDP growth seen in Q2 will probably be followed by a renewed slowdown this quarter. But we think the backdrop of rising oil production, falling inflation and possible interest rate cuts should set the stage for a more sustained …
Growth in the Gulf economies is likely to pick up in the coming quarters, particularly as oil output starts to rise from October. The outlook will become more challenging from 2025 as oil prices fall back and it becomes more difficult to sustain loose …
This page has been updated with additional analysis since first publication. Disinflation has further to run Inflationary pressures are easing gradually, but the details of today’s CPI release won’t bring the RBA any closer to dropping its hawkish bias. …
It’s perhaps surprising that financials have outperformed the S&P 500 during the recent bout of market turbulence . (See Chart 1.) After all, Treasury yields have fallen and the outlook for the US economy has darkened, both of which might have been …
27th August 2024
Our fair value analysis suggests that appraisal-based NOI yields need to rise by 50-60 bps from Q2 levels. But downgrades to our expectations for Treasury yields in the latter years of our forecast horizon mean the cyclical peak in yields implied by this …
While the S&P 500 is now nearly back to its all-time high in the wake of Fed Chair Powell’s dovish message at Jackson Hole, underlying risk premia are still somewhat larger than before the July correction began and the previously all-conquering “AI” …
The economy is on course to grow by 6.5-7% per year between 2024 and 2026, which would put India on course to become the world’s third-largest economy in the next couple of years. Headline CPI inflation is likely to have accelerated in August, but it …
Softer house price gains reflect looser market The muted 0.2% rise in the national Case-Shiller house price index in June was no shock considering that buyer demand collapsed that month, while supply kept growing. With the spring selling season now over …
Rates left on hold, easing cycle will be more “stop-start” from here The Hungarian central bank (MNB) suggested that its decision to leave the policy rate on hold today, at 6.75%, was likely to mark a temporary pause in the easing cycle, rather than an …
The small fall in Brazil’s headline inflation rate, to 4.35% y/y in the first half of August, alongside the prospects of a Fed rate cut next month, means that Copom is most likely to leave rates unchanged (rather than hike) at its meeting next month. The …
