Central bankers are unlikely to offer much forward guidance at this weekend’s Jackson Hole symposium, preferring to stress their “data dependence”. Since most economies are expanding, inflation is easing back to target and financial markets have …
21st August 2024
Downward revisions leave employment growth still healthy The 818,000 downward revision implied by the preliminary benchmark estimate to the non-farm payroll data were roughly in line with what we had expected based on the earlier data implied by the …
With the Fed set to finally start loosening policy and a soft landing still looking like the most probable outcome for the US economy, we think unfavourable rate differentials and continued robust risk appetite will lead to some further weakness in the US …
China’s announcement last week that it would curb exports of antimony, a critical mineral, was another example of global fracturing unfolding in the commodities arena. Recycling offers an obvious way for the US and its allies to shore up their own …
Inflation plunge seals the deal on a rate cut in September The larger-than-expected decline in South Africa’s headline inflation rate, to 4.6% y/y, in July strengthens the case for the SARB to start its easing cycle with a 25bp cut to 8.00% at its next …
Bank Indonesia today left its policy rate unchanged at 6.25%, but the central bank’s dovish commentary supports our view that rates will be cut before the end of the year. Today’s decision was correctly predicted by all 30 analysts polled by Reuters, …
Thailand’s central bank (BoT) today left interest rates unchanged but if, as we expect, growth slows further and inflation remains very low, we think the central bank will start loosening policy from October. Today’s decision came as little surprise and …
We believe that employment growth isn’t as strong as the Australian Bureau of Statistics is reporting because net migration seems to have weakened more sharply than the ABS is assuming. While it will take many months for the labour force survey to reveal …
This page has been updated with additional analysis since first publication. Limited wiggle room for the Chancellor at the Budget July’s public finances figures continued the recent run of bad news on the fiscal position, with public borrowing on track to …
Nearly all of the pullback in the S&P 500 since the bout of rotation in the stock market began in the wake of June’s CPI report on 11 th July has now been reversed. Admittedly, the same cannot be said for the rotation itself. But we remain of the view …
20th August 2024
The South African Reserve Bank’s (SARB’s) new “supercore” inflation measure adds yet another piece of evidence that price pressures are being brought under control. We think the SARB should now be confident that it can start its interest rate cutting …
Retail real estate has faced a tough period, buffeted by the rise of e-commerce, extensive oversupply and the impacts of the pandemic on in-store shopping. But we think the sector is well down the road to dealing with those challenges and now offers a …
The prevailing view that, over the medium term, Colombia will maintain its position as Latin America’s fastest-growing major economy looks overly optimistic in light of the collapse in its savings and investment rates. GDP growth is more likely to come in …
Renewed downward momentum in core prices The softer monthly gains in the Bank of Canada’s preferred core price measures in July suggest that the previous two months reflected normal volatility rather than a stalling of the downward trend in core …
CBRT staying the course The Turkish central bank (CBRT) left its main policy rate unchanged again today, at 50.00%, and offered little sign that it will soon start an easing cycle. While most other analysts expect monetary loosening to start in Q4, we …
There are good reasons to expect services inflation to start falling again towards the end of this year and in 2025. But as long as wage growth remains high, services inflation will stay strong too. This morning Eurostat published the full breakdown of …
Europe Commercial Property Valuation Monitor (Q3 2024) …
The rapid expansion of commercial bank lending in Saudi Arabia has raised the risk of an increase in non-performing loans and heightened the exposure of the banking sector to both the real estate market and global risk appetite. But, Saudi banks are …
China’s electric vehicle exports rose strongly in July despite EU tariffs coming into force. This, alongside the continued surge in battery exports, lifted our measure of China’s green export volumes to a record high. The US tariffs on Chinese-made green …
We think the Riksbank will follow today’s 25bp rate cut with a cut at each of the three remaining meetings this year to take the policy rate to 2.75%. But we expect the terminal rate to be 2.5% which will be reached in early 2025. This is higher than the …
After a summer of extraordinary economic, market and political developments, what can investors expect through the end of 2024? Our senior economists held this special briefing all about the risks we’re watching in the final months of the year. During …
The protests that have swept several EMs in recent weeks are likely to have a longer-lasting economic impact in countries with weak balance sheets and/or where they lead to a major shift in policy. To us, that suggests that the economic hit from recent …
Riksbank cut will be followed by one at each remaining meeting this year Alongside the Riksbank’s decision to reduce the policy rate by 25bp today to 3.5%, policymakers also lowered their rate expectation for the end of this year from either 3.25% or 3.0% …
Brazilian assets have generally underperformed other EMs so far this year, but measures of risk premia still appear low to us, especially given concerns over public finances. While bonds may offer large gains by end-2025, our downbeat view on commodity …
RBA won’t be rushed into rate cuts The minutes of the RBA’s August meeting confirmed what we already knew from Governor Bullock's post-meeting press conference: the Board discussed the case for a 25bp hike before ultimately deciding to leave rates …
The weaker July employment report and another set of mild inflation data mean the Fed remains on track to cut interest rates in September. With the activity data still supportive of our view that the economy is heading for a soft landing, we doubt the Fed …
19th August 2024
While we expect the yen to rise further this year and next, we think this won’t stop Japanese stocks from making gains, even in local-currency terms. The Japanese yen has risen by roughly 1% against the US dollar today. This seems to reflect a general …
Israel’s economy slowed more than expected in Q2 as weak investment and supply constraints continued to hold back activity. A ceasefire to halt the conflict in Gaza would clearly be positive for the near-term growth outlook, but we doubt the economy would …
The global macroeconomic risks surrounding a possible ceasefire deal between Israel and Hamas are asymmetric. An agreement – while having significant economic consequences for countries in the region – would probably not itself be a game-changer for …
The 0.6% q/q fall in Chilean GDP in Q2 is mainly payback for a strong Q1, and we expect a return to positive growth in Q3. Still, the Q2 figures should the central bank confidence to deliver a couple of more cuts this year. The outturn was in line with …
Even the perma-bears would have struggled to find much in the slew of data released over the past week that would justify recent recession fears. Admittedly, we learnt that US manufacturing production contracted by 0.3% m/m in July. But that largely …
While we expect inflation to fall below the Bank of Japan’s 2% next year, the Bank’s still very accommodative stance means that this alone won’t trigger interest rate cuts. We think it would require a major downturn in activity that results in a looser …
Thailand’s economy slowed in Q2 and we expect it to decelerate a bit further in the coming quarters as the boost from tourism fades and with uncertainty around fiscal policy now elevated, risks to our already downbeat growth outlook are skewed to the …
As markets have come roaring back from the recent growth scare, Group Chief Economist Neil Shearing talks to Jennifer McKeown, Capital Economics’ Chief Global Economist, about the true state of the global economy and the outlook for policy. Their …
18th August 2024
Kamala Harris unveiled her economic plan today and it appears to be focused on mostly small-scale pocket-book populist issues. Our main take-away is that, like her opponent Donald Trump, she has shied away from promoting any large-scale deficit-financed …
16th August 2024
The dollar remains on the backfoot as calm has been restored quickly in financial markets, with this week’s key economic data providing renewed support for the “soft landing” scenario. Next week is lighter on the data front but features the minutes from …
The data this week cast doubt on the Bank of Canada’s view that the worst is already behind us for the economy, with manufacturing sales slumping to a two-and-a-half year low in June and non-residential building permit volumes plunging to their lowest …
The relief felt in markets over the past week or so as worries about the US economy have dissipated makes sense to us. So we expect the rebound in equity markets to continue . The market reaction (or lack thereof ) to US data released this week supports …
Housing recovery yet to take off Interest rate cuts have so far failed to stimulate the housing market, although the sharper drop in borrowing costs this month will lend more support. Regional divergences are growing, with Toronto likely to struggle with …
Rebound in confidence driven by political change The small rebound in the University of Michigan consumer sentiment index in August was entirely driven by recent political developments, and still leaves it below its level for most of this year. At face …
More good data all round More good price data The July price data should have provided more relief for any Fed officials still worried about inflation. The PPI, CPI and import price data imply that the Fed’s preferred core PCE measure increased by 0.16% …
The good news just kept coming this week. The economy grew by an above-trend rate for the second quarter in a row in Q2 (see here ), the unemployment rate fell to 4.2%, well below most estimates of the natural rate of around 4.50%. (See here .) And at …
Poland the region’s star in Q2 Perhaps the standout feature of the data released in the region this week was the strength of Polish GDP in Q2. Output expanded by a bumper 1.5% q/q, its fastest pace since Q1 2022. (See our initial take here .) The data …
Corporate borrowing still growing at a decent clip China’s July credit data came in weaker than expected on Wednesday. In particular, despite the PBOC cutting the loan prime rate last month, net new bank loans to the real economy turned negative for the …
Manufacturing sales weakest since January 2022 It was an extremely poor month for the manufacturing sector in June, with sales falling to a two-and-a-half-year low. As new orders slumped, inventories are elevated and the S&P Global manufacturing PMI for …
Winds of change in Venezuela? Hopes for a regime change in Venezuela have risen after leftwing governments in Brazil and Colombia made several suggestions to overcome Venezuela’s impasse, including holding fresh elections or forming a transitional …
Housing starts hit by hurricane The slump in both housing starts and building permits in July, to the lowest levels since the epoch of the pandemic, only partly reflects the temporary impact of Hurricane Beryl. Accordingly, even though lower interest …
