The bigger-than-expected fall in CPI inflation in February was the second in as many months, and together with the Bank of England’s clearer hints that it is getting close to cutting interest rates, it gives us a bit more confidence in our forecast that …
9th April 2024
Further rise in core services inflation shifts odds in favour of a hold Mexico’s headline inflation rate held steady at 4.4% y/y in March, but the further rise in core services inflation to a 10-month high last month adds weight to our view that Banxico …
We think that reports of a wave of new resale supply coming onto the market are overblown. While the number of homes being listed for sale has increased compared to last year, it is still low by historical standards, as mortgage rate ‘lock-in’ continues …
After a historically weak 2023, there are early signs of a modest turnaround in world goods trade which we expect to endure. Meanwhile, global container shipping costs have halved – and those for commodity freight more than halved – from recent peaks, …
Taiwan will be one of the main beneficiaries of a lengthy global AI investment boom. We expect its economy to growth much faster over the rest of this decade than it did during the 2010s. It already appears that global excitement about the possibilities …
Media reports that Brazil’s government is already seeking to water down the latest fiscal rule (which has been in place for less than a year) reinforces the point we made when the rule was first unveiled that the Lula administration would be unable to hit …
The Q1 ECB Bank Lending Survey suggests that the drag on lending growth from tight monetary policy continued to ease. But the data remain consistent with broadly stagnant consumption and declines in investment. For the first time since late 2021, banks …
The slump in the yen has resulted in Germany overtaking Japan as the world’s 3 rd largest economy at market exchange rates. We expect Japan to overtake Germany yet again in the early 2030s as the yen strengthens and Japan benefits from higher productivity …
We expect Japanese equities to do quite well this year, as hype around artificial intelligence proves a more powerful catalyst than the headwind we anticipate from a stronger yen. Despite bouncing back a bit today, Japanese equities have fared poorly …
8th April 2024
Falling full-time employment not a sign of weakness The rise in part-time employment is not a sign of economic weakness, but instead reflects the large inflow of prime-age women into the labour force, who have been the big beneficiaries of the …
Uganda’s strong recent economic recovery is facing domestic and external headwinds, including international condemnation of the government’s Anti-Homosexuality Bill – and the associated impact on financing and trade – and upcoming EU deforestation …
Door for rate cuts closing The decision by the Bank of Israel (BoI) to leave its policy rate unchanged at 4.50% (rather than cut) for the second meeting in a row underscores policymakers’ concerns about the large budget deficit, above-target inflation and …
Note: We’ll be covering our views on residential market winners and losers in both the for-sale and rental markets in a Drop-In Tuesday 16th April 1100 EST/1600 BST . Register here for the 20-minute session. Our latest office metro forecasts highlight …
The Bernanke review of the Bank of England’s forecasting and communications will probably recommend the Bank illustrates the risks around its forecasts using alternative scenarios rather than fan charts and places greater emphasis on supply and monetary …
Downside inflation surprise keeps 75bp cut on the table The larger-than-expected fall in Chile’s inflation to 3.7% y/y in March has increased the chances of the central bank delivering another 75bp cut at its next meeting in May, although we still think …
The latest data are consistent with our view that the euro-zone will remain close to recession in the near term. With the labour market softening and inflation continuing to fall, the ECB is very likely to start cutting rates in June. Elsewhere, the SNB …
Oman and Bahrain both recorded sharp increases in their government debt-to-GDP ratios in the second half of the last decade, but while Oman’s public finances have improved dramatically since then, Bahrain’s have not. In Bahrain, significant tightening …
Three developments over the past fortnight have rekindled concerns about rising levels of government debt and the sustainability of public finances across advanced economies. First, France reported a larger-than-expected budget deficit of 5.5% of GDP for …
Inflation eases even after currency plunge Egypt’s headline inflation rate slowed to 33.3% y/y in March despite the near 40% fall in the pound’s official exchange rate last month. That said, the effects of the currency fall will continue to feed through …
Forecast change after hawkish BSP meeting The central bank in the Philippines (BSP) today left its main policy rate unchanged (at 6.50%), but sounded more hawkish than we had expected on inflation. Accordingly, we are pushing back the timing of when we …
Some signs of life from German industry, but outlook still poor The second consecutive large monthly rise in German industrial production in February confirms the sector has started the year on a better note. But we still expect it to struggle over the …
This page has been updated with additional analysis since first publication. Virtuous cycle will continue to gain momentum in Q2 Regular wage growth spiked in February, which suggests that the virtuous cycle between prices and wages is in full swing. And …
The EM team has taken over the podcast this week to highlight two of the biggest issues in emerging market investing. William Jackson talks to Shilan Shah about how emerging market economies will fare as fossil fuels are phased out in favour of green …
20th March 2024
Economy running hot in Q4, momentum continues into 2024 The 4.9% y/y rise in Russian GDP in Q4 was slightly below expectations but it followed an upwards revision to growth in Q3 (to 5.7%) and suggests that the economy continued to run hot at the end of …
5th April 2024
Another robust US non-farm payrolls report has seen the dollar rebound a bit, unwinding some of its losses earlier in the week and putting the DXY index on track to end the week near its highest level on the year. With FOMC members continuing to signal …
The prices of oil and gold increased sharply this week . The price of Brent rose to over $90 per barrel on fears that Iran could start to play a greater role in the Israel-Hamas conflict. And earlier in the week, OPEC+ reaffirmed its output restraint in …
The insolvency data released this week show the toll that high interest rates are putting on consumers and businesses. That is unlikely to be enough to persuade the Bank of Canada to cut interest rates next week but, with the cracks in the labour market …
Continued strength in the US labour market may keep US Treasury yields elevated and the greenback strong in the short term, but we think the upside for both is limited from here. And the backdrop for US equities looks favourable to us, even if the Fed …
Supercore inflation fundamentals still improving Inflation fundamentals improving This week brought more good news on the outlook for so-called supercore inflation. Core services (ex-housing) prices, aka supercore, are the most labour-sensitive component …
Banxico: hawks still rule the roost The hawkish tone of the minutes to Banxico’s March meeting, at which it kicked off its easing cycle with a 25bp cut, adds weight to our view that the easing cycle will be very gradual. We already knew that one member …
SA’s weak demand is holding back its recovery South Africa’s March PMI numbers were disappointing and support our view that, while the drags from loadshedding and austerity are easing, the recovery this year will be subdued. The ABSA/BER manufacturing …
The further slump in housing starts in Q4 was a surprise, but timelier data and leading indicators suggest activity has since begun to recover. We are therefore happy with our forecast of a gradual recovery in new home supply over the next two years. (See …
Cracks growing in the labour market The jump in the unemployment rate in March, together with evidence of easing wage pressures, raises the chance of the Bank of Canada surprising markets with a rate cut next week, although our base case remains that the …
Blockbuster report another reason for the Fed to take its time The blockbuster 303,000 increase in non-farm payrolls in March supports the Fed’s position that the resilience of the economy means it can take its time with rate cuts, which might now not …
BoT tightened in 2023 policy despite weak data The Bank of Thailand surprised most economists and financial markets last year when it continued to tighten monetary policy even as inflation dropped well below target (see Chart 1) and growth slowed. Chart …
While we learnt this week that inflation in the euro-zone fell a bit more than expected in March, to 2.4%, some commentators pointed out that the monthly increase was quite high, at 0.8%, and was even higher than in February (0.6%). However, most of the …
Identifying pockets of risk amid the optimism The positive news on India shows no signs of abating. The final composite PMI reading for March released this week rose to a 90-month(!) high. (See Chart 1.) That was underpinned by strength in both the …
Fiscal risks building in parts of CEE The larger-than-expected 2023 budget deficit figures released across parts of Central Europe this week underline our concerns about the fiscal challenges facing the region, particularly in Hungary. The better news …
Whether you’re a monetarist or not, it’s hard to ignore the big rise in the annual growth rate of M4 money coming out of the pandemic being a harbinger of the surge in CPI inflation. Shortly before CPI inflation surged from 0.3% in November 2020 to a …
PBOC eases auto loan policy to stimulate demand On Wednesday, the PBOC scrapped the regulatory minimum down payment for car loans on all passenger vehicles, giving banks the freedom to offer higher loan-to-value ratios. This latest attempt by the central …
Construction PMIs edge closer to expansionary territory The headline CIPS construction PMI rose to 50.2 in February, the first time it has risen above the no change level since August last year. The rise was driven by small improvements across the …
US steelmakers are preparing for robust growth in steel demand over the next few years, however we think those expectations will fall flat. Steel demand from property construction is likely to fall further and we expect softer demand for consumer durables …
The RBI kept the repo rate on hold at 6.50% today as expected but the more interesting aspect was the slight dialling down of its hawkish rhetoric. With inflation grinding down towards the central bank's 4% target, we remain comfortable with our view that …
Rebound in mortgage rates causes prices to stall The first decline in the Halifax House price Index in six months confirmed that the slight rise in mortgage rates since the start of the year has caused house prices to stall. The 1.0% m/m fall in the …
RBI policy pivot creeping closer The RBI kept the repo rate on hold at 6.50% today as expected but the more interesting aspect was the slight dialling down of its hawkish rhetoric. With inflation grinding down towards the central bank's 4% target, we …
No rush to cut rates The minutes of the RBA’s March meeting, published earlier this week, revealed that the Bank has now abandoned its tightening bias. Indeed, for the first time since May 2022, the Board didn’t discuss the option of raising rates higher. …
Tankan points to persistent strength in inflation Bank of Japan Governor Ueda today provided the strongest hint yet that the Bank is keen to hike interest rates further in the second half of the year. He noted that the probability of attaining a …
