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Research Briefing | Apr 19, 2021

Eurozone | A massive spending spree is coming, but not until 2022

Ipad Frame - Eurozone-a-massive-spending-spree-is-coming-but-not-until-2022

We have revised up our forecasts for eurozone private consumption, and now envisage spending increasing 3.1% in 2021 and by a staggering 7% in 2022. Our forecast, which is well to the upside of consensus (3.7% and 4.5%), is based on our view that most of the restraint on spending has been forced by lockdowns rather than being a voluntary response to uncertainty.

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Research Briefing | Apr 19, 2021

Eurozone | A massive spending spree is coming, but not until 2022

Ipad Frame - Eurozone-a-massive-spending-spree-is-coming-but-not-until-2022

We have revised up our forecasts for eurozone private consumption, and now envisage spending increasing 3.1% in 2021 and by a staggering 7% in 2022. Our forecast, which is well to the upside of consensus (3.7% and 4.5%), is based on our view that most of the restraint on spending has been forced by lockdowns rather than being a voluntary response to uncertainty.

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Research Briefing

Australia | New spending patterns don’t change inflation outlook

Copy of Ipad Frame (20)

CPI inflation rates will remain volatile in 2021, with both headline and core
measures set to spike to the top of (or possibly above) the RBA’s target range
in Q2 2021. But these movements will be more indicative of pandemic-related abnormal price changes in 2020 than developments in 2021; the RBA will ‘look through’ these movements in their interest rate decisions.

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Research Briefing

Australia | New spending patterns don’t change inflation outlook

Copy of Ipad Frame (20)

CPI inflation rates will remain volatile in 2021, with both headline and core
measures set to spike to the top of (or possibly above) the RBA’s target range
in Q2 2021. But these movements will be more indicative of pandemic-related abnormal price changes in 2020 than developments in 2021; the RBA will ‘look through’ these movements in their interest rate decisions.

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Research Briefing

Denmark | Country Economic Forecast April

Why big fiscal deficits and low inflation can coexi (33)

Lockdown measures likely caused the economy to contract by 1.5% in Q1, but we see growth recovering strongly throughout the rest of the year.
Given Denmark’s stronger health situation relative to other European countries, the government is planning to have reopened vast swathes of the economy once all people over age 50 have been vaccinated.

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Research Briefing

Denmark | Country Economic Forecast April

Why big fiscal deficits and low inflation can coexi (33)

Lockdown measures likely caused the economy to contract by 1.5% in Q1, but we see growth recovering strongly throughout the rest of the year.
Given Denmark’s stronger health situation relative to other European countries, the government is planning to have reopened vast swathes of the economy once all people over age 50 have been vaccinated.

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Research Briefing | Apr 16, 2021

US | Recovery Tracker benefits from a spring break lift

Why big fiscal deficits and low inflation can coexi (32)

The US Recovery Tracker rose 0.8ppts to 89.1 in the week ended April 2, the sixth straight rise. Another week of broad-based gains across the tracker’s components signals the recovery is pushing through the latest virus uptick.

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Research Briefing | Apr 16, 2021

US | Recovery Tracker benefits from a spring break lift

Why big fiscal deficits and low inflation can coexi (32)

The US Recovery Tracker rose 0.8ppts to 89.1 in the week ended April 2, the sixth straight rise. Another week of broad-based gains across the tracker’s components signals the recovery is pushing through the latest virus uptick.

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Research Briefing

Global | Vaccine distribution progress & impact on travel recovery

Vaccine tracker

The global travel recovery has remained elusive so far. Vaccination is underway in 150 countries and will play a vital role in the easing of travel restrictions and subsequent recovery for the travel & tourism sector. Our vaccine tracker has been developed to better understand vaccine progress and how this impacts the recovery of global tourism. The tracker, updated weekly, estimates the expected timeframe for herd immunity based on the current seven-day rolling average of daily injections (adjusted for population size).

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Research Briefing

Global | Vaccine distribution progress & impact on travel recovery

Vaccine tracker

The global travel recovery has remained elusive so far. Vaccination is underway in 150 countries and will play a vital role in the easing of travel restrictions and subsequent recovery for the travel & tourism sector. Our vaccine tracker has been developed to better understand vaccine progress and how this impacts the recovery of global tourism. The tracker, updated weekly, estimates the expected timeframe for herd immunity based on the current seven-day rolling average of daily injections (adjusted for population size).

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Blog|15 April 2021

In emerging markets, the world is even less flat

In emerging markets, the world is even less flat

In his recent blog post, Richard Holt explored whether Covid-19 will lead to a permanent flight from the cities as people and their employers make permanent their favourable pandemic experiences—thus taking a job once located in a major city to a quieter area with lower housing costs and a more relaxed lifestyle. While he could imagine that people in their 30s and 40s will move out of large cities like London to an even greater degree than before (and advertises Bordeaux!), Richard does not expect the pandemic to lead to a major reorganization of work and living patterns, as the pull of big city life will remain.

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Research Briefing

MENA | Coronavirus tracker for the GCC – April update

Copy of Copy of Copy of Ipad Frame (25)

The GCC provides an interesting case study of how the vaccine programmes
impact upon the response of countries to rising new cases of Covid-19. Bahrain, Kuwait, Oman and Qatar have all seen significantly higher new daily
cases of Covid-19 over the past month. This has resulted in tightening of
lockdown restrictions in Oman and Qatar and maintenance of tight restrictions in Kuwait to quell the spread of the virus and ease pressure on health services.

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Research Briefing

MENA | Coronavirus tracker for the GCC – April update

Copy of Copy of Copy of Ipad Frame (25)

The GCC provides an interesting case study of how the vaccine programmes
impact upon the response of countries to rising new cases of Covid-19. Bahrain, Kuwait, Oman and Qatar have all seen significantly higher new daily
cases of Covid-19 over the past month. This has resulted in tightening of
lockdown restrictions in Oman and Qatar and maintenance of tight restrictions in Kuwait to quell the spread of the virus and ease pressure on health services.

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Research Briefing | Apr 14, 2021

Global | Overheating risk is real, but probably overstated

Overheating risk is real, but probably overstated - iPad

Could fiscal stimulus lead to economic overheating? Our assessment suggests that while that’s a risk, it’s not a foregone conclusion, even with large fiscal packages. There are also arguments for erring on the side of more stimulus rather than less, with policy options to rein in demand quickly if inflationary pressures start to pick up.

What you will learn:

  • Multipliers are also likely to be low for other stimulus
    categories too, including aid to businesses (well below 1
    according to the Congressional Budget Office).
  • An important component of the argument for overheating is the existence of a large overhang of “excess” savings built up in 2020 due to coronavirus restrictions.
  • A key determinant of whether a fiscal package risks overheating an economy is, in theory, the size of the output gap (the difference between actual output and its potential level).

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Research Briefing | Apr 14, 2021

Global | Overheating risk is real, but probably overstated

Overheating risk is real, but probably overstated - iPad

Could fiscal stimulus lead to economic overheating? Our assessment suggests that while that’s a risk, it’s not a foregone conclusion, even with large fiscal packages. There are also arguments for erring on the side of more stimulus rather than less, with policy options to rein in demand quickly if inflationary pressures start to pick up.

What you will learn:

  • Multipliers are also likely to be low for other stimulus
    categories too, including aid to businesses (well below 1
    according to the Congressional Budget Office).
  • An important component of the argument for overheating is the existence of a large overhang of “excess” savings built up in 2020 due to coronavirus restrictions.
  • A key determinant of whether a fiscal package risks overheating an economy is, in theory, the size of the output gap (the difference between actual output and its potential level).

Read more

Blog|14 April 2021

The API economy vs. the forces of chaos

Graeme Harrison
Graeme Harrison
Director of EMEA, Macro Consulting
The API economy vs. the forces of chaos

Software developers celebrated in early April when the US Supreme Court shot down a high-profile copyright case after a decade of litigation, making it easier for coders to use a critical bit of digital plumbing called an application programming interface, or API, which allows applications to interoperate with each other.      

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Research Briefing | Apr 14, 2021

China | Why China’s subsidy to the world is likely to endure

Why_Chinas_subsidy_to_the_world_is_likely_to_endure_Page_1-1

China is a significant net creditor to the rest of the world. At the end of 2020, its foreign assets totaled US$8,704 billion, or 59.1% of GDP, compared with foreign liabilities of US$6,554 billion, or 44.5% of GDP. 

Nonetheless, earnings on foreign liabilities (foreign capital in China) substantially exceed those on foreign assets (China’s investment abroad). In fact, the average rate of return of 6.0% on inbound capital in 2020 was double that on outbound capital.

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Research Briefing | Apr 14, 2021

China | Why China’s subsidy to the world is likely to endure

Why_Chinas_subsidy_to_the_world_is_likely_to_endure_Page_1-1

China is a significant net creditor to the rest of the world. At the end of 2020, its foreign assets totaled US$8,704 billion, or 59.1% of GDP, compared with foreign liabilities of US$6,554 billion, or 44.5% of GDP. 

Nonetheless, earnings on foreign liabilities (foreign capital in China) substantially exceed those on foreign assets (China’s investment abroad). In fact, the average rate of return of 6.0% on inbound capital in 2020 was double that on outbound capital.

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Research Briefing | Apr 13, 2021

US | US Dollar to regain some luster in 2021

Copy of Copy of Copy of Ipad Frame (22)

While many commentators have been calling for a US dollar collapse, we believe the greenback will have a lot of staying power in 2021. In the wake of
extra-ordinary fiscal stimulus, favorable growth and interest rate differentials
should support a 3% year-over-year dollar appreciation by December 2021.

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Research Briefing | Apr 13, 2021

US | US Dollar to regain some luster in 2021

Copy of Copy of Copy of Ipad Frame (22)

While many commentators have been calling for a US dollar collapse, we believe the greenback will have a lot of staying power in 2021. In the wake of
extra-ordinary fiscal stimulus, favorable growth and interest rate differentials
should support a 3% year-over-year dollar appreciation by December 2021.

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Research Briefing | Apr 13, 2021

Vietnam | Role as a global manufacturing hub will fuel growth

Ipad Frame (27)-1

Vietnam’s transformation into a global manufacturing hub over the past decade helped it outperform most economies in 2020 and further strengthened its share of global electronics and manufacturing exports. We forecast these trends will continue over 2021 and beyond.

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Research Briefing | Apr 13, 2021

Vietnam | Role as a global manufacturing hub will fuel growth

Ipad Frame (27)-1

Vietnam’s transformation into a global manufacturing hub over the past decade helped it outperform most economies in 2020 and further strengthened its share of global electronics and manufacturing exports. We forecast these trends will continue over 2021 and beyond.

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Research Briefing | Apr 13, 2021

Australia | Smooth labour matching the key to recovery from here

Copy of Ipad Frame (16)

The labour market recovery has outpaced expectations since the initial COVID19 shock. While the removal of JobKeeper is likely to stall the recovery in Q2, labour demand indicators are quite strong, which should support employment growth in 2021.

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Research Briefing | Apr 13, 2021

Australia | Smooth labour matching the key to recovery from here

Copy of Ipad Frame (16)

The labour market recovery has outpaced expectations since the initial COVID19 shock. While the removal of JobKeeper is likely to stall the recovery in Q2, labour demand indicators are quite strong, which should support employment growth in 2021.

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Research Briefing | Apr 12, 2021

MENA | Regional PMIs; IMF GDP revisions; Saudi pilgrims

Regional PMIs; IMF GDP revisions; Saudi pilgrims

PMIs for March remained in positive territory across the GCC but showed nonoil growth at a varying pace in the countries. Qatar and the UAE saw significant improvements due to stabilising hiring activity, but a slowdown in new orders contributed to a decline in Saudi Arabia’s PMI.

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Research Briefing | Apr 12, 2021

MENA | Regional PMIs; IMF GDP revisions; Saudi pilgrims

Regional PMIs; IMF GDP revisions; Saudi pilgrims

PMIs for March remained in positive territory across the GCC but showed nonoil growth at a varying pace in the countries. Qatar and the UAE saw significant improvements due to stabilising hiring activity, but a slowdown in new orders contributed to a decline in Saudi Arabia’s PMI.

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Research Briefing | Apr 12, 2021

Canada | Higher inflation is inevitable but likely not sustainable

CPI inflation is set to rise well above the Bank of Canada’s 2% target this spring and will likely surpass 3% y/y for the first time since 2011. But we don’t believe this rise in inflation will be sustained.

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Research Briefing | Apr 12, 2021

Canada | Higher inflation is inevitable but likely not sustainable

CPI inflation is set to rise well above the Bank of Canada’s 2% target this spring and will likely surpass 3% y/y for the first time since 2011. But we don’t believe this rise in inflation will be sustained.

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Research Briefing | Apr 9, 2021

Africa | Complacency over Cabo Delgado costing State dearly

Copy of Copy of Copy of Ipad Frame (21)

After attacks on Palma in northern Mozambique in which dozens of civilians, including a South African and a Briton, lost their lives, Total pulled all its local staff out of northern Mozambique and suspended work on its onshore installations. The resulting delays will affect Mozambican government finances, and make it more urgent for Maputo to call on foreign friends for help.

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Research Briefing | Apr 9, 2021

Africa | Complacency over Cabo Delgado costing State dearly

Copy of Copy of Copy of Ipad Frame (21)

After attacks on Palma in northern Mozambique in which dozens of civilians, including a South African and a Briton, lost their lives, Total pulled all its local staff out of northern Mozambique and suspended work on its onshore installations. The resulting delays will affect Mozambican government finances, and make it more urgent for Maputo to call on foreign friends for help.

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Blog|9 April 2021

Is this time different, or an exercise in financial folly?

Irmgard Erasmus
Irmgard Erasmus
Senior Financial Economist, OE Africa
Is this time different, or an exercise in financial folly?

As John Templeton once said, the four most dangerous words in investing are “this time it’s different.” This notion seems to affect each forthcoming generation, with regulators hypothesising that fundamental changes to economic and financial systems—usually through technological advancement or broadening of the policy toolkit—will allow for greater protection against traditional market risks. Recent arguments by policy-makers in Africa suggest that rapid financial innovation and liberalisation have rendered widening twin deficits, unfettered public borrowing and low domestic savings rates as non-issues—or, at worst, tolerable—as an increasingly sophisticated policy framework and integrated global financial market are equipped to handle these “better than before.” Indeed, market complacency is again creeping in as the global financial system, awash with inexpensive liquidity, allows weaker-quality creditors to tap international debt markets as a dearth of domestic savings is set against ballooning fiscal deficits.

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Research Briefing | Apr 9, 2021

UK | Activity continues to firm ahead of the big reopening

Why big fiscal deficits and low inflation can coexi (30)

With the government confirming that non-essential retailers and outdoor hospitality will reopen in England on Monday, our forecast of a strong rebound in activity in Q2 looks to be in good shape. Our new forecast shows GDP growth of 7.2% in 2021, well above the consensus of less than 5%. Even before restrictions are relaxed, a broad range of data suggests that activity has firmed.

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Research Briefing | Apr 9, 2021

UK | Activity continues to firm ahead of the big reopening

Why big fiscal deficits and low inflation can coexi (30)

With the government confirming that non-essential retailers and outdoor hospitality will reopen in England on Monday, our forecast of a strong rebound in activity in Q2 looks to be in good shape. Our new forecast shows GDP growth of 7.2% in 2021, well above the consensus of less than 5%. Even before restrictions are relaxed, a broad range of data suggests that activity has firmed.

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Research Briefing | Apr 9, 2021

India is more resilient, but not immune to the second wave

Ipad Frame (26)-1

The coronavirus resurgence in India is raising concerns that the recovery could be derailed. With state governments reluctant to reintroduce strict lockdowns, we think the economic impact will be much less severe than in Q2 last year.

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Research Briefing | Apr 9, 2021

India is more resilient, but not immune to the second wave

Ipad Frame (26)-1

The coronavirus resurgence in India is raising concerns that the recovery could be derailed. With state governments reluctant to reintroduce strict lockdowns, we think the economic impact will be much less severe than in Q2 last year.

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Research Briefing | Apr 9, 2021

US | Recovery Tracker marches steadily higher

Ipad Frame (25)-1

The US Recovery Tracker rose 1.3ppts to 88.1 in the week ended March 26 on gains across most of the tracker’s six categories. The recovery maintained its momentum despite health dynamics worsening. Weekly gains were led by stronger production, driven by greater business startup activity and firmer upstream and downstream energy output.

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Research Briefing | Apr 9, 2021

US | Recovery Tracker marches steadily higher

Ipad Frame (25)-1

The US Recovery Tracker rose 1.3ppts to 88.1 in the week ended March 26 on gains across most of the tracker’s six categories. The recovery maintained its momentum despite health dynamics worsening. Weekly gains were led by stronger production, driven by greater business startup activity and firmer upstream and downstream energy output.

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