Saarah Ghazi 
Ecuador is no longer on track towards meeting the criteria imposed on it by the IMF to keep its US$6.4bn Extended Fund Facility (EFF) program afloat. President Guillermo Lasso has temporarily abandoned the fuel subsidy reform in the face of opposition from Congress and growing social unrest, undermining fiscal consolidation.
After several days of huge UK financial market volatility, the BoE intervened at the long end of the gilt market and postponed the beginning of its programme of gilt sales. The intervention appears to have brought greater stability for the time being. But with the government showing few signs of heeding markets’ message, further instability remains a significant risk.
Like its Rocky Mountain-area peers, Phoenix has seen tremendous growth since the start of the pandemic. Its net job growth of 3.6% from Q1 2020 to Q3 2022 ranks in the top 20 of 50 metros. Industries associated with population growth – retail, construction, even restaurants – have added the most jobs in the metro.
Enjoying the bounty of numerous corporate relocations and robust population growth, Dallas’s net growth since the start of the pandemic of 7.1% ranks 2nd of 50 metros, behind Austin. The industries that have added the most jobs over the last two years include employment services, finance and insurance, and warehousing and storage.
The energy crisis took a dramatic turn this week after reports of several leaks in the gas pipelines Nordstream 1 and 2 were reported. The nature of the incidents makes it very likely that sabotage was the cause, although the country responsible or the motive is unknown.
Although it has benefited from a rapidly growing tech sector, Denver’s net job growth since the start of the pandemic is only 2%, which still ranks in the top 20 of 50 metros. Tech-related industries (computer systems design, software, etc.) have added the most jobs over the last two years followed by employment services, which includes temporary staff, and management and technical consulting.
Although it has recovered its lost film jobs and then some, Los Angeles shows a net decline of 0.8% since Q1 2020 which ranks in the bottom 20 of 50 metros. The decline is largely due to tourism-related sectors. LA is expected to recover all of its lost jobs in Q3 2024.
Growth across advanced Asia Pacific cities is slowing down in 2022’s second half, and their full-year growth rates will trend downwards in 2023. In emerging Asian cities, we expect an uptick in growth in 2022, followed by a marked weakening in 2023.
Houston’s GDP is forecast to have declined 0.1% so far in 2022, with declining petrol and coal product manufacturing in particular holding back growth. Total GDP growth for 2022-2026, forecast at 2.1% annually, is above the US average but roughly in the middle of the 50 largest metros.
Still topping the charts on nearly every economic metric, Austin’s economy remains on fire. Its net growth since the start of the pandemic of 9.1% is considerably higher than #2 Dallas’s 7.1%. The tech sector (computer systems design, data processing, software, and computer manufacturing) has added the most jobs over the last two years along with retail trade, and management and technical consulting.
Strong annual GDP growth figures for most major European cities do not tell the whole story in 2022 as the economic environment across Europe has continued to deteriorate in the second half of this year. We expect technical recessions across most major European cities in H2 2022 and into Q1 2023.
The 50 largest metros will narrowly avoid a recession in 2022 but half will not escape one in 2023. In line with the US, we forecast a shallow recession for 25 of 50 metros given the Fed’s hawkish tone on raising interest rates. Of the top 20 metros, eight will see marginal GDP declines.
The impact of the lockdowns and Covid-19-related restrictions in China were severe in the second quarter of 2022. We have therefore revised down our expectations for growth in 2022 for most of China’s major cities—although we have revised Shanghai and Beijing up slightly. Changsha is forecast to be the best performing major city in 2022.
While US policy rates will rise further in the near-term, the long-run neutral rate – the interest rate consistent with inflation at the 2% target and production at its full potential – remains structurally low, according to our modelling.
We expect Canada to enter a recession in Q4 2022 and as a result, most metros including Toronto, Montreal, and Vancouver will experience economic contractions until mid-2023. A few smaller metros will avoid recession, however, including Barrie, ON, and Regina, SK.
A persistent pandemic, economic uncertainty, and a global geopolitical conflict continue to dominate headlines and fuel Chief Supply Chain Officer (CSCO) frustrations. Navigating uncertainties—and managing supply chain challenges accordingly—has out of necessity become a top business priority for boards and C-suites alike.
Russia’s invasion of Ukraine continues to sow economic disruption around the world. One long-term problem the conflict could exacerbate is climate change, as Europe slows its transition from fossil fuels in the scramble for alternatives to Russian energy—though the grim events of 2022 could yet end up accelerating a greener future.
We forecast copper prices to fall over the next six months as global economic growth deteriorates and surging energy prices disrupt global industrial production. Tighter monetary policy will dampen consumer spending, particularly on copper intensive big-ticket items.
We do not expect a long-lasting rebound in sterling (or gilts) anytime soon, given the lack of a credible fiscal consolidation framework and, thus far, a tepid BoE reaction today.
The negative market reaction to last week’s fiscal announcements appears to be a function of doubts over the credibility of the UK government’s long-term fiscal plans. Though we think the structural position is not as bad as last Friday’s drop in asset prices implies, it’s clear the government will struggle to retain credibility if it fails to engage with market concerns.
