The Weekly Briefing from Capital Economics

China data for May fell short of expectations and Capital Economics clients want to know what the government’s going to do about it. Our China Drop-In was one of two online briefings we held for them last week, along with our post-Fed, post-ECB, pre-Bank of England briefing. In this special episode, Group Chief Economist Neil Shearing tackles some of the most commonly-asked questions during those sessions, including: What will Chinese stimulus look like?Why is the German economy in such a dire state?Could the Bank of England signal a pause after a June rate hike?Plus, have Turkey and Nigeria come in from the cold? Post-election signals in both countries indicate their presidents are willing to break with the market-unfriendly policies that they’ve previously supported – but is this the real deal? Jason Tuvey and Liam Peach from our EM team talk about the lira and naira’s recent sharp devaluations, the path back to “normal” policy-settings, and whether Recep Tayyip Erdogan and Bola Tinubu are likely to stay the course.Click here to view recordings of the Drop-Ins and the analysis referenced in this episode.

These are not normal economic times and that makes the job of policymakers – and economists – that much harder. Group Chief Economist Neil Shearing talks to David Wilder about why this cycle is unlike any other, but also why it's likely to end in recession. Plus, the headline were all about LIV Golf, the PGA Tour and Karim Benzema, but the other big Saudi Arabia story this week was the oil production cut that barely raised a peep in the market. Bill Weatherburn talks about the price outlook and the OPEC+ dynamics that are driving decision-making, while James Swanston explains why he's just slashed his Saudi growth forecast, the chances of more high profile spending in sports and what Antony Blinken's trip to Riyadh signifies. Click here to read the analysis referenced in this episode.

US stocks ended the week with a broad rally in the wake of the May jobs report, but the S&P 500’s performance this year has been mostly dictated by the outsized strength of just a handful of giant tech firms. Oliver Allen and Adam Hoyes from our Financial Markets team talk to David Wilder about what’s really been happening under the hood of the US stock market, how this has played before and what it means for the outlook for equities.Plus, from that jobs report to euro-zone inflation to the latest PMIs, Simon Macadam from our Global Economics team reviews the week’s data to discuss how they’ve affected the global growth-inflation-policy outlook – including why we still think recessions in advanced economies are on the cards. Click here to explore the analysis referenced in this episode.

Neil Shearing says the UK’s April CPI report was a “horrorshow”. The Capital Economics Group Chief Economist tells David Wilder why sticky inflation readings make recession more likely – despite the popular view that a downturn can be avoided – while previewing May inflation data for the euro-zone and the US non-farm payrolls report.Plus, the reports suggest a deal is near, but what if Democrats and Republicans fail to agree in time and the US actually defaults? Hear an exclusive clip from our client briefing about the macro and market impact if the unthinkable became a reality.Also, most studies tend to understate the impact that a bigger-than-expected rise in global temperatures would have on economic activity. David Oxley, the head of our Climate Economics service, has tried to put that right with new analysis. Here he talks through some of the global and country-level impacts.Click here to explore the analysis referenced in this episode.

The cover story of The Economist magazine this past week has been largely based on our long-held view that China’s economic growth would slow to just 2% by the end of this decade, and wouldn’t surpass the US as the world’s biggest economy. The Capital Economics report outlining this view was first published five years ago this month, and Mark Williams, one of its co-authors, tells David Wilder why the drags on Chinese growth that were highlighted by the China team back in 2018 have only become more pronounced in the intervening years. Plus, Group Chief Economist Neil Shearing discusses what’s happening in advanced economy housing markets, and why the inflationary surge has helped push through their adjustment from positions of extreme overvaluation. Finally, Liam Peach from our Emerging Markets explains why the result of first-round voting in Turkey’s presidential election is such a negative for the country’s economic outlook.Click here to read the analysis referenced in this episode.

The sick man of Europe. Broken Britain. Stagflation nation. The UK has had an unenviable post-pandemic economic recovery, lagging other advanced economies on growth but ahead of the pack when it comes to inflation. But how much of what ails the UK economy is cyclical? Are fundamental changes needed to put the economy on a surer footing and, if so, is there the political will to deliver them? In this special episode of The Weekly Briefing, Chief UK Economist Paul Dales and Deputy Chief UK Economist Ruth Gregory speak to David Wilder about the UK’s near-term growth, inflation and policy outlook, as well as the longer-term issues that need to be addressed if the current gloomy narrative is going to be changed. Click here to read the analysis referenced in this episode.

The White House and congressional leaders are still working to try to reach agreement on raising the debt ceiling, but there’s no guarantee that a deal will get done in time. Deputy Chief US Economist Andrew Hunter and Deputy Chief Markets Economist Jonas Goltermann speak to David Wilder about this latest flare-up over the debt ceiling, including the potential for default, why minting a trillion dollar coin wouldn’t work and what's really going on in the CDS market.Plus, Group Chief Economist Neil Shearing addresses some of the big themes that have come out of a series of client roundtables in Asia, including whether China’s economic recovery is already over, why core inflation data look so troubling and what’s wrong with the idea of a BRICS currency.  Read all the analysis referenced in this episode here.

Last week began with another US bank failure and ended with hotter-than-expected headline jobs data. In between, Jerome Powell sounded optimistic about the likelihood of a soft economic landing. But how realistic is that? Group Chief Economist Neil Shearing talks to David Wilder about credit conditions, labour markets and why the Fed may have stopped hiking, even as the ECB is set to carry on.Plus, upcoming Turkish presidential and parliamentary elections are make or break for the country’s crisis-battered economy. Liam Peach, who leads our Turkey coverage, discusses the risks around the election with Chief EM Economist William Jackson – including the tough choices that Kemal Kilicdaroglu would have to make if he defeats President Erdogan. Click here to read the analysis in this episode.

After months of resistance, China has been making positive noises around talks on restructuring the debt of a number of EM borrowers. But William Jackson, our Chief EM Economist, isn’t optimistic. He talks to Chief Asia Economist Mark Williams about the mounting challenges facing these restructuring talks in an age of global fracturing.Plus, it’s a big week in central banking, with a rate decision from the Fed due on Wednesday and the ECB a day later. Chief Global Economist Jennifer McKeown talks to Paul Dales, who leads our UK coverage, about what we’re expecting, including why the ECB is set to continue hiking rates after the Fed stops, and what we’re concerned about on the inflation front. Click here to read the analysis referenced in this episode. 

It’s one of the big questions in markets after March’s banking sector turmoil but the prevailing guides to financial conditions don’t paint a very clear pictures. That’s why Simon MacAdam, our Senior Global Economist, has revamped and relaunched our Financial Conditions Indices – and he’s got a very worrying message about what they have to say about the ease of funding availability and what that means for the economic outlook.Plus, Group Chief Economist Neil Shearing talks to David Wilder about the week’s big data releases and their policy implications, as well as some potentially good economic news for Sub-Saharan Africa.Click here to read the analysis referenced in this episode.