The Weekly Briefing from Capital Economics

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.

Julian Evans-Pritchard, our Head of China Economics, talks to Steven Altman, Director of the DHL Initiative on Globalization at NYU Stern’s Center for the Future of Management, about what lies ahead for globalisation in an age of economic fracturing. The discussion includes the current health of globalisation, the risks of a broad reversal of trade flows and evidence so far of US-China decoupling, as well as how the DHL Global Connectedness Index drew on Capital Economics’ work in classifying the world’s economies by geopolitical alignment. Click here to read the analysis referenced in this podcast.

How will the ructions in the banking sector be reflected in the data? Tracking the credit impact of March’s events isn’t as straightforward as it appears, says Group Chief Economist Neil Shearing. He talks to David Wilder about how to cut through the noise and where to look for signs that banks are curbing lending activity – including in our proprietary Financial Conditions Indices.Plus, with the UN projecting that India is now the world’s most populous country, Deputy EM Economist Shilan Shah discusses what the country needs to do to make the most of its demographic dividend – including how to bring millions of women into the workforce.  

It may be too soon to say that the banking turmoil is definitively over, but it’s not too early to try to understand why events of the past few weeks are going to leave a painful legacy for the US economy. Chief US Economist Paul Ashworth talks to David Wilder about the coming credit crunch, what this means for the Fed's next moves, and why sentiment can shift like a dam bursting. Also this week:Leah Fahy discusses her work for our Global Economics team looking at countries whose populations are ageing rapidly and how this has shaped their labour forces. (9:41)An exclusive extract from a client briefing on the bank turmoil given by our Asia team discusses Indian NPLs, China as a safe haven, and what’s lurking in Japanese overseas lending. (17:04) (00:00) - Paul Ashworth on what bank turmoil means for the US outlook; (09:41) - Leah Fahy discusses her work for our Global Economics team looking at countries whose populations are ageing rapidly and how this has shaped their labour forces; (17:04) - An exclusive extract from a client briefing on the bank turmoil given by our Asia team discusses Indian NPLs, China as a safe haven, and what’s lurking in Japanese overseas lending.

Two weeks into the banking sector turmoil and there are few signs that the panic is ending. David Wilder speaks to Neil Shearing about why investors are still uneasy, whether central banks have made a mistake, and why there's growing focus on commercial property holdings amid the intensifying hunt for the next source of instability. Plus, wheat consumption has typically grown along with the global population. But that's set to change, according to economist Bradley Saunders. He talks to Caroline Bain about his new report which warns of an unprecedented drop in consumption in the coming years.Click here to read the analysis referenced in this podcast.   (00:20) - Neil Shearing on the banking turmoil and commercial real estate. (08:34) - Bradley Saunders on the looming fall in wheat consumption.