March, 09 2017 by lsr team

Xi Jinping promised in November 2015, that the economy would grow at 6.5% through to 2020. This was necessary, he said, to fulfill a promise by his predecessor, Hu Jintao, to double the 2010 GDP and per capita income by the end of the decade. However, over the past year, there have been several signs that Xi might be willing to back away from this pledge. After recent conversations in Beijing, we believe:
• Policymakers will accept growth below 6.5% from next year. 
• The change responds to a wide-scale recognition that the current rapid pace of...

March, 24 2016 by lsr team

We recently published the Q2 2016 edition of the LSR UK Outlook. Our central forecasts assume that the UK remains in the EU, but we also modelled a ‘Brexit risk’ scenario. This risk involved shocking the model in a number of different ways, in particular by weakening trade-weighted sterling, increasing the level of household’s precautionary saving and reducing the share of business investment associated with exports to the EU to a ‘depreciation-replacement’ only level. The difference in the quarterly profile of growth between our central pro...

March, 09 2016 by lsr team

Improved risk sentiment is driving another rebound in EM assets. Investors have scaled back fears of a US recession, with Treasury yields now off recent lows and inflation breakeven rates bouncing from depressed levels. At the same time, China is loosening the fiscal taps, while the PBoC has shifted its focus back to boosting liquidity and credit. In turn, commodity prices have found a degree of stability. Market expectations for the path of Fed policy hit extremes in February. Since then, the US$ index (DXY) has turned higher, EM currencies have strengthened and oil pri...

September, 01 2015 by lsr team

The yuan’s relatively small depreciation cannot explain its huge impact on investors’ attitudes. Rather, it served as a reminder of the persistent, powerful global deflationary trend. In the UK context, sterling strength has amplified global deflationary pressure on UK economy. Our analysis suggests that currency strength alone will have been sufficient to push annual CPI inflation around 0.5% lower today than it otherwise would have been. Along with large falls in energy prices, global deflation has done more than enough to contain any pick-up in inflation t...