Weekly Market Insight

Weekly Market Insights – 25th April

25th April 2022

On balance recessions still unlikely even as IMF downgrades 2022 growth forecasts, Netflix gets mowed down by investors as subscriber numbers fall and Irish hotels perform very strongly in Q1 2022. All these stories and more are covered in this week’s insights update from BlackBee.

Global Economy

A number of weeks ago we commented that consensus economic growth forecasts for 2022 had changed little so far but that downgrades were likely due to inflation and more particularly the conflict in Ukraine. We also noted that the Euro zone would likely be disproportionately impacted in economic terms by the war. Both of these observations emerged clearly from the latest IMF World Economic Outlook which was published last week.

Overall, the Fund downgraded its forecasts for world economic growth in 2022 from 4.4% to 3.6% while it also marginally downgraded the 2023 forecasts. Not surprisingly its 2022 inflation forecasts globally jumped for advanced economies from 3.9% to 5.7%. The major economies geographically closest to the war in Ukraine suffered the largest downgrades with Euro area growth forecasts slashed from 3.9% to 2.8% mainly as a result of German forecasts being cut to 2.1% from 3.8%.

This news is clearly disappointing but hardly surprising and we expect to see 2022 growth forecasts from similar bodies reduced over the coming weeks. However, standing back from the headlines we would still stress that even at their lower levels the new IMF growth forecasts even so represent above average performances for the main global economies compared to their long-term potential. Therefore, while we acknowledge that the short-term economic outlook is uncertain it remains our base case that recessions are unlikely around the world this year. 

The other key news of note last week was US Fed Chair Powell’s comments at an IMF panel which appeared to tee up the US central bank for a 0.5% interest rate increase when it meets in May. Echoing our earlier comments, the US economy is currently growing robustly and, in our view, should still be able to weather the interest rate increases over the next few months that now seem very likely.


Equity markets moved lower last week with the general trading backdrop remaining choppy. With the latest of the Q1 2022 earnings reports being published last week, investors at least got something else to chew on apart from the recent diet of war and stagflation stories. Moving into the earnings season the bar for Q1 is much lower than it has been for some time with US earnings growth of only 5% year on year expected by Factset. Last week the news was mixed. Netflix got run over, falling by 36% on foot of falling subscriber numbers. However elsewhere results from Procter and Gamble, Danone and Heineken presented a more resilient picture of consumer spending, albeit with the caveat that inflation was having a negative impact on prices and spending.


Bond investors suffered again last week as the recent trend of rising government bond yields continued, leading to lower prices and negative returns. Inflation and interest rate increases remain at the forefront of everything in government bond markets right now with not even the Ukraine war, the IMF downgrade or geopolitical uncertainty around the French Presidential election enough to stop the selling. The short-term surroundings isn’t any more positive in credit markets either, thanks to the combination of slowing economic growth and rising interest rates in the US. 


Price action in commodity markets was a little calmer last week but debate continues to rumble on about the potential impact of a mooted EU ban on Russian gas imports. Economic heavyweights on both sides of the Atlantic seemed to wade in against the proposal last week. At an IMF panel discussion US Treasury Secretary Janet Yellen cautioned that the EU should be careful about the prospect of banning Russian energy given the impact this could have on global prices and the negative corollary for world economic growth. Then on Friday the Bundesbank warned that banning Russian gas could know up to 5% off German economic growth in 2022, pushing the economy into a recession.

Sector News:

Tourism & Hospitality – Provincial hotel performance back to pre-pandemic levels in Q1

It’s very heartening to see hotels in Ireland recovering strongly post COVID. Q1 2022 data from STR show that RevPAR (Revenue per available room) at provincial hotels was actually higher than in Q1 2019 (prior to the pandemic) while national RevPARs were only around 10% down on Q1 2019 levels (see our chart of the week this week for the underlying data).

In our initial insights report on the sector last May we suggested that provincial hotels could recover fully from the pandemic by early 2024 with Dublin hotels perhaps a little later. The impact of rising inflation on costs and consumer demand represent short term headwinds for sure.  However, based on the sector’s current recovery trajectory it is growing more likely that Irish hotels could recover fully from the pandemic more quickly than we initially thought. 

Real Estate – Soaring construction costs fuelling uncertainty within the industry

Last week the Society of Chartered Surveyors Ireland released their tender price index indicating construction costs rose by roughly 13% throughout 2021, which has given industry participants cause for concern, especially as the impact of the war in Ukraine is not reflected in the figure. Construction cost inflation increases the level of risk borne by construction companies who bid to complete projects. This means that as costs rise margins tighten, especially on projects which had begun prior to the dramatic rise in costs. Some contractors will only tender new contracts if clients bear some or all the inflation risk, and will otherwise delay, which speaks to the uncertainty within the industry at present. This will provide another challenge for the residential sector, which is already experiencing critically low levels of stock for sale and rent. Coming on top of low levels of stock and high demand, rising costs look set to be another factor helping house prices grind higher over the next twelve months.