Macro Pulse

Geopolitics, IMF forecasts and China

The flare up of geopolitical instability in Israel and Gaza has led investors to re-examine the outlook for the world economy over the past few days. But the release of the IMF’s latest World Economic Outlook publication also grabbed some of the financial headlines though whether its staff additionally need to now re-examine that outlook remains to be seen. In our charts this week we take a look at the following:
·         The IMF’s latest forecasts
·         The Blue Chip consensus for 2024
·         The longer-term US consensus for inflation
·         Oil prices and consumer confidence
·         Global current account imbalances
·         China’s capital flows

Unyielding

A further steep climb in US Treasury yields has been in the eye of the storm for financial markets over the past few days. In our charts this week we assess this trend and its driving factors. Specifically we home in on:
·         US yields and the dollar
·         Expectations for the Fed
·         Quantitative tightening policies and real yields
·         Inflation expectations and oil prices
·         Japan’s portfolio flows
·         Emerging market vulnerabilities
 

Trading places

Financial markets have been much more unsettled in recent weeks largely thanks to a “tighter for longer” narrative from the US Fed and a further steep climb in US Treasury yields. In this week’s charts of the week publication we focus on this and other issues including:
·         Slowing world trade growth
·         Ebbing consumer confidence
·         Broad money supply contractions in the euro area
·         US household balance sheets
·         US corporate balance sheets
·         Female labour force participation rates

Higher for Longer

Financial markets have been on the back foot in recent days with some oil-related inflation jitters combined with a “tighter for longer” message from the Fed a couple of contributory factors. In our charts this week, we made a nod to these and other issues with some colour on:
 
·         Firming US Treasury yields
·         Higher consumer energy prices
·         UK financial markets (this year versus last year)
·         Firming JGB yields
·         Foreign exchange reserve in EM economies
·         India’s favourable FDI flows

A troublesome consensus

Following this week’s ECB policy decision, investors will likely remain focused on central banks in the coming days with the Fed, the BoJ and the BoE all due to meet next week. With that in mind, we look at some of the key considerations for these policymakers in our charts this week. Specifically we home in on:
 
·         Quantitative tightening and real yields
·         A mixed global growth consensus for 2024
·         A still-high global inflation consensus for 2024
·         Slowing UK labour market activity
·         The China-induced slowdown in South Korea’s export growth
·         The US dollar and FX reserves

More stormy waters

The world economy’s resilience over the last few months has surprised many forecasters but the incoming data from Europe coupled with a further climb in the price of oil suggest that downside risks are accumulating. In our latest charts of the week publication we dig into this with some perspectives on:
·       Recent global business surveys
·       Credit impulses in the US and euro area
·       Oil prices and inflation surprises
·       Manufacturing capacity pressures and inflation
·       Risk assets and data surprises
·       Productivity and demographics
 

Some necessary re-balancing

The trend toward higher government bond yields that had been in vogue for much of August has reversed in recent days. This can be traced to a batch of weaker-than-expected economic data and stronger suggestions, in particular, that the US labour market is re-balancing. In our charts this week we offer some colour on:
 
·       The re-balancing of the US labour market
·       Data surprises in the US versus the euro area
·       The dollar and real interest rate differentials
·       Supply and demand pressures in the euro area
·       Still-sticky euro area inflation
·       The messages from China’s high frequency indicators
 

What will drive global growth?

Some of anxiety that has lately gripped financial markets has ebbed a little in the early half of this week but investors are no longer actively embracing the soft landing consensus that had previously held sway. Our charts this week focus on the following related themes:
·       China’s structural growth foundations
·       The Bank of Japan and higher yields
·       The US economy’s resilience
·       UK inflation drivers
·       The growth and inflation consensus
·       Equity markets and liquidity

Sour, bitter and sweet but not that spicy

The mood in financial markets has soured over the past few days thanks to some downbeat messages from the global dataflow and most notably from China. The minutes released from the Fed’s July FOMC meeting further contributed to this negativity. Our charts for this week offer additional insight on this and, more specifically, on the following factors:
·       Investor sentiment
·       The US macro consensus
·       The global growth consensus
·       UK supply side challenges
·       Japan’s economy in Q2
·       Geopolitical risks

Goldilocks, or not?

Financial markets have continued to gravitate toward the ‘Goldilocks’ scenario where economic growth is neither “too hot” nor “too cold” and where inflation gradually moderates to more target-friendly levels. But while that view may have appeared overly optimistic a few weeks ago, much of the incoming data more recently appears to support this narrative. In our charts this week we focus on:
·       Upbeat GDP data for Q2
·       The messaging from August’s sentix surveys
·       Ebbing US unit labour cost pressures
·       Target-friendly inflation outcomes
·       Inflation expectations and oil prices
·       China’s soggy imports and PPI deflation