Macro Pulse

Close to completion?

The downgrade of US government debt by a credit rating agency has been a big driver of this week’s financial market gyrations. The decision by the Bank of England to lift policy rates by 25bps (with hints of more to follow) coupled with firmer-than-expected private sector payrolls data from the US also served as a reminder that central banks may not yet have completed their tightening cycles. In our charts this week we look at:
·         The central bank consensus
·         US financial market conditions
·         Service sector inflation in the euro area and US
·         Global economic policy uncertainty
·         World trade and commodity market activity
·         Rice prices

Energy matters

Central banks have dominated the financial headlines over this past week but, with the possible exception of the BoJ, they don’t appear to have spawned any big policy surprises so far. That said their communications continue to suggest a readiness to calibrate monetary policy at a more restrictive level if the incoming dataflow exceed their expectations. With this in mind our charts this week home in on the following factors:
·         Market expectations for Fed policy
·         Slowing money supply growth in the euro area
·         The revival in US and European consumer confidence
·         Goods and services inflation in advanced economies
·         Energy prices in advanced economies 
·         Global energy consumption sources  

Rising in the West, falling in the East

The mood in financial markets has remained upbeat over the past few days partly thanks to some stronger-than-expected US earnings reports. Last week’s weaker-than-expected inflation data have also continued to lift hopes that a hard landing scenario can be avoided. As we illustrate in our charts this week, however, the incoming data from elsewhere has not been as auspicious. More specifically this week we focus on
US data surprises and equity markets
China’s cyclical and structural challenges
Still-high UK service sector inflation
Ebbing wage growth in the US and Europe
Some evidence for re-globalisation
Refugee flows in high income economies 

Signs of normalisation

This week’s weaker-than-expected US inflation data coupled with tentative evidence suggesting that labour market activity may be cooling have driven soft landing scenarios into the ascendancy once again. With this in mind our charts this week home in on the following themes:
·       The decoupling of the global growth consensus
·       The decoupling of the inflation consensus
·       The importance of energy prices
·       The slowdown in the UK labour market
·       Still-low estimates of r-star in major economies
·       Still-high estimates of output gaps in major economies

Are we nearly there yet?

Financial markets have been rattled both by more hawkish communications from central banks and some much firmer-than-expected US labour market data in recent days. The consensus that monetary policy tightening cycles were close to completion and that soft landing scenarios were plausible is now being more actively challenged. In our charts this week we drill into the following issues:
·       The central bank policy consensus
·       The messaging from the US yield curve
·       Negative global inflation surprises
·       Receding capacity tensions in US manufacturing
·       Ebbing near-term inflation expectations in the euro area
·       The inflation messages from Japan’s Tankan survey

Charts of the Week: Growth and policy decoupling

Financial markets have been a little more unsettled in recent days as recession fears have resurfaced again in several major economies. Those fears have been amplified by remarks from central bankers suggesting that further monetary policy restriction is likely. Still, most gauges of financial market stress have not signalled any significant instability in recent weeks. In our charts this week we home in on:
·       The divergence between US and euro area data surprises
·       Ebbing rates of core CPI inflation in Canada
·       Recent UK financial market trends
·       Some evidence of slower labour market activity
·       Weaker inflation expectations in the euro area
·       Household savings trends in the US

Charts of the Week: The potency of policy

A recurring theme in the dataflow over the past week concerns the potency of monetary policy. Another positive CPI surprise from the UK and a 50bps hike from the BoE have, in particular, offered a stark reminder that central banks are struggling to calibrate monetary policy at an appropriate level. Against that backdrop our charts this week home in on the following themes:
·         The re-renewed vigour in the US housing market
·         Restraints on UK household purchasing power
·         UK food and energy price inflation
·         The contraction in narrow money growth in the euro area
·         The liquidity slowdown in China
·         The weakness of South Korea’s export growth

Unveiling this Week’s Charts: Pausing, peaking or pursuing?

Central banks have stolen the limelight over the past few days but with policy shifts that reveal stark differences - and perhaps greater disagreement - about the outlook for their respective economies. Receding headline inflation pressures, in the meantime, has been a key theme in the dataflow. But stubborn core inflation and still-tight labour markets are still clearly leaving central banks nervous about the calibration of monetary policy. We will be picking up on these issues in a forthcoming webinar about inflation next week.
In the meantime our charts this week focus on:
The stance of the Fed’s monetary policy
Financial markets and interest rates
Global inflation expectations
US inflation drivers
The rigidities in the UK labour market
China’s disappointing reopening phase

Fading supply chain pressures, inventory imbalances and ebbing PPI inflation

Financial market sentiment has continued to improve in recent days in part due to the removal of uncertainty surrounding the US debt ceiling. However, as some of our exhibits this week suggest, the world economy is not yet out of danger. Our charts specifically home in on the following factors:
Fading global supply chain pressures
Weaker inflation in the euro area
The slowdown in China’s trade
The fragility of investors’ growth expectations
US inventory imbalances
Asia’s transition to a Green economy
Read the full commentary and see the charts here: https://haverproducts.com/charts-of-the-week-2023/

Global vulnerabilities, inflation, credit and labour markets

The world economy’s underlying vulnerabilities have been in sharp focus over the past few weeks, but more deep-seated wounds with longer-lasting scars have been avoided, at least for now. Still, the avoidance for now of bigger wounds does not mean that these vulnerabilities have been erased.
In our charts this week we focus on:
Negative global growth surprises
The recent strength of the US dollar
Slowing euro area inflation
Weaker bank credit growth in the US and Europe
Mixed messages from the US labour market
Increased youth unemployment in China