So I go to the original sources for about 500 different datapoints each week, and report back. But not all shocks and not all surprises are equally interesting: some of them might be telling us something interesting, whilst others are just statistical tumbleweed. Here are the shocks and surprises generated this week which I think should be working their way into your assumptions.

As always with Coldwater, the emphasis is on trying to give the best understanding of how the world actually is NOW, on the assumption this gives you a better base for imagining how it is going to be in the future.

If it’s useful to you, then you know what to do. . . .

This was a week where I tracked 93 data releases, and found13 surprises but 21 shocks - a solidly negative week in other words. Europe was hit hard, Asia was hurt only mildly, and the US was neutral.

The highlights for me this week included:

The extraordinary net financial strength of the US household sector. which is allowing it to shrug off the worst of what the Fed can throw at them. Households are also enthusiastically swapping out of bank deposits into money market funds and bond holdings.

The US householders can live with the Fed, but can the rest of the world?

So the second issue showing up this week was Eurostat’s downward revisions to 4Q and 1Q GDP results, showing 0.1% qoq contractions in both quarters. Recession then, albeit mild. But with real output per worker falling sharply even as capital stock per worker rises, there’s going to be more pressure on employment in for the foreseeable future. And with liquidity preference (M1/M2) also falling, we can also expect continued domestic demand pressure.

Conclusion? Eurozone’s recession has started, but only just, and it will probably deepen from here.

And plenty more. . .

A busier week, with 107 data releases, from which I identified 17 surprises and 20 shocks. Almost half the surprises came from the, and just over half the shocks came from Asia.

To pick three strands from this quite busy week:

On Friday I tried to figure out how the US is managing to avoid a recession you’d think was being mandated by monetary tightening. And there’s something hiding in the monetary data which genuinely surprised me. Despite everything (rising interest rates, massive unrealized bond losses, deposits draining away) the banking system is still releveraging the economy - that’s right, releveraging, not deleverating.

On Thursday, I used Japan’s Ministry of Finance’s massive quarterly survey of c3.8mn private sector balance sheets and p&ls to do a Dupont analysis breakdown of Japan Inc behaviour and results. Mostly it’s steady as she goes (of course), but with Japan’s workers expenses being an ever-smaller proportion of sales.

On Wednesday, I looked at India’s 6.1% yoy 1Q GDP growth, and noted that its showing a very familiar Asian pattern of growth, driven not by consumption, but by rapid investment spending and improvement in net exports. Now, where have we seen that before?

The three things I picked out for commentary from this week’s 85 data releases were:

Stasis in the US - both capital goods spending, and household financial stress measures both keep just tracking sideways, as they have for months now. It suggests there’s surprisingly little cyclical pressures actually being felt - despite the cacophony of economic and financial commentary.

Germany’s 1Q GDP announced the country had entered recession, but when I did the numbers, it turns out Germany’s Kalecki profits are in sharp recovery. So Germany joins the US and UK in enjoying a profits recovery even as its economy struggles. In none of these countries does that look like an obvious backdrop for sustained recession. And in these countries the profits recovery share two factors - government deficits are rising once again, and the terms of trade knock felt last year is wearing off.

In the UK, April’s 8.7% yoy headline CPI read came from a 1.2% mom rise which was 2.4SDs above historic seasonal trends. Horrible, and bond markets reacted accordingly. But I have two observations. First, April’s CPI is yet another testament to the UK government’s crazy and damaging energy policies, which charge at the highest - not the lowest - marginal cost discovered by producers. Turning basic economics on its head is not usually a smart strategy. But second, the sustained rise in CPI means distributors (shops etc) have just about made up the margins they lost last year. So perhaps we’re nearer the end of this inflation cycle than the beginning.

Even though the week’s 85 data releases generated 22 surprises and 14 shocks, the overall tone was more negative that positive.

Three things stood out.

First, the monthly tally of foreign investment flows into US$ assets continues to defy expectations that the dollar is losing its position as a reserve currency. In the 12m to March, foreign purchase of $ securities rose to a record $1.31tr, with a further $119bn coming in as $ deposits. Yes, those were eroded by $70.7bn in March and $11.5bn in Feb, but that shows only that foreign depositors are no happier with the US banking system than domestic depositors.

Second, I looked at the continued and now quite dramatic erosion of Japan’s Kalecki profits - down 8.1% qoq and down 25.1% yoy in the 12m to March. In nominal terms, these profits have sunk to just 14% of GDP - losing touch with the pre-pandemic l/t average of 20.6%. With profits evaporating like this, it’s difficult to justify TOPIX levels. At the very least, there must be some expectations of a powerful profits recovery in the near future.

Third, China’s April economic data dump told us fairly clearly that the moment China eases up on the credit accelerator, things begin to slow. To summarise, there’s very little evidence of positive cyclical momentum yet. If that means China has to roll back onto net external demand, that’s difficult too: if you take G3 import demand as an indicator, its underlying sequential momentum is now as negative as anything we’ve seen in the last decade (ex the immediate onset of the pandemic).

Not a fabulously busy week - only 83 data releases generating 10 surprises but 17 shocks. But those shocks were enough to push the Coldwater global shocks & surprises index into negative territory for the first time since February.

The worst news came out of the US, and there are two things we need to look at. First, late yesterday, we got April's bank credit numbers - which were pretty scary. Total credit was still up 2.5% yoy, but the 0.6% mom contraction was 4.4SDs (!!) below historic seasonal trends. Banks are still dumping securities as fast as they can - down 9.9% yoy, but they still account for over 30% of total credit. They literally can't get rid of them fast enough. Loans are still growing, 9% yoy, and up 0.2% mom also - but I doubt this can last.

So do American consumers and investors. The May consumer sentiment index dropped 5.8pts, with outlook down 11.7% to the worst since July 2022. 12m economic expectations dropped 23% mom, and long term expectations dropped 16%. Then there's the IBD/TIPP survey of economic optimism, which dropped 12.2% mom to 41.6 - that's the 21st consecutive sub-50 result, and the worst since Nov 2022.

I put in a bit of effort on inflation this week, and came to a couple of conclusions. First, although we've got used to falling yoy comparisons, for the US, the test will really come in July, when the bases of comparison turn much less friendly. The best we can expect from pretty much any extrapolation of trends, is stabilization around 4% - but most trajectories paint a reacceleration to 5%+ toward the end of the year. To get inflation back below 4% will at this point take a complete shattering of trend. And that, of course, may yet be exactly what happens, given the collapse in US money and credit data.

Much the same applies to my global CPI index - we'll head into stabilization at around 3.5%-4.5% levels in mid year, and from there. . . . well, you'd expect inflation to start rising again . . . . unless trends are completely shattered. Which they might be.

Finally, I want to leave you with some positive comment, and to my absolutely enormous surprise, it comes from the UK, where I did the sums for Kalecki profits for the 12m to March, and found profits were up 15.2% qoq and up 29.3% yoy to a record high. As a % of GDP its back almost to its pre-covid normality. It seems bizarre and counterintuitive, until you reckon on an expanding budget deficit (positive for profits), a falling trade deficit (positive for profits), and modest positive contributions from net investment and household dissaving. I have to say, I had no inkling or expectation of this result, but it does place the UK in a far better cyclical position than I'd previously thought.

Later than usual this week (I was watching the coronation, rather than recording. . . )

I looked at 106 data releases, and got back 22 surprises and 17 shocks, with the US v positive, Asia positive, and Europe negative. Within that I highlighted:

* The surprising strength of US April heavy-truck sales - a ‘not-a-recession’ indicator.

* Dreadful March monetary data from the Eurozone and US. March seems to be the month when the deterioration in conditions is no longer being set by the Fed or ECB, but rather, the damage is now concatenating and generating its own negative momentum. That’s very bad news.

* Surprisingly, however, that doesn’t (yet) seem true of the UK, where surprisingly resilient demand data echoes the comparatively modest deterioration in monetary conditions.

* Germany’s 10.7% mom fall in March factory orders came under inspection: earlier worries that Germany’s numbers were being propped up by channel-stuffing operations in the Eurozone look more likely now.

* I also ran the numbers for public debt sustainability for Italy, France and Spain. Unequivocally bad news for Italy, but also a real threat now for France unless it can rein in the dramatic deterioration in its current fiscal trajectory. Good news for Spain, though: its finances finally begin to look sustainable.

I didn’t find the time to spotlight the near-collapse in US March money M2 numbers, so added a comment here: M2 fell 4% yoy, with a monthly movt 2.3SDs below trend. Don’t kid yourself this is about deposits fleeing to money market funds, because MMFs are counted in M2. Rather, this is a quite genuine credit squeeze migrating from banks’ securities holdings to broader lending patterns.

Elsewhere, I talked about:

* The US’s ‘mixed’ 1Q GDP result;

* The stagnation of US core capital goods orders and shipments, and its likely continuation;

* The extremely surprising 8% qoq rise in 12m US Kalecki profits seen during 1Q;

* The regular monthly over-statement of the UK’s public sector net borrowing;

* The IMF’s faulty and damaging perorations on calculating the ‘natural interest rate’.

All this, and remember . . . . “no synthesizers”.

This week I looked at:

China’s numbers for March and for 1Q;

Taiwan’s vanishing export orders (related);

Eurozone’s bigger than expected fiscal stimulus;

UK’s gas-fired inflation disaster;

UK’s deceptive labour market ‘strength’.

Two themes from this week’s data: China, and US inflation.

China’s 1Q data didn’t shape up to describe a dramatic recovery. Banks are certainly lending, but those loans are just being banked, whilst M1 growth continues to stall.

More importantly, the details of 1Q’s imports emphatically do not describe an industrial economy sucking in the commodities it would need to feed an industrial recovery. Quite the reverse - imports of key feedstocks and components are falling sharply. Rather, imports are being made simply to satisfy early domestic demand now.

The second theme is about US inflation. Here I focus on the terms of trade between CPI and PPI - ie, the degree to which cost-price rises are passed on to consumers. And the news here is that by March those terms of trade are back to near pre-covid levels. So unless there’s real wages pressure - and there isn’t yet - US inflation has peaked. Given the continued money and credit squeeze, I’m penciling in actual deflation in the US next year.