Macro Pulse

The global economy continues to show resilience. But beneath the surface, some increasingly uncomfortable divergences are emerging.

In this week's charts we examine six signals worth watching:

→ Interest-rate expectations have risen, but long-term bond-yield forecasts have lagged.

→ Korean equities have been falling even as growth forecasts improve.

→ US demand for conventional credit has weakened sharply.

→ Lending to non-bank financial institutions continues to surge.

→ Supply-chain pressures are re-emerging, complicating the inflation outlook.

→ Europe's old fiscal divide is reversing, with France increasingly vulnerable.

Four central banks decide policy this week, with an awkward message from the data: growth is holding up, but the sources of resilience are narrowing.

In this week’s charts:

One capital spending cycle, one stock market and a falling saving rate. The expansion is real, but its dependence on asset values and financing conditions gives central banks reason to tread carefully before tightening further.

The world economy has taken war, political uncertainty and expensive money in its stride. But resilience is not strength. Growth now leans on a narrow investment boom whose financial and physical costs are climbing. In our charts this week:

→ A market retreat that punished the year’s winners in proportion

→ Japanese exports tracking the scale of the chip investment cycle

→ British wage disinflation losing momentum

→ Housing markets flat across the advanced economies

→ Chinese investment weakness spreading past property

→ Power prices climbing in every major market

The question running underneath all six is whether this investment delivers productivity fast enough to cover what it costs. Until it does, the expansion keeps running on borrowed strength.

Markets spent the past week doubting the proposition that has carried them all year. Technology stocks fell, bonds caught a defensive bid — none of it about the macro data, which if anything improved. In our charts this week:

→ Blue Chip: growth up almost everywhere, inflation down

→ US trend growth marked up — back to where it sat a decade ago

→ US construction: data centres rising, everything else falling faster

→ Chips now dominate Chinese exports. Solar has collapsed

→ China’s surplus with the EU widens. Europe sells no more

→ What European firms use AI for: words and pictures

US equities pushed to fresh highs again this week, the dollar is firmer than it was a month ago and gold sits some way below its late-August peak. Capital is being pulled towards American investment rather than away from risk. In our charts this week:

→ US hiring has slowed, but so has the bar it must clear

→ French spreads now wider than Italy's

→ Political stability has tracked living standards since 2019

→ America's yield rise is real, Europe's is inflation compensation

→ Supply chain pressure back at 2022 levels

→ One economy holding the global expansion up

Bond markets are pricing a tightening cycle. Equity markets are arguably pricing a productivity boom. Both can't be right for long.

This week's Charts of the Week looks at why the current combination is so unusual — and what would end it.

→ Policy rates expected higher in every major economy

→ AI hiring spreading well beyond the US

→ Output accelerating, core inflation still falling

→ The global capex cycle has turned

→ Pay growth has halved while unemployment barely moved

→ Power costs climbing where the data centres are

In our charts this week:

Energy and the cost of money set the tone this week. Crude held above $100, the ten-year Treasury yield pushed through 5 per cent, and the Federal Reserve raised rates for the first time since 2023. But the tightening is not coming from corporate borrowing, and the week's data from Britain, China and Korea point to very different pressures again. In our charts this week:

The global economy is tilting back towards reflation: growth is firming while inflation proves stubborn, just as a cluster of central banks prepare to meet.

This week in six charts:

→ Global growth surprises have lately been positive and inflation surprises negative — a supportive mix for equities.

Central banks set the tone this week. After Warsh's first Jackson Hole address, and with the ECB expected to move again, the monetary tide is turning towards tightening — even as growth slows. The week in six charts: