Macro Pulse

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

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 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

Read the full commentary and see the charts here: https://haverproducts.com/charts-of-the-week-2023/

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

Lingering concerns about US debt ceiling negotiations have left financial markets on the back foot over the past few days. But incoming economic data this week have not helped. With that in mind our charts this week offer some perspectives on the following factors:

·         Market expectations for Fed policy

·         Global growth surprises and copper prices

·         Economic growth in Asia’s industrialised economies

·         Semiconductor inventories

·         Inflation and energy prices

·         Core inflation (and energy prices)

Financial markets were a little unsettled earlier this week but heightened optimism about the willingness of US politicians to raise the US debt ceiling has calmed some fears. Incoming economic data, however, have taken a turn for the worse and there is arguably now mounting evidence to suggest that tighter monetary policy is beginning to exact a heavier toll. Against this backdrop, our charts this week home in on:

·         The US yield curve

·         Private sector deleveraging

·         China’s disappointing reopening phase

·         Japan’s economy in Q1

·         The UK labour market

·         Inflation, profits and sales

This week’s key release, namely April’s US CPI data, more or less met market expectations while on the policy front the Bank of England matched forecasts too in hiking the Bank rate by 25bps. Otherwise the stability of the US banking sector and debt ceiling politics were a couple of themes for investors to additionally focus on.

Financial market jitters have resumed in recent days in part because of renewed concern about funding pressures in the US banking sector. Forward-looking US economic data have additionally disappointed expectations and continue to flag non-negligible risks of a recession in the period ahead.

Concerns in financial markets about the health of the US and European banking sectors have continued to ebb in recent days leaving more familiar macro factors to re-take centre stage. The focus this week in particular has been on the Q1 US earnings season but some stronger-than-expected GDP data from China and another positive inflation surprise from the UK were also in the limelight.