- Although up this past week, this crucial market rate continues to drift down after peaking in mid-2022.
- Source: The comprehensive and ever-useful FX macro newsletter. Check it out here.
Macroeconomics
Snippets on the big picture.
Small Banks are Vital for Lending
- As you think through the second-order effects of recent bank failures, these charts are worth keeping in mind.
- Small banks account for 50% of commercial and industrial (C&I), 45% of consumer and 80% of commercial real estate (CRE) lending in the US.
- Source.
Sources of Funds
- Businesses have seen sources of funds (profits and credit) start to fall according to this Bridgewater analysis.
- “As you would expect, when this happens, they cut back first on buybacks and M&A, then on capex, and last of all hiring.”
- Once the latter happens consumer spending suffers and contraction ensues.
- Though they do point out that earnings have yet to fall the required amount for this to start properly.
PMI Global Heatmap
- U.K. and US are seeing some improvement, while Germany continues deeper in the red.
- Taken from this comprehensive and user friendly newsletter – a veritable tour of everything macro. Well worth subscribing.
LinkedIn Workforce Data
- The social network and it’s 199m members is a rich source of data.
- Here is their latest workforce report.
- “Nationally, across all industries, hiring decreased 6.5% in February compared to January. This is the largest month-over-month decrease we’ve seen since April 2020, though we don’t expect declines of this magnitude to occur on a regular basis going forward. Year-over-year hiring decreased 27.9% – and hiring has now declined for 10 consecutive months“.
Decelerating Money Supply
- Money supply in developed markets keeps decelerating.
- In the US it’s in correction territory, for the first time since 2006.
- h/t: Daily Shot.
UK Housebuilding
- The UK has not built nearly enough houses according to this comprehensive report, especially when compared to other European countries.
Macro and EM Trader Interview
- “Czech Republic has one of if not the best reputation in policy-making credibility. When they signal a cutting cycle is to begin, its worth taking note.“
- Interesting interview throughout on all things EM and Macro.
Fuel Subsidies
- Despite climate change dominating global headlines – fossil fuel consumption subsidies hit a record in 2022.
- Source.
Pakistan – a microcosm
- Climate change, debt, US-China economic conflict.
- The latest Pakistani crisis has it all, a captivating read.
Bank Lending
- Reserves at small banks have dwindled, sapping a key source of lending in the US economy.
- This is linked to loan officers reporting a substantial tightening of lending standards (not a bad indicator of recession).
Credit Card Interest Rates
- US credit card debt is nearing $1trn, up $60bn last quarter.
- This is coinciding with a dramatic jump in interest rates since November 2022.
- Average rates are now above those seen in the 1980s.
- Source: Lykeion’s excellent Charts of The Month (worth subscribing).
Chinese Construction Boom
- 43% of Chinese residential homes were built after 2010.
- Let that sink in.
- “If you put this in relation to total population it implies that in a single generation, China has built enough homes to house a billion people.”
- Source: Rogoff & Yang (h/t Adam Tooze)
Demographics
- Four regions, the US, Europe, Japan, and China, make up 70% of the world’s consumption.
- In 2020 this group was home to 1.47 billion people aged 25-64, the prime demographic. By 2050 there will be 1.2 billion. “That’s an 18% decline in the working age population for the four largest economic regions.“
- The US, as seen in this chart, fares best as it sees this cohort grow. However, at slower rates than before and facing a decline as a proportion of the overall population.
- As goes population, so does long-term growth.
- Source.
Macro Vol is Persistent
- Calm begets more calm, volatility begets more volatility.
- Source.
Housing Market Vulnerability
- Chart from BCA Research plotting housing markets by (1) debt to income and (2) proportion of variable rate mortgages of total issuance.
- This should be paired with price dynamics.
House Price Blowouts?
- Chart showing change in housing valuations (based on two metrics).
- Italy, as usual, stands out as having seen very little in the way of a housing boom.
- Source: Gavekal via Daily Shot.
Hawks
- The big hawks on the FOMC lose their vote in 2023.
- Source: BAML via Hamilton Lane.
Global Value Chains
- WTO chart showing how the world has changed from 2000 to 2017 in terms of trade networks.
- Chimes with this.
Trade Tensions
- Worrying rise in fragmentation documented by IMF.
- Source.
