- Europe and the US, though both clocking high inflation, are facing different challenges.
- This is best demonstrated by the evolution of the difference between headline and core inflation in each region.
- h/t Daily Shot.
Macroeconomics
Snippets on the big picture.
Party Congress Reports
- Worryingly, “security” has overtaken “economy” as the key concern at the Chinese Party Congress.
- h/t Daily Shot.
Developing Countries and Trade
- The participation of these countries in global value chains (GVC) has peaked.
- Nice read by Martin Wolf in FT.
Mortgage Product by Interest Variability
- The world’s mortgage markets are very different.
- Data is from 2010 and is for flows not stock.
- Source.
Semiconductor Cyclicality
- “Semiconductor share price performance relative to the market leads the ISM manufacturing by six months. Recent relative weakness in semiconductor markets is consistent with our view that lead indicators have further to fall. Historically, we would look for sector share prices to trough concurrently with lead indicators.“
Fed Crib Sheet
- As the US Economy slows and there are signs inflation might be rolling over, what the Fed will continue to do becomes very important for the rest of the cycle.
- This is a really useful crib sheet of what the various Fed speakers have been saying organised in an easy to use way.
- It is produced by fx:macro – a really comprehensive newsletter for those who want to get a good pulse on what central banks are up to.
Demographics
- Most market analysis is focused on the cycle but it is always worth thinking about the demographic situation.
- h/t Lykeion.
UK Mortgage Market
- UK residential mortgages have increasingly shifted to 5-year products.
- Despite this, over 1.2m products with fixed rates 2.5% and below are set to expire in the next 12 months.
- From a nice chart pack on the UK housing market by BuiltPlace.
Government Debt Maturity
- Chart of average term to maturity of the outstanding stock of government debt.
- As interest rates rise around the world and fiscal tools are being used to cushion the energy shock, it is worth keeping these numbers in mind when assessing country risks.
- QE has actually distorted the usability of this metric as described so well in this OBR piece.
- NB Mix of OECD and IMF data.
Dollar Stress
- These types of charts can be a good guide.
- Dollar spikes often lead to some form of crisis.
How is the UK government handling the economy?
Inflation Expectations
- Are starting to come back in close to Fed target.
- Something to ponder.
Euro and Chinese Data
- The Euro area export powerhouse depends heavily on the Chinese economy.
- So Chinese TSF (Total Social Financing), which is now stabilising/turning up, is a pretty good indicator of Euro strength.
UK Linkers Backfiring
Italy
- Italy shows very little improvement sine 2011, across multiple economic measures.
- h/t Daily Shot.
Cost of Sanctions in Russia
- The first comprehensive economic analysis measuring the impact of sanctions on economic activity in Russia.
- The team relies on “using private Russian language and unconventional data sources including high frequency consumer data, cross-channel checks, releases from Russia’s international trade partners, and data mining of complex shipping data”.
- Results are grim – “From our analysis, it becomes clear: business retreats and sanctions are catastrophically crippling the Russian economy.”
UK Consumer
- Asda income tracker is painting a dire picture for the UK consumer.
- Inflation is squeezing and it could get worse later this year.
- Other worrying signs include spike in demand for pawnbrokers.
New Home Sales
- This important variable is now rolling over.
- And, according to this chart, it likely has more to go.
- h/t Daily Shot.
Return of Yield
- For the first time in a decade, the majority of fixed income assets yield 4% or above.
- NB “The bars show market capitalization weights of assets with an average annual yield over 4% in a select universe that represents about 70% of the Bloomberg Mulitiverse Bond Index.”
- Source: Blackrock
Inflation Expectations
- Fascinating chart from BIS on how survey inflation expectations shift over time.
- As they say – first you get skewness, then variance, then both decline and the mean shifts.
- Temporary shocks become persistent in expectations.
- This happened in 1960s into 1970s in the US and 2010s in Brazil (see page 11 of deck).
