Politics has continued to dominate the headlines in recent days and will doubtless remain a big focus in the immediate weeks ahead. In the background, however, incoming data have suggested the outlook for the world economy has been darkening (chart 1) probably because more restrictive policy settings are now more forcibly weighing on aggregate demand (charts 2 and 3). However, still-sticky service sector inflation (chart 4) could postpone any moves to (further) ease the stance of monetary policy not least if traded goods price inflation now begins to stir (chart 5). This week’s evidence suggesting robust demand for semiconductors has continued to support global trade also serves as a reminder that there are some tailwinds behind the world economy at present that are countering policy-related headwinds (chart 6).
Introducing
Andrew Cates
in:Our Authors
Andy Cates joined Haver Analytics as a Senior Economist in 2020. Andy has more than 25 years of experience forecasting the global economic outlook and in assessing the implications for policy settings and financial markets. He has held various senior positions in London in a number of Investment Banks including as Head of Developed Markets Economics at Nomura and as Chief Eurozone Economist at RBS. These followed a spell of 21 years as Senior International Economist at UBS, 5 of which were spent in Singapore. Prior to his time in financial services Andy was a UK economist at HM Treasury in London holding positions in the domestic forecasting and macroeconomic modelling units. He has a BA in Economics from the University of York and an MSc in Economics and Econometrics from the University of Southampton.
Publications by Andrew Cates
Global| Jul 18 2024Charts of the Week: Walking a Tightrope
Markets have become increasingly optimistic this week about a potential interest rate cut by the Federal Reserve in September following some dovish remarks from Fed Chair Powell. Meanwhile, the IMF has maintained that the outlook for the world economy remains broadly balanced, a message that chimes too with the latest Blue Chip survey of economic forecasters (chart 1). That being said, incoming data from many major economies, including China, have disappointed to the downside much more frequently in recent days (see charts 2 and 4) keeping recession risks elevated (chart 3). And while investors in big US technology companies have, until very recently, brushed off those risks, buoyed by optimism about the productivity-related potential from AI, broader global equity market gyrations equally suggest heightened concern. Still, aside from AI’s-productivity potential, there are grounds for optimism about other areas of the global economy, including India (chart 1) and South-East Asia (chart 6). Latest data and forecasts additionally suggest the near-term outlook may be brightening a little in the UK (charts 1 and 3).
by:Andrew Cates
|in:Economy in Brief
Global| Jul 03 2024Charts of the Week: Political Melodies and Macroeconomic Harmonies
We will not be publishing ‘Charts of the Week’ and our accompanying podcast next week.
A soft landing scenario for the world economy, driven by moderating global growth, and aided by disinflationary pressures, has remained the base case in financial markets in recent weeks. A recent – and prospective – loosening of monetary policy by the world’s major central banks has also been reinforcing the view that a severe economic downturn can be avoided (see chart 1). Writing ahead of the non-farm payroll report on Friday, this week’s dataflow from the US and the euro area offered some mixed messages. The US labour market, for example, still appears to be quite tight judging by May’s data for job vacancies and turnover (chart 2) while June’s ISM surveys suggest the economic activity more generally could now be slowing much more sharply. Service sector inflation in the euro area, in the meantime, still appears to be quite sticky, judging by June’s flash CPI data, and possibly because regional labour markets also remain relatively tight (chart 3). On a brighter note, latest data from South Korea have reinforced the idea that global demand for new AI infrastructure is still solid (chart 4). Japan’s exporters have also been in vogue in recent times, partly thanks to a weak yen (chart 5). Finally, and just after the UK election, but ahead of the second round of the French election this weekend, financial markets have also been dancing to political melodies in recent days. However, a lack of domestic macroeconomic harmony, and much uncertainty about how politicians will respond, remain key sources of downside risk in the period ahead (see chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Jun 27 2024Charts of the Week: Global Growth Concerns
Growing concern about the economic ramifications from France’s upcoming election have been weighing on risk appetite in European financial markets in recent weeks (see chart 1). But the outlook for the broader world economy has also been arguably taking a turn for the worse. Evidence is certainly mounting that global growth momentum is slowing (see charts 2 and 3), that financial conditions are tightening (charts 4 and 6), and that central banks may now be more hesitant to loosen monetary policy in the period immediately ahead (chart 5).
by:Andrew Cates
|in:Economy in Brief
Global| Jun 20 2024Charts of the Week: Beyond the Headlines
Soft landing narratives have remained in vogue in financial markets in recent weeks, partly due to weaker-than-expected US inflation data (see chart 1). In contrast, this week’s stronger-than-expected UK service sector CPI inflation data unsettled investors and probably played a role in the Bank of England's decision to keep interest rates unchanged (chart 2). European investors have also been unsettled by the political instability in France and its broader regional implications (chart 3). Meanwhile, property market instability continues to impact China’s economy, as evidenced by this week’s slew of economic data (chart 4). On a more positive note, Japan's latest trade data indicated healthier economic conditions, partly due to firmer export growth (chart 5). That improvement can be attributed, in part, to sustained demand for semiconductors, which also acts as a reminder that soft landing narratives have additionally been bolstered by the productivity potential of Artificial Intelligence over the past few months (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Jun 14 2024Charts of the Week: Energising the politics
A debate about the precise timing of a Fed rate cut has continued to dominate financial market sentiment in recent days. A nod from the Fed acknowledging progress in fighting inflation, coupled with weaker-than-expected CPI data, has, in particular, kept hopes of a soft landing for the US economy alive (chart 1). Elsewhere, the timing of a potential rate cut by the Bank of England has also been actively discussed, following a downbeat batch of UK economic data (chart 2). Meanwhile, politics has grabbed headlines again, particularly in France, following President Macron's decision to call a snap election (chart 3). More generally, political instability in Europe has arguably increased due to growing hostility from fringe parties regarding the economic implications of the global energy transition (chart 4). Additionally, European politicians have shown growing hostility toward China’s industrial policy, which has coincided with lacklustre trade data between both regions (see chart 5). In the background, and returning to Fed policy, the US dollar has continued to strengthen, which could have some consequences for global trade growth in the period ahead (see chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Jun 06 2024Charts of the Week: Politics and Economics
A further batch of disappointing US growth data, coupled with policy rate cuts from the Bank of Canada and the European Central Bank, have continued to re-energize easing narratives in financial markets over the past few days. But politics has also been grabbing the headlines thanks to some unexpected election results from e.g. India and South Africa. In our charts this week, we delve into some of the globally-rooted macroeconomic factors that explain why incumbent political parties have struggled to gain renewed traction with their electorates in recent months (see charts 1 and 2). Given that some of these relate to consumer prices and interest rates, near-term relief could be forthcoming if recent declines in global oil prices are sustained (chart 3). However, the decline in oil prices might indicate a broader downturn in the world economy, a message that finds an echo in this week’s disappointing US ISM manufacturing survey (chart 4). Shifting focus, we also examine this week’s firmer-than-expected wage data from Japan and its implications for the BoJ (chart 5). Finally, we highlight China’s electric vehicle production, given the sector's significance for the world economy and its prominent role in the industrial policies of several nations (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| May 31 2024Charts of the Week: Oil Consuming
Expectations about when exactly central banks will begin an easing cycle have remained a dominant driver of financial market trends in recent weeks. But in the background to this, heightened enthusiasm for the rollout of Artificial Intelligence infrastructure, reinforced by stellar corporate earnings reports, have additionally contributed to an upbeat mood. In our charts this week we review the messages from the US and European consumer confidence reports that have been released over the past few days (chart 1). Key messages from those reports concern the big role that energy price fluctuations have played for confidence in recent months (chart 2). European consumers also now seem much happier, a message that chimes with the message from this week’s broad money supply data for the euro area as well (chart 3). Labour market activity, nevertheless, has continued to slow in many of the world’s major economies according to high frequency data, a factor that could impinge on the outlook for consumer spending going forward (chart 4). Taking a step back from cyclical matters, we look next at the deterioration in the UK’s net direct investment position in light of the heavy focus on the economy’s predicament during the current general election campaign (chart 5). Finally, and against current global concerns about China’s industrial policies, we look at some sector-specific export trends in China and the recent pace of deflation in its export prices (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| May 23 2024Charts of the Week: The Chips Are Up Again
In the absence of top-tier economic data, corporate earnings reports, particularly from the technology sector, have played a crucial role in shaping financial market sentiment over the past few days. And some very impressive revenue gains for companies that are producing AI-friendly semiconductors certainly have some macroeconomic parallels, as we illustrate in our charts this week via the equally impressive growth in South Korea’s semiconductor exports (see chart 1). Another noteworthy trend this week is the recent sharp decline in measures of European policy uncertainty (see Chart 2), which may have contributed to the recent improvement in UK economic data (see Chart 3). The improving economic data and the series of positive surprises within the UK might have factored into the timing of the Prime Minister Sunak’s decision to call an election on 4th July. However, persistent UK service sector inflation remains a challenge, as highlighted by the latest CPI report for April (see Chart 4). Additionally this week, we note the sharp rise in copper prices in recent weeks, a trend potentially linked to the rollout of AI technology, though supply-side disruptions are an equally likely cause. The green energy transition could also be impacting copper demand, which chimes with some data on renewable energy sources in our final exhibit this week (see Chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| May 16 2024Charts of the Week: Reversal of fortune
A Fed easing narrative has been re-energized over the past few days largely thanks to a slightly weaker than expected US CPI report this week but, more generally, because of a battery of weaker-than-expected US data over the past couple of weeks. In our charts this week we examine the latest Blue Chip survey of economic forecasters and the corresponding signals suggesting that the light is now shining a little less brightly on the US economy (see chart 1). The same survey suggests the outlook is shining a bit more brightly on Europe’s economies, albeit from a position of relative darkness, and as equally indicated by the GDP growth outcomes for Q1 2024 (Chart 2). Germany, however, continues to be a notable underperformer, which prompts us to examine the latest data on industrial production across several major euro area economies and the persistent evidence of underperformance (Chart 3). Next, we turn our attention to this week's UK labour market data, which increasingly suggest that this market is loosening (Chart 4). We then shift focus back to the US economy, highlighting one of the reasons for its relative strength in recent months —namely, higher levels of immigration (Chart 5). Finally, we address inflation issues, and specifically the relatively rapid pace of global food price inflation in recent years (Chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| May 09 2024Charts of the Week: Inflation Still Holds the Key
Last week's softer-than-expected US data releases have sparked renewed hopes that the Federal Reserve may initiate an easing cycle in the coming months, and, in doing so, have reignited investors' appetite for risk. This week, our charts explore the messaging from some of those US data releases (see chart 1). We also examine the signals from this week’s final composite PMI data, and particularly how weaker US growth momentum currently contrasts with stronger growth momentum in many other major economies (chart 2). With inflation dynamics likely one of the drivers of this relative growth divergence, we next explore how a series of positive inflation surprises in the US recently contrasts with negative inflation surprises elsewhere (chart 3). Weaker oil prices in recent days may provide some relief to the US inflation outlook in the period ahead (chart 4), as could the further easing of global supply chain pressures that’s been signaled by latest data from the New York Fed (chart 5). Finally this week, and pivoting to Asia, we examine recent currency trends in some of the region's major economies (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| May 02 2024Charts of the Week: Policy Surprises Versus Data Surprises
Lingering concerns about the US Fed's inclination to lower interest rates in coming months have continued to unsettle financial markets over the past few days. That said, comments from Fed Chair Powell after this week’s FOMC meeting have calmed some of those nerves. In our charts this week we delve into the latest Blue Chip consensus on policy rates across the world’s major economies (chart 1). We also compare market expectations for US policy rates, inferred from 2-year Treasury yields, with a trend toward more negative US data surprises in recent days (chart 2). In addition we contrast that more negative US growth trend with the relative resilience of the euro area dataflow and some recent downward pressure on the EUR/USD exchange rate (chart 3). Turning to Asia, we assess Japan's economy with a focus on some recent disappointing retail sales data (chart 4), and provide insights into China's economic activity through aircraft movements at Beijing Airport (chart 5). Finally, and with a nod to climate change and its impact, we look at reduced water levels on the Panama Canal and how these contrast with above-average land and sea temperatures over the past few years (chart 6).
by:Andrew Cates
|in:Economy in Brief
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