Financial markets have been pricing in tighter-for-longer monetary policy settings in recent weeks thanks to some firmer-than-expected US data. And this is now reversing the shift from a hard to a soft landing consensus that had begun to form in January. Our charts this week, however, turn the focus back onto some of the more positive trends that have established themselves in recent times. We look, for example, at falling European energy prices (in chart 1), ebbing core inflation rates (in chart 2), and at an arguably more realistic consensus for US profits and interest rates (in chart 3). We then hone in on the punchy US fiscal policy impulse that’s being enacted for the coming years (in chart 4) and how this (relative to elsewhere) might be affecting interest rates and the US dollar (in chart 5). Finally - and from a longer-term perspective - we throw some light on how costs of various renewable energy sources have been falling over the past few years (in 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| Feb 17 2023Charts of the Week (Feb 17, 2023)
The shift toward a soft landing consensus that had been in vogue since the start of this year has suffered some setbacks over the past two weeks. Last week’s strong US jobs data combined with this week’s firmer-than-expected US CPI report have been the principal challenges to that view. Still-hawkish communications in the meantime from a number of central bankers have additionally thrown some salt onto the wounds. Our first two charts this week home in on the recent evolution of consensus growth forecasts for 2023 and how these contrast with high-frequency indicators of economic activity. China’s re-opening is another closely-watched theme at present and we offer some perspectives on this in our third and fourth charts. Then, returning to the US, we contrast indications about recession risks from a couple of indicators in our fifth chart. And finally we make a nod to this week’s UK labour market report and its suggestion that wage pressures could now be easing, in our sixth chart.
by:Andrew Cates
|in:Economy in Brief
Global| Feb 10 2023Charts of the Week (Feb 10, 2023)
Last Friday’s much stronger-than-expected US jobs report has set the tone for financial markets in the past few days. But it has not yet meaningfully derailed the more upbeat narrative concerning inflation and monetary policy that’s been in vogue since the start of this year. Our first few charts this week chime with the idea that inflation is rolling over and that tighter policy settings are taking a toll. Business sentiment data, however, are now exhibiting an unexpected improvement as we illustrate in our fourth chart. This improvement stands in contrast to harder (albeit more backward looking) data for industrial production, which we underscore in our next chart. Lastly the UK has been a notable underperformer on the industrial production front in recent years, so we dig a little deeper into its relative performance in our final chart this week.
by:Andrew Cates
|in:Economy in Brief
USA| Feb 03 2023Charts of the Week (Feb 3, 2023)
Central banks have been dominating the financial headlines in recent days but appear – so far – to have generated few big surprises. In the meantime a trend toward weaker activity and ebbing inflation has remained in vogue according to this week’s data but with a small bias nevertheless toward firmer-than-expected growth. Our charts this week offer some further perspectives on these themes with a focus on central banks in our first two charts. We then home in on US wage pressures and global labour market activity in, respectively, our third and fourth charts. The ECB’s tightening campaign and its impact on the European banking sector is the focus in our fifth chart. And in our final chart we look at the outperformance of GDP growth in the euro area in 2022 relative to the US and China.
by:Andrew Cates
|in:Economy in Brief
Global| Jan 27 2023Charts of the Week (Jan 27, 2023)
The mood in financial markets has continued to improve over the past few days and investors remain a little more upbeat about the outlook for the world economy than they were toward the end of last year. Our charts this week offer some further perspectives about the reasons for, and response to, this improvement. In our first two charts, for example, we look at US and broader global data surprises and how the US Treasury market has responded to these. Then, on the inflation front, we provide an update on supply chain pressures and how these have been affecting inflation in our third and fourth charts. Clearly a key factor that’s been amplifying supply chain pressures in recent months concerns labour markets. So, in our final two charts, we offer some colour on, respectively, labour market shortages in the UK and labour force participation rates in Japan.
by:Andrew Cates
|in:Economy in Brief
Global| Jan 20 2023Charts of the Week (Jan 20, 2023)
The messaging from this week’s raft of economic data has painted an increasingly familiar picture of the global economic scene. Headline inflation is finally easing off its highs in large part thanks to ebbing energy prices. But last year’s high levels of inflation and the global trend toward a tighter monetary policy that they sparked are now exacting a heavier toll on economic activity. Our charts this week drill into how financial markets have been responding to these themes with a spotlight on the US dollar (chart 1). With the latter in mind, we illustrate too the recent stickiness of core inflation in several advanced economies compared with the United States (chart 2). We also illustrate how US capex has been holding up surprisingly well, at least so far (chart 3). On the policy front and with this week’s unchanged BoJ decision in mind, we highlight the correlation between JGB yields and the central bank’s bond-buying initiatives (chart 4). As for China, and notwithstanding a much firmer-than-expected smattering of Q4 data earlier this week, we highlight how credit growth has continued to decelerate in recent months (chart 5). Finally and with a new energy database from Haver Analytics in mind, we look at the share of renewables in the power generation of several major economies (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Jan 13 2023Charts of the Week (Jan 13, 2023)
Heightened optimism that inflation has turned a corner and that central banks will shortly pivot away from restrictive monetary policies has been a dominant theme in financial markets since the turn of the year. Our first two charts this week certainly underscore the importance of inflation expectations to the economic and financial market outlook at present. And this week’s economic data have, on the whole, also chimed with the idea that the global inflation has now peaked as we illustrate in our third and fourth charts. China’s re-opening and its impact on the world economy is another big macro theme for investors at present and we look at what high frequency indicators are revealing about its economic activity at present in our fifth chart this week. Finally, and with China’s economy partly in mind, we look at some data for world trade flows in our final chart this week and what they reveal about a de-globalisation of the world economy.
by:Andrew Cates
|in:Economy in Brief
Global| Dec 02 2022Charts of the Week (Dec 2, 2022)
Incoming economic data have continued to paint a more settled picture of the world economy over the past few days and especially on the inflation front. Of most note were a weaker-than-expected batch of preliminary inflation data from Europe for November, which have added some thrust to the idea that the global inflation cycle has now peaked (see charts 1 and 2). Incoming survey data, however, attest to still-tight labour market conditions which ought to perhaps temper expectations about an imminent pivot toward looser monetary policy (see chart 3). In the meantime, downside risks to the outlook in China have accumulated thanks to enduring challenges with COVID and a recent flare-up of social instability (see charts 4 and 5). Finally, we note that geopolitical risks appear to have been fading of late relative to outsized levels from earlier this year (see chart 6).
by:Andrew Cates
|in:Economy in Brief
- Global| Nov 24 2022
Charts of the Week (Nov 24, 2022)
_We have published this shorter edition of Charts of the Week earlier than normal owing to the US Thanksgiving holiday on Thursday. _ Investors have, on the whole, been taking a more positive view about the outlook for the world economy in the last couple of weeks in part because of evidence that the US inflation cycle may be turning. But there have been other fundamental factors that have – at the margin – contributed to a more upbeat market mood. For example, a sharp retreat in oil prices in the past few weeks – and their impact in lowering inflation expectations – ought to be good news for global growth as we underscore in our first chart this week. Incoming economic data have also been surprising the consensus on the upside more frequently in recent weeks, a trend that we highlight in our second chart. And finally, hopes have also risen that China may enact much less restrictive policies toward the COVID pandemic, which might unleash some pent-up demand, a point that we make via our final chart this week.
by:Andrew Cates
|in:Economy in Brief
- Global| Nov 18 2022
Charts of the Week (Nov 18, 2022)
This week our first two charts home in on the enduring trend toward weaker growth expectations and rising inflation expectations that was featured in the November Blue Chip survey of economic forecasters. Despite that poor fundamental backdrop, risk assets in financial markets have nevertheless rallied in recent days thanks in large part to some weaker-than-expected US inflation data for October. And our next two charts underscore how important the evolution of US inflation – and monetary policy – could be in sustaining that risk rally in the period ahead. China's economy too has been in the spotlight this week thanks to a barrage of weaker-than-expected data, some of which we highlight in our fifth chart. Finally, we zoom in on Japan's economy and its weaker-than-expected Q3 GDP report which was also published this week.
by:Andrew Cates
|in:Economy in Brief
Global| Nov 11 2022Charts of the Week (Nov 11, 2022)
When (or indeed whether!) central banks will pivot toward more growth-friendly monetary policies remains a key question for financial markets at present. Our charts this week drill into some of the key issues with some perspectives on US CPI data (chart 1), the stance of US monetary policy (chart 2), Europe's business cycle position (chart 3) and global supply chain pressures (chart 4). There are seemingly no major inflation challenges in China at present, one reason for which is evidenced in our fifth chart this week. Finally, as policymakers meet in Egypt to discuss climate change challenges, our final chart this week offers some colour on global greenhouse gas emissions.
by:Andrew Cates
|in:Economy in Brief
- Global| Nov 04 2022
Charts of the Week (Nov 4, 2022)
While the US Fed's decision to lift interest rates by 75bps this week was widely expected, subsequent comments from Chair Powell have led financial markets to anticipate more hawkish policy (than previously anticipated) in the period ahead. As our first three charts this week suggest, however, there has arguably already been a big change in the inflation-generating capacity of the world economy in recent months which is magnifying the risks of a policy error. An acute dilemma is certainly being confronted at present by Japan's and China's policymakers, albeit for different reasons, messages conveyed by our fourth and fifth charts this week. Finally in our sixth chart we home in on a new index that we have recently added to our ESG database that measures disaster risks arising from extreme natural events and the negative consequences of climate change.
by:Andrew Cates
|in:Economy in Brief
- of21Go to 15 page