Haver Analytics
Haver Analytics

Introducing

Andrew Cates

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

  • The decisions from several central banks this week have, on the whole, amplified hopes that the world economy remains on course for a soft landing. Equity investors were certainly reassured by the absence of big changes to the Fed's interest rate outlook, despite some concerns following last week’s US inflation surprises. This week’s unexpected decision by the Swiss National Bank (SNB) to cut interest rates by 25bps, in the meantime, chimed with the idea that a global easing cycle has now commenced. In the other direction, moreover, the Bank of Japan’s cautious move toward policy normalization met with a muted financial market response, possibly because it was softened by some dovish communications. In our charts this week we assess some of these financial market reactions (in charts 1 and 2), we review recent global inflation trends (in chart 3), and we then examine China's credit growth (chart 4), and its possible impact on other Asian economies (in chart 5). Finally, we assess 2023's equity market inflows in a selection of major economies, as a prelude to a forthcoming webinar with EPFR.

  • With little to destabilise financial markets over the past few days, soft landing narratives have remained in vogue. While this week’s US CPI report was certainly a little stronger-than-anticipated, other indicators, including the latest UK labour market report, were more benign. In our first two charts this week we look in more depth at, respectively, those US CPI and UK labour market numbers (charts 1 and 2). We then shift our focus to Asia and, in light of this week’s more positive GDP report for Q4, shed some light on the contribution that productivity growth has been making to Japan’s economic performance. We look next at China and specifically at its status as a leader in the production and sales of electric vehicles (chart 4). Finally we take a step back and review shifts in consensus growth and inflation forecasts for several major countries over the past few months and what those adjustments reveal about the nature of their economic and policy challenges (charts 5 and 6).

  • The equity market rally that kicked off in late October has recently taken a breather. Nonetheless, an abundance of optimistic narratives continue to support the rally’s rationale and prospects for an extension in the near term. This week’s charts provide some insights into some of these narratives. They include, for example, a renaissance in US manufacturing investment (chart 1), optimism about AI and its impact on the semiconductor sector, (chart 2), positive global growth surprises (chart 3), and receding inflationary pressures (chart 4). A more favourable backdrop for equities is another factor that has supported Japan’s stock market in recent weeks (chart 5). Finally, recent rallies in other assets, including cryptocurrencies and gold, hint at robust financial market liquidity potentially driving these gains as well (chart 6).

  • Prospects for a swift pivot toward looser monetary policy in the US and Europe have been further diminished by some stronger-than-expected inflation data in recent days. Equity market sentiment in most major economies, however, has remained fairly resilient, buoyed by a positive stream of corporate earnings news. In our charts this week and following the release of this week’s surveys we look at the gulf that still exists between consumer confidence in the United States compared with Europe (chart 1). Since an outperforming US economy relative to Europe could be one reason for that confidence disparity, we focus next on technology matters and specifically on the rapid growth of US investment in software over the past several years (chart 2). We then stay with technology and look at the improving demand and supply balance in the semiconductor sector that’s suggested by inventory levels in several Asian economies (chart 3). Next, we turn to Europe with some perspective on the outperformance of the Italian bond market that’s unfolded in recent months (chart 4). We then stay with Europe by offering some colour on the weakness of this week’s money supply data from the euro area (chart 5). Then, and finally, we throw some light on post-pandemic consumer spending patterns in the UK (chart 6).

  • A quiet economic calendar coupled with holidays in North America and much of Asia have left markets struggling for direction in recent days. This week’s US FOMC minutes revealed concerns among some members about reducing policy rates too soon. And in our charts this week, we first examine the shift in investors' expectations for those policy rates that has unfolded in the early weeks of this year (chart 1). Surprisingly strong US inflation data is one reason why a tighter-for-longer campaign is now under more serious consideration. Seasonal data variability at this time of year, along with recent fluctuations in energy prices (see chart 2), are undoubtedly being weighed by policymakers at present. But so too is evidence suggesting that labour markets have been tight and that wage pressures in the US and Europe have, hitherto, been too strong. Still, as our next two exhibits illustrate, more inflation-friendly labour market data have emerged in recent days (see charts 3 and 4). Against this backdrop, equity markets in most major economies have remained resilient, partly thanks to optimism about new technology (e.g. AI). This optimism may have been further bolstered by this week's trade data from South Korea, which highlighted a resurgence in its semiconductor trade (see chart 5). Lastly, we turn our attention in our final exhibit of the week to the global economy's social progress and the worrisome findings released by analysts from the Social Progress Imperative last week (chart 6).

  • Stronger than expected US inflation data this week has dampened hopes that the Fed might swiftly reduce interest rates in the coming months. This comes on the heels of a flurry of firmer-than-expected US economic data in recent weeks that had previously undermined the case for an early pivot toward looser monetary policy. Still, as we illustrate in several of our charts this week, evidence is accumulating to suggest that tighter monetary policy is taking a toll on the world economy. This week’s data from the UK and Japan, for example, revealed a second consecutive contraction in GDP in Q4 2023. Both economies have, therefore, now joined Germany in a technical recession (chart 1). The fragility of domestic demand growth in Japan in recent months will doubtless cause concern and might further delay a normalization of the BoJ’s monetary policy (chart 2). Growing structural rigidities in the labour market might, however, delay a pivot toward looser monetary policy in the UK if this keeps wage inflation uncomfortably high (chart 3). More generally, the latest Blue Chip survey of economic forecasters potentially reinforces the case for a relaxation of monetary policy in other major economies thanks to a reduced inflation consensus combining with a lower growth consensus (charts 4 and 5). But this clearly does not apply to the US where firmer growth expectations are combining with higher inflation expectations. The latter, moreover, could be subject to more upside risk following this week’s January CPI report (chart 6).

  • Last week's surprisingly strong US employment report has diminished investors’ expectations that central banks would quickly shift to more relaxed monetary policies. And this has caused bond yields to spike sharply higher in recent days. Nonetheless, equity market sentiment across most major economies has remained resilient, buoyed by a consistent flow of positive corporate earnings news. In our charts this week, we examine the extent of monetary policy relaxation that’s anticipated by the consensus for the world's leading central banks (chart 1). Given that recent and expected disinflation trends are crucial to these forecasts, we also assess how recent US survey data align with a projected decline in inflation in coming months (chart 2). We then turn our attention to ongoing tensions in the Middle East and disruptions in Red Sea shipping lanes, offering insights into supply chain challenges and global shipping costs (chart 3). Surprisingly positive news regarding the global economy is a further takeaway from our analysis of investor sentiment and, to a lesser extent, Germany's factory orders (charts 4 and 5). This contrasts, however, with unexpectedly weak retail spending reports this week, including from Australia (chart 6).

  • Some inflation friendly economic data coupled with a dovish pivot from the ECB last week have seen a trend toward lower yields re-establish itself in bond markets in recent days. Some push back from the Fed this week against expectations that it could begin cutting policy rates as early as March, has threatened to reverse that downward trend again. Nevertheless, there was equally little pushback to the generic idea that the Fed will shortly pivot toward a looser monetary policy in coming months. And with the incoming data typically reinforcing soft landing narratives (see charts 1 and 2), equity markets have remained resilient. The case for a soft landing for the world economy was also reinforced this week by stronger-than-expected PMI readings in parts of Asia, and, in India in particular (see chart 3). That global semiconductor sales are rebounding has probably helped those economies that are exposed to that sector (chart 4). Still, downside risks abound. This week’s PMI surveys, for example, also revealed that manufacturers’ delivery times are lengthening again in many developed economies, no doubt, in part, because of the instability in the Middle East (chart 5). In a broader sense, policymakers could also face significant challenges in maintaining economic and financial stability in coming month if they continue to pursue quantitative tightening campaigns (see chart 6).

  • Financial markets have taken their cue from company-specific developments in recent days with positive news from the technology sector Ieading the way. Lingering tensions in the Middle East, however, are now affecting shipping costs more adversely (see chart 1) and raising concerns about the durability of global supply chains. Recent commentary and some data points, in the meantime, have also been casting doubts on the willingness of central banks to pivot toward looser monetary policy (see chart 2) notwithstanding the more downbeat messages from manufacturing surveys (chart 3). Over in Asia, this week’s announcement of a forthcoming 50bps cut in reserve requirements is a strong hint that China’s central bank could loosen its policy settings in the coming weeks. Policymakers have certainly appeared more mindful of late about its ailing domestic equity market (see charts 4 and 5). That stands in vivid contrast to Japan, however, where equity markets have climbed to new 33-year highs this week even as the Bank of Japan has been hinting at steps to begin normalizing its monetary policy (chart 6).

  • Over the past few days there has been further pushback to the idea that central banks might initiate easing cycles in the immediate months ahead. Specifically, several Fed and ECB policymakers have expressed doubts about early interest rate reductions. And stronger-than-expected CPI data from the UK have probably reinforced that view among BoE policymakers. The flare up of instability in the Middle East is arguably another factor that’s been amplifying investor anxiety. In many of our charts this week we address some of those concerns. For instance, we provide insights into the volume of trade traversing the Red Sea (see chart 1), we explore the recent fluctuations in energy prices and the impact of geopolitical unrest (chart 2), and we examine global shipping costs (chart 3) and pressures on global supply chains (charts 3 and 4). In addition to this, we delve into the latest labour market data from China, which shed light on the continuing struggles of its economy (chart 5). Finally we wrap up with a comparative analysis of the recovery in real per capita GDP levels in major advanced economies during the post-pandemic era (chart 6).

  • The soft-landing consensus that emerged toward the end of last year has come under increased scrutiny in recent days. Specifically, there are now more doubts about the notion that central banks will shift towards a much more accommodative monetary policy in the coming months. Incoming data suggesting still-tight labour markets and above-target inflation have certainly reinforced those doubts. In this week's charts, we look more closely at consensus views for 2024. We illustrate, for example, how financial markets continue to be highly sensitive to economic data that deviate from the consensus (chart 1). We then inspect the evolution of aggregate growth and inflation forecasts for 2024 in some of the world's major economies (charts 2 and 3). Along the way we highlight the prevailing optimism regarding the US growth outlook but we contrast this too with more downbeat forward looking business cycle indicators, including this week's December NFIB survey (chart 4). Elsewhere, and in the other direction, recent upbeat high-frequency data are challenging the more pessimistic consensus shaping China's economic outlook (chart 5). The same might be said more generally about world trade from recent data for Asia’s exports and global shipping costs (chart 6).

  • The growing belief that central banks may start easing cycles within the next few months (chart 1), coupled with the increasing plausibility of a soft landing for the world economy, has fuelled a rally in financial markets over recent weeks (charts 2 and 3). This optimism has been bolstered by data showing a continued easing of inflationary pressures (chart 4). However, the main catalyst was the latest projection in mid-December from the Federal Reserve, which indicated three 25bps policy rate cuts in 2024, more than previously expected (chart 5). That optimistic market appraisal, nevertheless, raises several questions about the global economic outlook. Latest data, for example, suggest that China’s economy is still in the doldrums (chart 6). And expectations of easing cycles in several major economies next year seem somewhat inconsistent with recent communications from other central banks. If the global dataflow elicits more upbeat messages in coming weeks central banks might also of course become more hesitant to ease monetary policy.