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).
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| 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
Global| Apr 24 2024Charts of the Week: Flash Dance
Following a week in which the risks to the global economic outlook suddenly skewed to the downside, the pendulum has swung back again over the past few days. Confidence in a soft landing for the world economy has instead now re-surfaced partly thanks to firmer-than-expected global economic data, together with some solid corporate earnings reports from the United States. Additionally - and at the root of last week’s concerns - geopolitical tensions between Israel and Iran have eased, further bolstering investors' risk appetite. In our charts this week we delve into key insights from April's flash purchasing managers' (PMI) surveys (see chart 1). We also examine the recent rise in copper prices—often a reliable indicator of global economic activity—and now echoing the messages from those PMI surveys (chart 2). An additional echo (and indeed reason for) both improving global growth momentum and higher copper prices can also be found in the impressive growth in South Korea’s exports of semiconductors (see chart 3). Next, we explore monetary policy issues, particularly how traditional Phillips curve models have struggled to accurately predict the relationship between inflation and unemployment in recent years (chart 4). We conclude with an analysis of financial balances in the US and euro area, which offers some reasons for those struggles (charts 5 and 6).
by:Andrew Cates
|in:Economy in Brief
Global| Apr 18 2024Charts of the Week: Geopolitics, Oil, the IMF and China
Investors have grown increasingly cautious about the economic outlook in recent days, partly thanks to heightened geopolitical instability in the Middle East. That Fed Chair Powell has also expressed greater concern about the US inflation outlook has not helped, not least as higher oil prices (and the resilience of the US economy) had already been unsettling investors’ inflation expectations. The timing of this week’s publication of a more optimistic economic outlook from the IMF (see chart 1) also appears a little unfortunate. The extent to which those forecasts may be jeopardized will arguably now hinge on the interplay between geopolitical instability, oil prices, inflation and monetary policy (see charts 2, 3, 4 and 5). It is noteworthy, nevertheless, and against these considerations, that China’s economy has also been punching more positively according to some additional data that were published this week (see chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Apr 11 2024Charts of the Week: Oil in the Price
This week’s stronger-than-expected US inflation data have further dampened hopes that the Fed would swiftly lower interest rates in coming months. And this has led to increased anxiety in financial markets about the outlook for the US and broader world economy. In our charts this week we explore recent shifts in the consensus view toward global growth and inflation as revealed by the latest Blue Chip survey of Economic Forecasters (charts 1 and 2). Then, staying with inflation, we assess the big role that higher oil prices may have played in igniting interest rate concerns over the past few weeks (charts 3 and 4). One of the possible reasons for the recent run-up in oil prices is an improving global economy, some survey evidence for which we examine next (chart 5). Finally, and ahead of this week’s ECB meeting, we delve into some of the key messages from the latest bank lending survey from the euro area (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Apr 04 2024Charts of the Week: Something for Everyone
Renewed concerns about the US Fed's inclination to lower interest rates in coming months have triggered broader anxiety in financial markets over the past few days. This week additionally revealed some data that have possibly tilted the balance of risks to the global economic outlook to the downside again. For example, latest trade data from South Korea offered tentative evidence to suggest the recent upswing in global trade is losing momentum (see chart 1). This week’s euro area flash CPI data, meanwhile, revealed stubbornly high levels of service sector inflation, raising doubts about the European Central Bank's willingness to lower interest rates in the immediate weeks ahead (chart 2). Latest data for US money market inflows also suggest a big role for liquidity in driving financial markets in recent months (chart 3). That potentially exposes those markets to some vulnerability should financial conditions tighten again in the near future. Still, not all of the global macro dataflow has been negative. On a more positive note, indicators of economic policy uncertainty have lately decreased to multi-month lows (see chart 4). US business formation has also been showing robust growth over the past few months, which has coincided with a big pickup in productivity (see chart 5). And finally, China's economy has unexpectedly accelerated over the past few weeks, possibly due to an increased pace of credit formation (see chart 6).
by:Andrew Cates
|in:Economy in Brief
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