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).
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| Jan 04 2024Charts of the Week: Soft Landing Narratives
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.
by:Andrew Cates
|in:Economy in Brief
Global| Dec 11 2023Charts of the Week: Twelve Themes for the Year Ahead
In our final Charts of the Week publication for 2023, we turn our attention to 2024, and highlight twelve themes that are poised to influence the economic and financial market landscape in the year ahead. These include several cyclical themes that concern, for instance, inflation, monetary and fiscal policy settings (see charts 1 to 4). The outlook for China’s economy and India’s economy could also remain significant (charts 5 and 6). We then turn our gaze to more structural matters such as the advance of AI (chart 7) and ageing demographics (chart 8). Politics, however, will also be critical next year with more than half of the world’s population destined to vote in elections, including of course the US (chart 9). The latter, in turn, though could have profound implications for trade (chart 10) and geopolitical stability (chart 11). Our final theme is climate change and the energy transition which will also never remain too far from the headlines (chart 12).
Global| Nov 30 2023Charts of the Week: The Year in Review
A growing belief that central banks have not only concluded their tightening cycles but could even initiate an easing cycle within the next six months has continued to fuel a rally in financial markets over the past few days. In our charts this week, however, we steer away from the daily macro news cycle and highlight six charts instead that give some colour on some of the key macroeconomic trends that have unfolded during 2023. This is ahead of next week’s publication, which will include some perspectives, via another batch of charts, on the outlook for 2024. Our charts this week specifically concern the outperformance of the US economy (chart 1), and the disinflationary trends that have engulfed advanced economies (chart 2). The latter has been driven in large part by falling energy prices (chart 3) and has emerged notwithstanding still-tight labour markets (chart 4). China’s economy has also been key this year amidst intense concerns about its beleaguered property market and rising debt burden (chart 5). Finally, with several structural factors in contention that have impacted the supply side of the world economy this year (e.g. heightened geopolitical stress, the advance of AI) we focus in our last chart on one of the most critical, namely climate change and temperature anomalies in particular (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Nov 23 2023Charts of the Week: Stepping Back
There has been little to dislodge the growing conviction in financial markets about soft landing scenarios over the past few days as data calendars have been thin and policymakers have been relatively quiet. Investors have, therefore, taken their cue from the dataflow that’s been released over the past month suggesting that inflationary pressures are cooling and that further interest rate hikes could now be unnecessary (see charts 1 and 2). We use this opportunity, therefore, to focus this week on some longer-term issues that could potentially generate heightened economic and financial instability in the period ahead. Uncertainty about the economic outlook certainly seems to have been much higher over the past 10 years compared with the norms in prior decades (chart 3). Moreover, the rapid advance – and adoption – of new technology (chart 4), demographic shifts (chart 5) and climate change (chart 6), could intensify this uncertainty in the period ahead.
by:Andrew Cates
|in:Economy in Brief
Global| Nov 17 2023Charts of the Week: Inflation Relief
Growing conviction that central banks have concluded their tightening cycles has fueled a rally in stock and bond markets over the past two weeks. And that conviction was reinforced by some weaker-than-expected inflation data released over the past days (see chart 1). That view has been supported too by growing evidence to suggest that higher interest rates are taking a heavier toll on economic growth (see charts 2 and 3). In some ways, the US economy stands apart in this narrative, having maintained a surprisingly resilient pace of growth compared with other major economies in recent months. But cracks are arguably now appearing there too when we dig beneath the surface (chart 4). Japan’s economy has also drawn attention this week following a much weaker-than-expected GDP report for Q3 (see chart 5). Notwithstanding concerns about the economy - and the Bank of Japan’s potential response to above-target inflation - it has continued to attract considerable interest from equity investors over the past few months (see chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Nov 10 2023Charts of the Week: Oiling the Wheels
In a week that’s been sparse with market-moving data and central bank communications the focus in financial markets has shifted to the oil market. That’s largely because oil prices have declined to three-month lows, with Brent crude now around $80 a barrel. In our charts this week we take a look at broader commodity price trends in the past few weeks (chart 1) and then go onto examine how the normalisation of supply chain pressures in the world economy over the past few months has been contributing to the decline of inflationary pressures more generally (chart 2). Staying with inflation, we look next at the ECB’s latest consumer expectations survey and still-sticky inflation expectations in particular (chart 3). We turn next to China and the surprising weakness of its foreign direct investment inflows in Q3 (chart 4). We then turn our gaze to trade flows and specifically highlight the weakness of the UK’s export activity with EU (and non-EU) countries over the past few years (chart 5). Finally, we weigh in on the US economy with some perspective on the Fed’s Q4 senior loan survey and the still-weak indications this carries about credit demand (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Nov 03 2023Charts of the Week (Nov 3, 2023)
Financial market sentiment has improved in recent days, partly thanks to the Fed’s decision this week to leave interest rates on hold. Although this decision was largely expected, recent data from the US and Europe have additionally revealed weaker-than-expected growth and inflation, bolstering the belief that a global tightening cycle may be near its end. In this week's charts, we examine the consensus on central banks' policy rates that emerged from the November survey of Blue Chip Financial Forecasts (see chart 1). Our focus then shifts to the United States, where we observe how tighter financial market conditions seem to be now steering the economy toward much weaker growth outcomes (see chart 2). With the BoJ also making headlines this week, we next analyse how Japan's significant yield differentials with the US are negatively affecting the value of the yen (chart 3). Our next stop is the Euro area, where we highlight this week’s encouraging news on the region's inflation front (chart 4). We then turn our attention to mutual fund flows in Asia, specifically examining how India, and to a lesser extent Vietnam, seem to be benefiting from some increased pessimism surrounding China. Lastly, amidst some escalation of geopolitical instability in the Middle East, we explore some indicators of credit card activity in Israel (see chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Oct 27 2023Charts of the Week (Oct 27, 2023)
Financial markets have been more unsettled over the past few days partly because of an escalation of geopolitical tensions in the Middle East. This has been exacerbated by a mixed set of company earnings reports from the United States coupled with lingering concerns about the trajectory of bond yields. In our charts this week we offer some insights on these issues with some perspective on US Treasury yields (in chart 1) and financial market stress (in chart 2). Then, ahead of the ECB’s policy decision later this week, we look at the messages from its latest Q3 survey of bank lending conditions (chart 3). With one eye on this week’s UK labour market release we subsequently focus on how unemployment rates have shifted in the world’s major economies over the last 6 months (chart 4). We then pivot to Asia with some colour on the region’s portfolio flows (chart 5). We wrap up with an update on temperature anomalies and highlight evidence that suggests September marked another month of record-breaking temperatures throughout the globe (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Oct 20 2023Charts of the Week (Oct 20, 2023)
Geopolitical instability in the Middle East has continued to weigh on sentiment over the last few days not least given its potential to amplify financial instability. In our charts this week we contrast the recent spike in a global gauge of geopolitical risk with the absence – to date – of any meaningful climb in financial market volatility (chart 1). We look too at the oil price – a key bellwether of geopolitical stress – and the critical role this could play in triggering global economic strain in the period ahead (chart 2). On the data front this week’s economic news from China was much more upbeat (chart 3). But the longer-term outlook for that economy remains uncertain, one reason for which we focus on next (chart 4). The downward revisions that have been made to the IMF’s longer-term forecasts for the world economy is our subsequent port of call (chart 5). That policy makers have felt compelled to deploy fiscal policy levers and ramp up government debt in order to mask a disappointing growth outlook is the message from our final exhibit this week (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Oct 13 2023Charts of the Week (Oct 13, 2023)
The flare up of geopolitical instability in Israel and Gaza has led investors to re-examine the outlook for the world economy over the past few days. The release of the IMF’s latest World Economic Outlook publication (IMF WEO October 2023) also, however, grabbed some of the financial headlines though whether its staff additionally need to now re-examine that outlook in light of this instability remains to be seen. In our charts this week we take a look at the IMF’s forecasts (chart 1) and contrast these with the October Blue Chip consensus, the forecasts from which were also released this week (chart 2). That Blue Chip survey contained twice yearly long-term projections for the US which we additionally examine (chart 3). One of the key channels via which global growth could be dislodged as a result of a war in Israel and Gaza is the oil price, which we focus on next (chart 4). We conclude this week though with some broader perspectives on global current account imbalances (chart 5) and then on how China appears to have lost its allure as a haven of foreign direct investment in recent months (chart 6).
by:Andrew Cates
|in:Economy in Brief
Global| Oct 06 2023Charts of the Week (Oct 6, 2023)
A further steep climb in US Treasury yields has been in the eye of the storm for financial markets over the past few days. In our charts this week we assess this trend (chart 1) and driving factors. The latter include a tighter-for-longer narrative from the Fed (chart 2), a broader global trend toward quantitative tightening (chart 3), and an oil-related lift in US (and global) inflation expectations (chart 4). We touch too on the potential role that Japan may have played in generating some financial instability in recent weeks (chart 5). We then conclude with some perspective on the implications of these trends for emerging markets (chart 6).
by:Andrew Cates
|in:Economy in Brief
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