Key takeaways The softening of the US recovery is continuing apace with different components of the macroeconomic compound showing signs of weakness on the back of inflationary headwinds and the delta variant. The housing market in particular shows signs of slowing growth. The recovery of Consumer spending has also been delayed by the Delta variant. […]
Category: Macro Analysis
Most participants to the FOMC July meeting noted that, provided that the economy were to evolve broadly as they anticipated, it could be appropriate to start reducing the pace of asset purchases this year because they saw the Committee’s “substantial further progress” criterion as satisfied with respect to the price-stability goal and as close to being satisfied with respect to the maximum-employment goal.
The COVID-19 recession brought to the fore some very unusual and puzzling patterns between different macroeconomic aggregates, with supply side bottlenecks and shortages, record consumer inflation and the unusual coexistence of an unusually tight labour market altogether with record labor slack. The COVID recession itself lasted only two months according to the NBER’s Business Cycle Dating Committee. The fiscal and monetary response to the pandemic has corrected some of its most dire human and economic consequences but it has also led to new imbalances and it has magnified some of the imbalances that existed prior to the pandemic. The combined impact of all these imbalances, direct and indirect effects of the pandemic on supply and demand have shaped a very peculiar COVID-19 related business cycle, giving rise to what one might call “the COVID-19 conundrum”.
According to the data released by China’s National Bureau of Statistics, in Q2 2021, China’s gross domestic product (GDP) reached 28,285.7 billion yuan, recording a year-on-year increase of 7.9% at constant prices and an average growth rate of 5.5% in two years. Table 1. China’s Year-on-Year GDP growth rate (%) years 1 quarter 2 quarter 3 quarters 4th quarter […]
The latest reading of the US Consumer Price Indexes for June compiled by the Bureau of Labor Statistics showed how the double impact of a surging US and global demand and lingering supply side constraints translated into turbo-charged consumer prices. In this article, we analyse in detail the latest CPI figures and elaborate on their potential path in the coming months.
In June 2021, China’s consumer prices fell by 0.4 percent month-on-month, translating into a 1.1 percent increase year-on-year, a decrease of 0.2 percentage points from the previous month. Industrial producer prices rose by 0.3 percent month-on-month resulting in a 8.8 rise on a year-on-year basis. The strong yearly increase in industrial prices is to a large extent the result of a low baseline with commodity prices moving well ahead above their pre-COVID levels.
Following the conclusion of its Monetary Policy Review, the ECB has updated its monetary policy strategy. The main evolution is the replacement of the ambiguous “below, but close to two percent” inflation target by an unambiguous two per cent inflation target over the medium term. The Governing Council’s commitment to this target is symmetric, meaning that negative and positive deviations from this target are considered as equally undesirable. In line with the Federal Reserve’s new average inflation targeting framework, the ECB acknowledges the necessity to tolerate above target inflation in order to anchor long term inflation expectations at two percent. The second change is the introduction of climate risk as an input in the Central Bank’s monetary policy operational framework. In this article, we analyse the rationale, the technicalities and the potential implications of these changes.
The latest Data from Japan’s Cabinet Office shows that Business conditions in Japan deteriorated slightly in May against their level reached in April. This has affected the Coincident Index more than the Leading Index. Overall the gap between the two indexes remains significant as Japan is still grappling with the COVID-19 pandemic amid promises made by the Suga administration to accelerate the vaccination campaign and to continue supporting the economy.
The FOMC Meeting convened on June 15-16 surprised the markets with ramped-up expectations for future interest rate hikes expressed by some of the participants to the Meeting. But the accompanying documents released after the meeting include other interesting insights, which help further assess the outlook for monetary policy going forward.