Bilal’s Macroscope: My Top 10 Macro Charts for Q4
- By Bilal Hafeez
- 3 min read
US services inflation has proven more robust than many expected, even while core goods inflation has declined well. While the shifting pattern of consumption post-COVID will have had a strong impact, services cost pressures tend to be more driven by wages, which tend to be stickier.
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US services inflation has proven more robust than many expected, even while core goods inflation has declined well. While the shifting pattern of consumption post-COVID will have had a strong impact, services cost pressures tend to be more driven by wages, which tend to be stickier.
US growth has continued to surprise to the upside, particularly as compared to other economies, such as the Eurozone. Much of this strength may lie with the relative strength of the US consumer, which has remained much stronger than many had expected.
Despite the hikes performed so far, when adjusting for inflation, US rates remain relatively low versus historical cycle peaks (only just about where they were pre-COVID). Unlike previous hiking cycles, the slope between US 3M and 2Y interest rates inverted (i.e. 3M > 2Y) far earlier in the cycle – before all the hiking was done.
The slope of the US yield curve has been much more negatively correlated to risk than has been typical in the last 30 years.
While the USD has strengthened a lot this year, it remains off the highs seen earlier in the hiking cycle, and indeed far off historical highs.
While Chinese property data continues to look very weak, we actually find that timely market data suggests that broader growth is bouncing back.
In commodities, US inventories have fallen sharply in the last month, after previously being close to the 5Y average. They are not yet at extremely low levels for the time of year, but the trajectory is worth watching closely. Meanwhile, investors have shifted much more net-long oil in the futures market recently.
Bonus Chart
Adjusting for inflation, Latam has the highest short-term yields, while 2Y JPY and PLN are the lowest. Within the DM countries, NZD and CAD stand out above others, with USD and GBP close behind.