Commodities | Economics & Growth | EEMEA | Equities | Monetary Policy & Inflation
Charts of the Week: An Inconvenient Truth
- By Matthew Tibble
- 4 min read
Summary
- Europe supports Russia more than Ukraine.
- Wheat is going wild.
- US real wages are going nowhere.
- Chile witnessed an unexpected meeting.
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Summary
- Europe supports Russia more than Ukraine.
- Wheat is going wild.
- US real wages are going nowhere.
- Chile witnessed an unexpected meeting.
Europe Supports Ukraine, But It Supports Russia More
Europe is united in its horror at Russia’s invasion of Ukraine. It has driven an unprecedented commitment to send monetary aid via the European Peace Facility, the EU’s Macro-Financial Assistance Fund and other individual country contributions. But all that pales before the amount we give Russia for its energy (Charts 1 and 2).
Wheat Goes Wild
Since the beginning of the Russian invasion of Ukraine, an index of fertilizer prices jumped 45%. The reason, quite simply, is that Russia is the leading exporter of fertilizer and urea, a key ingredient for manufacturing fertilizer. In tandem, corn and particularly wheat soared. Russia and Ukraine are major exporters of wheat, with about 25% of global volume. Ukraine also produces corn and accounts for about 7% of global corn exports. This clearly leaves a big hole in the global supply of wheat and corn in 2022 (Chart 3).
The US Economy Is Slowing
Overall, this week’s data releases supported Dominique Dwor-Frecaut’s narrative of a slowing economy due to sliding household consumption. The headline NFP data disappointed and other indicators such as lower hours worked and unchanged unvoluntary part time work signalled a labour market that is starting to soften. Meanwhile, hourly wages may be rising, but inflation is eliminating all gains (Chart 4).
A Dovish Hike Sends Swap Rates Spiralling
The first meeting under Chile’s new central bank governor, Rosanna Costa, did not pan out as expected. The bank kept the pace of tightening the same with a 150bp hike. Chile’s 2yr swap rates dropped sharply after Tuesday’s dovish hike and the curve steepened with 2s10s swaps now less inverted. We expect the curve to flatten from here.