June 8-14, 2024
Big news. There are two main news. One is of a conspiracy nature: according to a number of experts, a 50-year contract has ended, according to which Saudi Arabia pledged to invest oil revenues in US securities. Let us note that there is no exact knowledge on this issue, but this information itself, released into the public space, begins to influence the markets. So this is definitely news.
And the second one is the US Federal Reserve meeting. The rate was left in place; The Fed expects only one reduction before the end of the year (3 such acts were predicted in March):
Details, as usual, are in the final section of the Review. We can only preliminary note that formal inflation indicators have improved, and the number of decreases has decreased… From which it follows that the Fed’s leadership is becoming more and more adequate to the real picture. However, if at the previous meeting there were already members of the Open Market Committee (FOMC) who spoke about the need to raise the rate, it is possible that there were even more of them at this meeting.
Inflation data has become a little better (but so slightly that it is difficult to draw any far-reaching conclusions from this). Most likely, this improvement is real, since for the full volume of industrial goods prices fell again in May, to -0.86% in annual terms (the last two months there was a very slight increase in prices). However, against the backdrop of the industrial recession (see next section), this is normal.
Macroeconomics. Japan’s GDP -0.5% per quarter:
Рис. 2
And -0.2% per year, 1st minus since Covid:
Рис. 3
Industrial production in Saudi Arabia -6.1% per year, 12th minus in a row:
Рис. 4
In the eurozone -3.0% per year, the 11th minus in the last 12 months:
Рис. 5
In Italy -2.9% per year, 15th minus in a row:
Рис. 6
In Japan -1.8% per year, the 6th minus in a row and the 9th in the last 10 months:
Рис. 7
Output in the UK manufacturing industry is -1.4% per month, not counting Covid, this is the bottom for 5 years:
Рис. 8
Industrial orders in Sweden -15.8% per year, the worst dynamics since 2016 (excluding Covid):
Рис. 9
Production in the Swedish construction sector -4.9% per year, 15th negative in a row:
Рис. 10
Britain’s trade deficit is at its highest in 2 years:
Рис. 11
Japan’s Economic Observers Index is weakest in 2 years:
Рис. 12
As is the forecast for it:
Рис. 13
RMB loans in China +9.3% per year, a record low in 26 years of data collection:
Рис. 14
The growth rate of the M2 money supply has the same anti-record (only +7.0% per year):
Рис. 15
US unemployment rate is highest in 6 years (not counting Covid):
Рис. 16
Weekly new US jobless claims at 10-month high:
Рис. 17
And the total number of recipients of such benefits is very close to the top for 2.5 years:
Рис. 18
We remind you that labor statistics in the United States are heavily falsified, which even studies have begun to publish there; we wrote about this. Even Powell said this in his speech following the FOMC meeting. If these “beautiful” statistics show poor results, what in reality…
Claims for unemployment benefits in Britain are the highest in 15 years (excluding Covid):
Рис. 19
And the number of unemployed even over 27 years (again, minus the Covid surge):
Рис. 20
The Bank of Japan, like the Fed, left the rate unchanged (after the first increase in 17 years in March), but already in July a reduction in purchases of government bonds and even a new increase in interest rates are likely.
Main conclusions. The structural crisis is showing itself in all its glory: due to inflation, rates need to be raised, due to the decline in industry, they need to be lowered! Since our main specialists are based in the United States, their concerns are broadcast to all central banks. And now they are most afraid of inflation. Accordingly, the stakes are high and, as can be seen from the previous section, the real sector of the economy, primarily industry, is quickly collapsing.
Where to go?… In the context of elections in the United States, monetary policy will most likely be softened, but not by lowering the rate, but through direct emission (redemption from the securities market in exchange for printed money). Inflation will rise, of course, the rate of economic decline will increase…
Powell’s speech when announcing the bet:
“▪️There is an opinion that job growth is somewhat exaggerated. But this indicator is still very strong.
▪️This is no longer the overheated market that it was in the USA several years ago.
▪️Today’s inflation report was better than anyone expected. But we will still need to study everything carefully.
▪️We have no obligation to specifically reduce rates.
▪️All Fed chairmen know that the trajectory of rates depends on macro data.
▪️Our priority is the fight against inflation in the USA.
▪️Rates limit economic growth – the very action we sought.
▪️Today’s inflation report is indeed very good, I hope it will mark the beginning of a whole series of good data in the future.
▪️Fed members are unanimous in their opinion that the rate is unlikely to drop to the level of the Covid-19 period.
▪️We did not expect an increase in import prices in the USA.
▪️The US banking system appears to be in good shape.
▪️We have made good progress in the fight against inflation…but we cannot know what the future holds.”
At the press conference, Powell additionally said:
“Right now we have the OPPORTUNITY to approach the issue of lowering rates carefully.
▪️We have NO PLAN to wait until something breaks in the US economy and then try to fix it.
▪️No one is considering rate increases as a base scenario.
▪️BUT I cannot announce the date of the Fed rate cut…
▪️There are several triggers that will prompt us to reduce the rate in the country to soften the monetary policy.”
Once again, inflation data is within the normal monthly fluctuations and does not provide much reason for optimism. The growth of the consumer price index in May was 0.1% compared to 0.11% in May last year. And the core index rose by 0.16% versus 0.36% a year earlier. But the decline in household consumption is visible to the naked eye.
Well, in conclusion, we note that the budget deficit in the United States in May amounted to 347 billion – the second worst result in history after May 2020 (398 billion).
And we wish our readers a pleasant weekend and a problem-free work week!