The truth will out

20-26 апреля 2024

Big news. The net consumer basket price index jumped to its highest level in a year:

As well as their general index:

This means that the upward trend in inflation, which we noted at the end of last year, has finally taken shape. And this means that it is absolutely impossible to reduce the discount rate. Even taking into account political objectives. Larry Summers turned out to be right, not in the sense that he said about the growth of inflation (this was obvious to all reasonable experts for a long time), but in the fact that he guessed that the official bodies would begin to show this growth.

There may be several reasons for this phenomenon. We reject the possibility that there are Trump supporters in the US statistical agencies. But it is possible that the rise in inflation turned out to be so strong that the United States had to reluctantly admit it. Changing the methodology is difficult and time-consuming, so there’s no escape.

However, there is another option: some statisticians realized that since the crisis could not be avoided anyway, Summers’ strategy (“… and then I come out, in a white tailcoat!”) is more promising. However, here we are already entering the political field and therefore we are moving the discussions to the third section of the Review.

Macroeconomics. US GDP growth is weakest in almost 2 years:

However, if you believe the same Summers regarding inflation, then this is not growth, but decline. Let us remind you that we warned our readers that the US economy was beginning to decline at the beginning of autumn 2021.

Industrial production in Singapore is officially falling, -16.0% per month – the worst dynamics in 14 years:

The balance of orders in British industry has been in the red for 21 months in a row, prices are rising at the highest rate in 14 months:

In such a situation, by the way, you need to think not about political intrigue, but about saving the situation. But the British elite are doing what they can. But in the economy and in production, apparently, there are no craftsmen left there.

PMI (expert index of industry condition; its value below 50 means stagnation and decline) of US industry is the weakest in 4 months (49.9):

In the service sector – for 5 months (50.9):

And this is against the background of colossal propaganda of a growing economy (remember, the index is an expert one!).

The Kansas Fed’s composite (across all sectors) activity index has been in the red for 19 months in a row:

Canada’s Business Barometer (47.5) is approaching the 15-year low from six months ago:

Coincident indicators in Japan are the lowest in almost 2 years:

Direct foreign investment in the Chinese economy in January-March -26.1% per year, a little over the entire history
it was worse only in January-February 2009; separately in March -38% per year:

In the previous review, we showed relatively successful statistics on China, noting that statistics in this country are a rather specific thing. Apparently, foreign investors who are inside the situation know or feel something better than the official indicators.

Canadian Commodity Prices +4.7% m/m, 2-year high:

The mood of New Zealanders is approaching records of pessimism:

US 30-year mortgage rate 7.24%, 5-month peak; The 24-year top is not that far away (7.9%):

So we are waiting for more negative construction data.

Eurozone household loans +0.2% per year, weakest growth in 9 years:

Loan growth in Indonesia +12.4% per year, maximum since autumn 2018:

In response, the country’s Central Bank unexpectedly raised the interest rate on deposits by 0.25% to a 9-year peak of 5.50%:

And also the key rate – by 0.25% to 6.25% (8-year top):

The Central Bank of China has not changed anything in its monetary policy, as have the Central Bank of Turkey and the Central Bank of Japan. Theoretically, the situation is the same in Russia, but here it has nothing to do with the economic situation in the country.

Main conclusions. The inflation situation has become critical. The point is not the inflation itself; it has been at a level of no less than 10-12% for two and a half years. The fact is that its official scale (about 3.5%) is the main indicator of changes in the discount rate. And given the significant decline in industry, the rate urgently needs to be reduced. Well, this is useful for the elections, the mood of consumers improves.

But rising inflation requires the rate to be raised (in the USA, unlike Russia, it is of a monetary nature). So any discussion on this topic becomes political. Plus – Summers’ revelations, which raise doubts about the official data. And it’s not only Summers who blows this tune, there are especially many complaints about labor statistics (we also wrote about this).

As a result, all power political groups in the United States are beginning to use the economic situation to their advantage. And in such situations, any meaningful work of economic experts ends. If we add to this that official experts are well aware of the degree of distortion of real data (although they may not know what the indicators are in reality), then the situation becomes completely gloomy.

In particular, within the framework of such a picture, there is absolutely no desire to invest in long-term industrial projects. And, according to scientists, it is completely unclear how to ensure production in the technological industry (defense industry, microelectronics), in which this is absolutely necessary. Well, entrepreneurs and citizens find themselves in extreme situations when it is completely impossible to make informed decisions. In particular, defaults on card loans are quickly shown again:

And payments on government debt are growing rapidly:

One thing is good: our readers receive real information about the state of affairs long before it appears in official reports. Therefore, our readers can safely celebrate the May holidays and not worry about the upcoming workdays!