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Not So Much A Soft Landing

GLOBAL

Executive summary:

  • Since the start of the year, we have seen that a rising number of leading and financial ‘leading’ indicators have been pricing in a significant deceleration in the economic activity in the coming 6 to 12 months.
  • Even though the Ukraine war shock is going to accelerate the process, global growth has been slowing down even before the February breakout, leaving market visibility extremely poor in the short to medium term.
  • Hence, preference for the ‘safe’ US Dollar could remain high in the medium term.

Link to full piece:


MNI MARKETS ANALYSIS - Weakening PMI2.pdf


Since the start of the year, we have seen that a rising number of economic and financial ‘leading’ indicators have been pricing in a significant deceleration in the economic activity in the coming 6 to 12 months. Even though the Ukraine war shock is going to accelerate the process, global growth has been slowing down even before the February breakout, leaving market visibility extremely poor in the short to medium term.


The chart below shows that the aggressive tightening run by central banks is pricing in a significant plunge in the global manufacturing PMI in the coming 9 months (‘proxy’ for real time growth). Out of the 38 central banks tracked by the BIS, 24 raised interest rates this month to tame inflation and support the domestic currency. CBR is the only major central bank that cut rates this month following the emergency meeting this morning, lowering its benchmark rate by 300bps to support the economy. Hence, the light blue line represents the net central bank hikes in May (23), which has historically acted as a strong ‘leading’ indicator of the global economic activity.

Source: Bloomberg/MNI/BIS.

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