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Citi’s U.S. economic surprise index has registered the deepest negative print seen since early ’23, with the mix of disappointing economic activity data and generally firmer-than-expected inflation readings filtering in.
- A couple of rounds of softer-than-expected labour market readings have also been seen over the last 10 days.
- While the numbers aren’t typically recession-like (the U.S. economy has been more resilient than most people imagined), they will be promoting the stagflation discussions that Chair Powell was so keen to play down at the most recent FOMC.
- Linked conversations surrounding financial repression and fiscal dominance have also been noted.
- This will be factoring into the higher for longer rate narrative and limiting receiver-side moves in FOMC-dated OIS, with the market probably eying the potential for a ‘stagflation-lite’ outcome at present.
- FOMC-dated OIS last shows ~42bp of ’24 cuts vs. the recent range of ~26bp (late April) to ~55bp (post-payrolls).
Fig. 1: Citi U.S. Economic Surprise Index
Source: MNI - Market News/Bloomberg/Citi
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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