Chart of the Week and Weekly Report Highlights
This week: Global Growth Outlook, Inflation Outlook, Commodity risk drivers, Treasuries and bond yield outlook, Global Equities, EM equities, WTI Crude Oil...
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Chart of the Week - Disinflation Desire
Pricing Pressures Peaked (Piqued?): The global PMI pricing pressure indicator peaked earlier this year, and if past correlations hold we should expect further easing of pricing pressures as commodity disinflation takes hold.
A key reason why the apparent correlation in this chart “works“ is because firstly commodity prices have a direct impact on costs, but also a key driver of marginal demand for commodities is the actual business cycle itself.
General demand levels go up = general pricing pressures go up (“ceteris paribus“).
On that note, the increasing downside risks to global growth that we are seeing (weaker data, downward sloping leading indicators) will likely weigh further on commodity prices and further contribute to easing of price pressures.
Indeed, this is all part of the monetary policy plan: tighten policy, crush growth, send inflation lower.
And that’s one reason why we still can’t get excited about a potential policy pivot or even a pause just yet. Astute observers will note that while the PMI pricing pressures index has come down, it is still at the upper end of the range of the past decade.
So if your job KPI’s are to bring down inflation and to avoid anchoring inflation expectations higher, then you’re going to stick to that monetary policy plan: tighten policy, crush growth, send inflation lower…
Key point: Pricing pressures peaked thanks to commodity disinflation.
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Topics covered in the latest Weekly Insights Report
Aside from the chart above, we looked at several other charts, and took a bite out of some really important macro/asset allocation issues right now:
Global Growth Outlook: global growth playbook written by central banks.
Inflation Outlook: a look at disinflation drivers vs lingering upside risks.
Commodities: review of technical/macro/value commodity risk charts.
Treasuries: bond yield outlook based on shifting macro sands.
Global Equities: what are the weight of risks and outlook for equities.
EM Equities: an update on EM equity technicals; the one chart to watch.
WTI Crude Oil: demand is going to be the swing factor from here.
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Callum Thomas
Head of Research and Founder at Topdown Charts
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