🇺🇸 #Fed | From #Inflation (Now) To #Deflation Fears (In Late 2023)

*A bit provocative I know but leading indicators suggest that CPI YoY will normalize quickly in the coming months and, in absence of external shock, could return to 2% in late 2023.
*A thread ⬇
1- Market #rents will keep retracing in the coming months. Household formation and rental demand are slowing in response to macro conditions while #housing supply will gain traction in the coming months, with a peak expected around 4Q23 (HT @jayparsons).
The collision of these factors will probably result in a contraction of market #rents on a YoY basis at some point next year. In the past, the CPI’s measure of rents for homeowners has typically lagged other measures of market rents by between 6 and 12 months.
2- Proxies also point to a significant downward normalization of food prices’ growth by the end of 2023. Agricultural commodity prices – which are usually leading CPI Food prices by 12 months – retraced over the past few months.
3- Supply chain disruptions heave eased significantly.
Several indexes point to a partial normalization at the global level and even a return close to normal in the U.S. (at least in manufacturing sector).
4- Core good prices are expected to contract on a YoY basis at some point in 2023
In this context (easy supply disruptions), wholesalers of finished goods have faced an extremely large rebound in inventories due to weak real consumption and will be forced to implement discounts.
5- In addition, there are already signs that used cars and trucks’ prices could contract further on a YoY basis amid significant supply chain improvement for new vehicles.

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More from @C_Barraud

Sep 27
🇺🇸 (1/10) | As I already warned several times, the #housing #recession has gained traction since July as prices started dropping ⬇

christophe-barraud.com/10-tweets-that…
🇺🇸 (2/10) Today’s figures (Corelogic CS and FHFA) confirmed this assumption. Looking ahead, latest proxies already point to a larger drop in August.

🇺🇸 (3/10) In addition, the recent bounce of #mortgage rates implies that sales’ cancellations will rise, and demand (at least from 1st time buyers) will collapse. As a result, downward pressures are expected to intensify from September.
Read 10 tweets
Aug 25
🇺🇸 #JacksonHole | Since July #Fed meeting, data point to GDP weakness, housing recession, inflation peak but also lower unemployment rate

1/ GDP: Towards downward revisions
*GDP fell for a 2nd straight quarter in 2Q
*Aug. Composite PMI crashed to 45, lowest since May 2020 ⚠
*Atlanta Fed expects 3Q GDP to be close to 1.5% in 3Q
*Taking into account these figures, it seems that 4Q21/4Q22 GDP growth will be close to 0%
*In June, Fed expected 1.7% growth so there could be a significant downward revision in Sep.
2/ Housing: a key downside risk to GDP projections
*Refinancing index hit the lowest since 2001
*Existing and new home sales fell by >20% YoY
*Inventory rebounded (especially for new home sales)
Read 8 tweets
May 29
🇨🇳 #China | #Shanghai Unveils Fresh Policies to Support Economy Hit by Covid - Shanghai municipal government
*50 measures in eight categories aimed at stabilizing the city’s economy.
*Link (Chinese): shanghai.gov.cn/nw12344/202205…
🇨🇳 #CHINA | *#SHANGHAI TO REMOVE 'WHITELIST' REQUIREMENT FOR COS. FROM JUNE - BBG
*SHANGHAI TO ADD 40,000 PASSENGER CAR PLATES THIS YEAR
*SHANGHAI TO CUT PURCHASE TAX FOR SOME PASSENGER CARS
*SHANGHAI SUPPORTS COUPON ISSUANCE TO BOOST CONSUMPTION
🇨🇳 #CHINA | *SHANGHAI TO LAUNCH NEW BATCH OF HOUSING PROJECTS - BBG
*SHANGHAI TO IMPROVE HOUSING MARKET POLICY, SUPPORT HOUSING NEEDS
*SHANGHAI TO PROPERLY INCREASE CONSTRUCTION LANDS FOR 2022
Read 5 tweets
Apr 22
🇺🇸 #Fed (1) | As I expected ⬇, the Fed is on track to tighten its policy quickly and strongly for economic and political reasons.
christophe-barraud.com/why-is-the-fed…
🇺🇸 #Fed (2) | On the economic front, Inflation is well above target and the risk of a wage/price spiral for low-income families has become real.
🇺🇸 #Fed (3) | Given that the labor market also looks tighter than indicated by the U.R., the Fed can easily justify a tightening move.
Read 9 tweets
Mar 14
🇨🇳 Chinese officials will be forced to support growth soon in a context where downward pressures are gaining traction.
*The probability of missing growth target (5.5% in 2022) looks high the year of Xi re-election.
1/ The hospitality sector is under pressure with air traffic and restaurant sales plunging YoY in early March.

2/ More damages from the Zero-Covid policy are expected with restrictions and lockdowns in several areas such as Shenzhen.

Read 6 tweets
Mar 11
🇩🇪 German economy is facing heavy headwinds:

1/ Covid-19 is still circulating a lot which implies that several restrictions will remain in place longer than expected.

2/ Sanctions/counter-sanctions linked to #Russia/#Belarus and the collapse of Ukrainian economy will have a significant impact on trade and supply chain. It's more than just natural gas.

3/ Problems of logistics multiply with airspace and ships bans while freight costs are still rising.
*See Harpex index: bit.ly/3MFkrid
Read 6 tweets

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