Is the Recent Improvement in Inflation Data a Temporary Evolution?

Our chart shows a pick-up in the US inflation surprise Nowcaster that is tallying with a pick-up in our Diffusion index. The Diffusion index is computed as the proportion of increasing macroeconomic indicators, hence giving an indication of the broadness of inflation pressures. The index varies from 0 (all indicators are decreasing) to 100% (all indicators are increasing). Are we likely to see increased inflationary pressures going forward?

Taking a look at our Growth Nowcaster, it is currently recording on average 56% of improving data across the 90% of global GDP that our indicators monitor. That is a big number, raising the question of its sustainability. We are currently not overly convinced that it can be sustained. The picture we are getting is that the previous macro slowdown is making a pause. What worries us more for now is the second round consequences of slowing global trade on many economies that have grown accustomed to it, emerging and developed alike. The risks there are not only brisk rises in risk aversion, but also an increased risk of recession should stubbornness take the upper hand over reason.

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Unigestion, based on Bloomberg data as at 22 May 2019.

 


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