Head of Macroeconomic Research
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance, and this week we look closer at U.S. gas prices.
Click here to download this week's full edition of Macro Chartmania.
The below chart should serve as a warning to the Biden administration. The average U.S. price of regular-grade gasoline, including taxes, is hovering at its highest level since October 2014, currently at $3.17 per gallon. This represents a jump of 41% since the beginning of the year. Most experts say the period of costlier gas is likely to be brief. But if consumers start to assume otherwise, it could seriously jeopardize the ongoing recovery. It could also mean problems for the Biden administration.
Over the recent days, several surveys questioned the « transitory » inflation line. Inflationary pressures were up again in the U.S. August Empire Manufacturing survey, failling to confirm the last two months’ declines. The index of Prices Received came in at 46.0 versus 39.4 - the highest level in the history of the survey (three previous all-time highs were set in April, May and July). What is perhaps most worrying is the drop in the U.S. University of Michigan sentiment for August. The index plunged to its lowest level since 2011 at 70.2 versus 81.2 expected and prior 81.2 in July. It was the seventh biggest decline in since the beginning of the survey in 1952. This is partially explained by the renewed spread of the Delta variant and, first and foremost, by rising consumer prices. Based on the survey, the price of vehicles is up 24% year-over-year while buying conditions for vehicles are down 48% year-over-year. This is only one example among many which could be mentioned.
Contrary to what the Federal Reserve and the Biden administration have repeated over the past months, there are growing evidence of a broadening of U.S. prices pressures which could lead to longer persistent price pressures. And if consumers start to believe prices will keep increasing in the short- and medium-term, the situation could rapidly go out of control. We are not at that point yet. But the current situation clearly makes the case for swifter Fed action.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
