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Daily update

  • The US fiscal farce continues, with government shutdown increasingly likely. A short-lived shutdown damages the US economy, but middle-income families have some immunity (it is middle-income spending that is softening the soft economic landing). The rest of the world cares less about this type of US growth slowdown as the US government does not import much. The rest of the world cares whether US consumers are spending.
  • Durable goods data from the US is due—which covers consumer durable goods alongside investment products. The slowdown in consumer durable goods spending is quite well established, and slowing global trade volumes suggest strength is not to be expected at the moment.
  • Eurozone M3 money supply is expected to keep falling (indeed, to accelerate the speed of the decline). There are some people who believe inflation to be a money supply phenomenon, and who see this as a guarantee of deflation. Inflation is a monetary phenomenon—meaning money demand needs to be considered alongside money supply. With shifts to online retail, and liquid savings behavior over the pandemic, money demand cannot be thought of as a stable part of the equation.
  • Spain’s parliament will be voting on whether the Popular Party leader should become prime minister.

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