Daily update
Daily update
- Investment by armchair generals seems to be the fashion. Markets are reacting to political comments about the length of the Gulf war. With uncertainty about US objectives, it is hard to for investors to assess how much more fighting is required to achieve the “end goal”. The economic war may also continue after the US withdraws. US gasoline prices keep rising—average prices may reach USD 4/gallon this week.
- Yesterday’s central bank decisions left rates unchanged. Masterful inactivity is the ECB’s default for this year. The Bank of England decision had a hawkish tone, with concern about second-round inflation effects from the Gulf war. This seems aggressive—the labor market is unlikely to produce inflation pressures. Looking at what the Bank will do, not what they should do, the tone suggests only one rate cut this year.
- UK fiscal data has global lessons. Self-assessed income taxes rose over 16%. That hints at the rise of the side-hustle in economic activity (taxed via self-assessment). The rise of the side-hustle in turn suggests there may be more economic activity than official data recognizes.
- German producer price data remains firmly in deflation, and was more deflationary than expected. However, very few economists forecast this data, so “expected” is a misleading idea.