War impact arriving

• Global (i.e. G7 plus E7) headline consumer prices rose by an estimated 0.5% in March with a further large increase indicated for April / May (see charts).
• Consumer / business surveys are breaking lower, while the OECD’s G7 leading indicator has lost momentum, confirming a PMI peak (see charts).
• US personal consumption was slowing before the energy price shock (see charts).
• Q1 strength in US bank lending is unlikely to be a positive signal, appearing to reflect a pick-up in stockbuilding and private credit firms drawing down facilities (see charts).
• Rising input costs pushed the annual change in Chinese producer prices into positive territory, with consumer goods prices still deflating (see charts).
• Japanese annual core wage growth picked up further but new job offers slumped and narrow money has moved back into contraction (see charts).
• UK home-buying demand fell sharply, signalling a faster decline in mortgage approvals and likely price deflation (see charts).

Global (i.e. G7 plus E7) headline consumer prices rose by an estimated 0.5% in March with a further large increase indicated for April / May:

The rise in price momentum will slow six-month real money growth, with a possible additional dampener from higher rates:

Japanese consumer confidence slumped, while US sentiment reached a new low:

A survey-based measure of G7 labour market weakness reached a new high:

Japanese small firms turned bearish, suggesting a PMI drop through 50:

German Sentix economic expectations weakened further:

The OECD’s G7 leading index slowed for a third month, confirming a peak in manufacturing PMI new orders:

US personal consumption was slowing before the energy price shock, with a contraction in goods spending offsetting services resilience:

The Atlanta Fed GDPNow forecast for Q1 consumption growth has fallen from 2.9% annualised in February to 1.1%.

Six-month rates of increase of core PCE prices and core CPI have diverged further, adding to the Fed’s analytical difficulties:

US commercial bank loans grew by 9.7% annualised in the three months to March, reflecting strong demand from firms and non-bank financial institutions:

Financial lending probably reflects private credit firms drawing down facilities to offset fund outflows and raise precautionary liquidity.

C&I loans are correlated with the stockbuilding cycle so strength is consistent with a cycle peak (i.e. loan acceleration may be a negative signal for economic prospects):

Rising input costs pushed the annual change in Chinese producer prices into positive territory, with consumer goods prices still deflating:

Japanese annual core wage growth picked up further but new job offers slumped:

Wage growth was boosted by a favourable base effect, which will reverse into Q2.

The three-month change in narrow money moved back into contraction:

UK home-buying demand fell further, signalling a faster annual decline in mortgage approvals:

A faster decline in approvals suggests a larger year-on-year fall in annual house price inflation:

With the annual price rise already down to 1.3% in January, this suggests that national prices will move into deflation.

Cyclical sectors rallied strongly on the cease-fire news – another opportunity to reduce exposure?:

Banks and corporate high yield reversed a significant portion of recent losses but there has been no recovery in private credit: