For now, low inventories impede growth and lift inflation
Inventories – normally a strong predictor of the business cycle – are uncharacteristically low, even though global growth is at record highs. This is yet another consequence of the post-pandemic recovery and all its bottlenecks and signal transitory nature of inflation rather than the state of the cycle.
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- Monthly survey indicators on new orders – another marker closely related to inventories – point to a stable recovery in most advanced economies (AEs), with Germany doing especially well. This is consistent with the state of the business cycle globally.
- A detailed breakdown for the US and Germany points to a particularly severe drawdown of inventories in the retail sector – consistent with a recent mini boom in consumption as well as bottlenecks in supply chains and shipping.
- Escalating global shipping costs have yet to abate, with the Harpex global shipping cost index standing at almost twice its historic record.
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For how long will Japan’s households support bonds and the yen?
Households' financial surpluses sharply increased in 2020 and remained high in 2021 due to the Covid pandemic. Most of the surplus continued to go to cash and deposits, but there was a notable increase in funds going to investment trusts (with a large portion invested in foreign equities) in 2021. Amid rising international yield differentials and a weakening yen, there is market chatter about whether this is the beginning of a structural shift from households' risk-averse investment style?Find Out More