Macro Highlights May 25th 2015

Analysis - 5/26/2015

Our Investment Research Department publishes a weekly newsletter with a round-up on the main economic developments and news flow.

Chinese equities soar as the greenback perks up

The US dollar is rallying. After pulling back more than 7% since peaking last March, it has rapidly recouped a good part of its loss.

Janet Yellen, chair of the Federal Reserve, said last Friday that US short-term interest rates would rise before the end of this year. Although this was no big scoop in itself, the tone of her statement was a bit less dovish than just y few days earlier. Yellen reminded her audience that the economic slowdown in the first quarter was largely due to temporary factors and that the national jobless rate was gradually easing towards the level regarded as full employment. Her words reinforced the expectation that the timing of the initial uptick in the federal funds rate will depend on the US economic outlook. (...)

The stage is set for october

At the end of last week Janet Yellen, chair of the US Federal Reserve, issued a reminder that monetary policy affects inflation with a lag of several months and that, as a consequence, the Fed has to raise interest rates before upward pressure on prices becomes too strong. Inflation will already go up automatically in the coming quarters because of the recent rally in oil prices, but the challenge will be to make it level out around 2%. The core rate, which excludes the volatile food and energy components, rose 0.3% last month and is already at 1.8% year on year. (...)

Don’t believe what you hear about consumer sentiment

Some economists try to tell us that consumers in developed countries are overly cautious, that their mood is downcast and that things are going from bad to worse. Is this true? Should we worry about the situation, knowing that household consumption accounts for about 60% of GDP in service-based economies (see chart below)? It is time to answer these questions.

A look at china’s property market

Recent data on the Chinese real-estate sector have shown signs of an upturn. That is encouraging as the industry, which has been in a deep funk in recent years, is a vitally important source of revenue in China’s economy.

Property sales have finally pulled out of negative territory and were up 7% in April. (...)