Quand les Américains se ruent sur les voitures d’occasion, l’inflation flambe

L’inflation américaine s’est envolée à 4,2 % l’an en avril, après 2,6 % en mars ; un plus haut depuis septembre 2008, sous le coup d’une hausse mensuelle des prix de 0,8 % et de puissants effets de base. Mauvaise surprise, l’inflation sous-jacente, s’est également emballée à 3 %, contre 1,6 % en mars. À première vue, ces résultats ne sont pas bons et certains ne manqueront pas d’y voir la concrétisation d’un environnement définitivement plus inflationniste. Les détails du rapport ne valident pas ce diagnostic, tout du moins, pas à ce stade. Au-delà de l’impact des effets de base, l’accélération de l’inflation tient, en effet, à quasiment un seul phénomène : l’envolée des prix des véhicules d’occasion de 10 % entre mars et avril, qui explique à elle seule le tiers de la hausse de l’inflation du mois d’avril.

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Changement de prix relatifs ; pour l’inflation on verra plus tard…

Depuis ses débuts, la crise sanitaire n’a cessé d’entretenir les interrogations sur ses conséquences en matière d’inflation. Dans un tout premier temps, les risques de ruptures d’approvisionnement ont fait redouter une possible envolée des prix des produits de base ; mais les pénuries n’ont pas eu lieu. Dans un second temps, le choc de demande a agité le spectre d’une nouvelle jambe de déflation conforté par la décrue de l’inflation sous-jacente dans de nombreux pays. La vigueur de la reprise économique mondiale au troisième trimestre a néanmoins éloigné ces craintes et, avec l’amorce des vaccinations, l’hypothèse d’une escalade inflationniste a fini par les supplanter. Sur les marchés, les annonces de dispositifs inédits de relance budgétaire ont dopé les anticipations d’inflation tandis que l’envolée des cours des matières premières et la meilleure résistance de l’activité industrielle au regain de crise sanitaire ont fait le reste : ces deux derniers mois, l’indicateur Citi de surprise inflationniste est repassé en territoire positif pour la première fois depuis janvier 2019 et atteint aujourd’hui un plus haut depuis 2017.

Quel diagnostic porter sur ces observations ? L’accélération des prix aujourd’hui observée est-elle frictionnelle ou plus fondamentale et, à ce titre, prémonitoire ? C’est plus à une question de prix relatifs entre industrie et services que nous conduit notre diagnostic à ce stade.

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So the era of low interest rates will soon be over, right?

Trends in the financial markets have accelerated in the last few days. After hesitating slightly at the start of 2018, it is increasingly obvious to investors that reflation is around the corner. That belief is based on widespread growth, a surging oil price, the first positive effects of Donald Trump’s tax reform – with giant US companies promising to repatriate profits – and good news on investment and jobs. It is hard to see how that situation could fail to end the phase of latent deflation in the last few years and support expectations – seen throughout 2017 – of inflation getting back to normal. The impact of rising oil prices alone could significantly change the inflation situation, judging by how sensitive inflation is to movements in oil prices. If crude stabilises at $70 per barrel between now and the summer, inflation could rise by more than half a point in the industrialised world, taking it well above the 2% target that it touched only briefly in February 2017.

So what could prevent a significant increase in interest rates? It is very tempting to change our outlook for 2018. How is the interest-rate environment likely to develop?

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2018 Outlook – Welcome to Annapurna

Summary – Current economic trends seem particularly favorable, but after taking a step back, we are inclined to be more circumspect than the consensus of economists on the outlook for 2018. Our worldwide scenario has changed little since September. Our global GDP growth forecast for 2017 remains the same, at 3.6%, and we have lifted our 2018 scenario slightly to 3.3% from 3.2%. Upward revisions to our 2017 estimates for the developed world offset the declines we project in emerging markets. Meanwhile, we continue to foresee a modest global slowdown in economic activity next year as a result of reduced US and Chinese growth.

In this context, and amid the structural changes underway, worldwide inflation does not look ready to accelerate. It should fall from 2 % on average this year to 1.8% next year, in the wake of declining raw material prices. With no inflation on the horizon, central banks will maintain their very accommodative bias. Restricted by a persistent flat yield curve, the Fed will have trouble carrying out the three key interest rate increases it has planned. The ECB will remain particularly conservative and is unlikely to have an opportunity to take a position on a future increase in key rates.

The dollar is set to disappoint and maintain pressure on other countries. Japan, now benefiting from a more promising environment, is probably the country best placed to absorb the market’s wariness with regard to the US currency. Our exchange-rate scenario remains unchanged from our September projections and includes a substantial appreciation in the yen.

In the short run, we think exposure to risk is still a viable strategy, so long as it is focused on developed markets. But the current environment requires investors to be ready to change direction at a moment’s notice. For this reason, we have developed a fundamental allocation to complement our short-term, tactical recommendations.

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The rising euro is taking more wind than expected out of eurozone inflation’s sails

Until now, economists have not been particularly worried by the euro’s rise since the beginning of the year, given that business trends and confidence in future growth had gained momentum. At less than $1.20 since mid-summer, the euro is trading well below certain past levels and also more in line with its purchasing power parity. Recent data indicate, however, that the single currency’s appreciation has had a significant impact on corporate margins and on import prices, resulting in a reduction of core inflation rates in the eurozone. This is relatively disconcerting at this stage in the business cycle and may be behind the sluggish stock markets of the past few months.

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Price of Oil, Global Inflation and T-Bonds

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Disinflation continues to gain ground around the planet and things don’t seem poised to improve anytime soon. The effects of the drop in global oil and agricultural commodities in the coming months will compound the consequences of sluggish growth amid persistent competitive tension. Global inflation could fall to around 2.5 % to Q1 2015 while a growing number of economies slip into negative inflation territory. Such an environment could very well lead to a new slump in global interest rates…

No QE, so we’ll have to settle for the minutes…

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The ECB says it needs time to beef up its anti-deflation measures. Let’s not kid ourselves, the bank is in no hurry. There seems to be but one justification for its move to space out its meetings from every four to every six weeks and the innovation that consists of publishing its minutes: deflate ballooning expectations of future intervention.
This, in reality, was the only take-away from the ECB’s monthly monetary policy meeting held this week. In other words, there is no revolution under the European skies: the pace of change is still in slow motion and lacking in ambition.

“Our currency, your problem”

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Things are a little clearer since Mario Draghi’s press conference: the ECB considers the euro’s strength a deflationary risk factor. It is likely to move as a result, albeit in a measured manner starting in June then increasingly so thereafter if necessary, which will probably be the case. Against a backdrop where most other central banks are implementing monetary policies aiming to depreciate their currencies, the hesitancy of the ECB was no longer tenable. So that was a bit of good news but let’s not get ahead of ourselves: by taking such action Mr. Draghi is trying to give the other central banks a taste of their own medicine, making life hard on the Fed, BoJ and BoC, and not the other way around