Daily update
Daily update
- The oil cartel OPEC announced a 1 million barrel per day production cut (an announcement is not the same thing as reality). The oil price has risen in response, and at the moment is back to where it was 20 days ago. At these levels, energy prices remain a disinflation force, as the price is significantly lower than it was a year ago.
- The other question: what happens to energy demand? This is driven both by the level of growth and the energy intensity of growth. The risk of a more dramatic US slowdown after the banking turmoil is important. Deposit churn seems to have faded, which might imply less need to tighten lending standards, and gives very tentative grounds for optimism.
- Other disinflation forces at work—more of the US PCE deflator is below 2% annualised growth. However, with profit-led inflation, those sectors with pricing power are being more aggressive than in a normal pricing cycle, keeping the headline inflation rate above normal.
- Business sentiment polls are due. The Japanese Tankan was slightly weaker—capital spending plans are subdued. The US ISM manufacturing survey comes with the normal health warning associated with surveys (the question asked is not necessarily the question answered), and the risk of political bias.
