Global Macro Views

"Sur-prise, sur-prise, sur-prise" is what we learned from the incoming data for advanced economies over the past quarter. Unfortunately, only Jim Nabors, who died a few weeks ago, could deliver that message with the correct intonation. In his memory, we want to highlight three surprises across advanced economies. Data on output outstrips expectations, inflation continues to disappoint, and central bankers seem more worried about the former than the latter.

Another trademark of Nabors was a confounding transition from a squeaky soprano speaking voice to a rich baritone song delivery. That is how the US data on activity transformed, from posing an irritating and anemic worry to presenting reassuring and confident momentum. Oh, and Nabors’ most famous song (after "Back home again in Indiana" to the Indianapolis 500) was "The Impossible Dream," which seems about to be achieved in Washington, D.C. Tax legislation will pass, and what the President will sign before Christmas has a higher component of reform than might expected in the first year of an administration.

The first surprise is that economic data in advanced economies has consistently run stronger than expected. In the past four months, the US moved as distinctly into positively territory as it was in negative territory in late summer. But this was also true for the Euro area and the United Kingdom. The masculine switch from soprano to baritone is seen on many fronts, including purchasing managers’ intentions on spending, which have been consistently above the 50 percent breakeven rate and rising.

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