A Benign Phase

Falling oil prices offer welcome relief for the global economy. But stubborn inflation and higher borrowing costs threaten an increasingly concentrated expansion. In this week's charts we examine six signals worth watching: → Global momentum is easing, but resilience persists. → Technology is reshaping China's export mix. → Finance and information dominate the US profits recovery. → Oil inventories are cushioning supply disruptions. → Interest-rate forecasts have risen faster than inflation expectations. → Short-term inflation readings challenge the disinflation story.

The global economy continues to show resilience. But beneath the surface, some increasingly uncomfortable divergences are emerging. In this week's charts we examine six signals worth watching: → Interest-rate expectations have risen, but long-term bond-yield forecasts have lagged. → Korean equities have been falling even as growth forecasts improve. → US demand for conventional credit has weakened sharply. → Lending to non-bank financial institutions continues to surge. → Supply-chain pressures are re-emerging, complicating the inflation outlook. → Europe's old fiscal divide is reversing, with France increasingly vulnerable.  

Four central banks decide policy this week, with an awkward message from the data: growth is holding up, but the sources of resilience are narrowing. In this week’s charts: → Factories are doing more of the lifting → Positive growth surprises are still outpacing inflation surprises → Stronger data had been pushing bond yields higher → Household disposable income growth weak or falling → US consumption leaning on equity wealth → Growth upgrades concentrated in chipmakers One capital spending cycle, one stock market and a falling saving rate. The expansion is real, but its dependence on asset values and financing conditions gives central banks reason to tread carefully before tightening further.  

The world economy has taken war, political uncertainty and expensive money in its stride. But resilience is not strength. Growth now leans on a narrow investment boom whose financial and physical costs are climbing. In our charts this week:   → A market retreat that punished the year’s winners in proportion → Japanese exports tracking the scale of the chip investment cycle → British wage disinflation losing momentum → Housing markets flat across the advanced economies → Chinese investment weakness spreading past property → Power prices climbing in every major market   The question running underneath all six is whether this investment delivers productivity fast enough to cover what it costs. Until it does, the expansion keeps running on borrowed strength.

Markets spent the past week doubting the proposition that has carried them all year. Technology stocks fell, bonds caught a defensive bid — none of it about the macro data, which if anything improved. In our charts this week:   → Blue Chip: growth up almost everywhere, inflation down → US trend growth marked up — back to where it sat a decade ago → US construction: data centres rising, everything else falling faster → Chips now dominate Chinese exports. Solar has collapsed → China’s surplus with the EU widens. Europe sells no more → What European firms use AI for: words and pictures

US equities pushed to fresh highs again this week, the dollar is firmer than it was a month ago and gold sits some way below its late-August peak. Capital is being pulled towards American investment rather than away from risk. In our charts this week: → US hiring has slowed, but so has the bar it must clear → French spreads now wider than Italy's → Political stability has tracked living standards since 2019 → America's yield rise is real, Europe's is inflation compensation → Supply chain pressure back at 2022 levels → One economy holding the global expansion up

Bond markets are pricing a tightening cycle. Equity markets are arguably pricing a productivity boom. Both can't be right for long. This week's Charts of the Week looks at why the current combination is so unusual — and what would end it. → Policy rates expected higher in every major economy → AI hiring spreading well beyond the US → Output accelerating, core inflation still falling → The global capex cycle has turned → Pay growth has halved while unemployment barely moved → Power costs climbing where the data centres are  

The world economy has absorbed six months of disrupted energy supply with far less damage than it could have. The reasons why are arguably narrower than they look. In our charts this week: Delivery times lengthening, freight rates climbing Growth upgrades went almost entirely to the chip exporters Record drawdown in global oil stocks Three commodity shocks, three unrelated causes US labour demand steady, UK still falling France now trades wider than Italy

Energy and the cost of money set the tone this week. Crude held above $100, the ten-year Treasury yield pushed through 5 per cent, and the Federal Reserve raised rates for the first time since 2023. But the tightening is not coming from corporate borrowing, and the week's data from Britain, China and Korea point to very different pressures again. In our charts this week:   Futures now price above the Fed's own path US companies are funding investment from cash Blue Chip marks growth up, inflation down UK pay growth and vacancies keep falling China's investment slump Korean chips are nearly half of all exports

The global economy is tilting back towards reflation: growth is firming while inflation proves stubborn, just as a cluster of central banks prepare to meet. This week in six charts: → Global growth surprises have lately been positive and inflation surprises negative — a supportive mix for equities. → Policy uncertainty has eased, but remains high. → Most major economies now sit on the reflationary side of the cycle. → Supply-chain pressure is building again, pointing to firmer producer prices. → The Phillips curve has re-steepened across advanced economies. → The climb in bond yields is being driven by real rates, not inflation expectations.