since the beginning of last year Many economic research agencies, both global and national, have revised their outlook on the global economy. from the economic picture that seems to look better Since the International Monetary Fund (IMF) is more optimistic about the global economy than in October. This was due to better-than-expected domestic factors such as a strong US labor market, managing the energy crisis in Europe. and China’s opening up, causing the IMF to raise its global economic forecast from 2.7% to 2.9%.

While the fast economic numbers measured by the preliminary Purchasing Managers’ Index (Flash PMI) in February Large economies continued to improve, with the US Composite PMI at 50.2, the highest in eight months, as services index recovered to 50.5 from 46.8, while manufacturing index continued to contract at 48.4 from 46.9. The European index was 52.3 from 50.3, mainly due to the recovery of the service sector. while England also recovered from 48.5 to 53.0

Across the U.S., some key figures looked surprisingly better, such as retail sales picking up positive. It expanded well both compared to the previous month at +3% from the contraction in the previous two months. And compared to the previous year, it recovered at 6.4% from 5.9% in December.

The labor market has improved a lot as well. U.S. Nonfarm Employment It came out much better than expected, adding 517,000 jobs in January. The unemployment rate fell to 3.4%, a 53-year low, while average hourly earnings rose 4.4% in January from a year earlier, down from 4.8% in January. December But the average weekly income rose sharply at 4.7%, the highest in 10 months.

With better pictures, talk of ‘No Landing’ or the US economy began. that can continue without slowing down or recession

on the other hand US inflation Despite slowing down as expected, with an increase of 6.4% in January, close to the market expectation of 6.2%, internal components are more worrying. With inflation from food, energy and housing starting to return. Increased concerns about the Fed raising long-term interest rates. The Fed Minutes of the US Federal Open Market Committee meeting in February continued to signal an interest rate hike. The majority voted to continue to raise 0.25% to control inflation. and also signaled concerns about inflation risks and viewed that the policy was not tight enough (Insufficient Restrictive) to reduce inflation.

In addition, Fed Chairman Jerome Powell’s post-meeting comment that was beginning to see a “disinflationary process” was omitted in the report, suggesting the Fed may be signaling an upward trend. Longer Interest

in our view The current picture of the investment economy is more risky in 3 points, which are:

  1. world economy picture Overall, it appears to be looking better with a rise in the Purchasing Managers’ Index (Flash Composite PMI) in February. But if in detail, it will be found that the recovery of the service sector is mainly while the manufacturing sector continued to shrink which corresponds to the industrial production index (Manufacturing Production Index), which, according to our tracking, found that 30 out of 42 countries in the index tend to slow down or contract more.
  1. Inflation began to move upwards. and/or slower than expected This was partly due to the rise in commodity prices in January. and partly due to rising wages in response to rising prices (Wage-Price Spiral) and partly due to expectations for more easing monetary policy. Causing bond yields to ease which indirectly increases liquidity which will make various central banks May have to raise interest rates for a longer time (Higher for Longer) and lead to the risk of an economic recession in the next phase and
  1. Geopolitical risks are rising. After President Joe Biden visited Ukraine without notice On the occasion of the 1st anniversary of the Russo-Ukrainian War While President Vladimir Putin announced the cancellation of the nuclear treaty with the United States. Foreign adviser to President Xi Jinping announced that he was ready to step up cooperation with Russia. After meeting with President Putin Indicates China is starting to weigh more on foreign affairs. After the issue of spy balloons with the United States went last week Increased risk will make the dollar more likely to appreciate. and pressure to invest in risky assets going forward

Based on a study of current US economic dynamics, we compare it to our two past interest rate increases. found that the current US economy (Including the global economy as a whole) is dividing into 2 poles, with employment in the service sector still expanding well. with remaining job positions But employment in the technology sector and other sectors More likely to get worse as well as industrial production numbers (measured by the Manufacturing Production Index and the Purchasing Managers Index) and private investment in machine tools will deteriorate. But the service sector economy will continue to grow for a while.

In addition, we have three other interesting observations for the current US economic cycle:

  1. This interest rate rise is much faster and stronger than the previous one. This time it lasted only 1.25 years and reached 5.00%. While in 2000 (dotcom crisis) and 2008 (hamburger crisis), the Fed longer interest rate But the overall rate of increase is less than this time.
  1. Before interest rates reach their peak (Peak), the labor market will be very good. but after the interest rate has reached the maximum The labor market is rapidly deteriorating. The non-farm employment will enter negative territory. indicates that employment will contract, and
  1. The picture of the strength of the manufacturing sector and the service sector is not different between this time and the previous times. During the period interest reached its peak. until the interest rate cut The manufacturing sector will slow down/constrict first. But the service sector will still go. But when the economy is bad, the Fed has to cut interest rates. The manufacturing sector will recover faster than the service sector, which will continue to absorb for a long time. affecting consumption in the future

with a picture like this Therefore, we still believe that the US economy will also be at risk of an economic recession. The important image is New hires will be negative, which, based on momentum, we believe is likely to happen sometime in Q4 this year, which will require the Fed to cut interest rates for the first time in a cycle. The important variable to keep an eye on is excess savings ofamerican At the latest, the research office Bloomberg Economics has calculated that it is about 1 trillion US dollars. From a peak of about 2-2.5 trillion US dollars. And it is expected that excess savings will run out in the third quarter of this year, which will significantly reduce spending.

The figure is in line with a New York Fed survey that found American debt rose to a record high in the fourth quarter, rising $394 billion. mainly from housing loans and credit card loans While the current default rate is back to the pre-Covid period. The young people aged between 20-40 (who are important purchasing power) have the highest default rate at 3-3.5% and tend to increase continuously. which picture like this Amid a sharp rise in interest rates will put pressure on consumption. affecting the company’s performance and laying off workers in the future

In summary, we are therefore still concerned about the global economy. There will be more risks from 1. The direction of monetary policy that will continue to tighten in line with inflation risks 2. The manufacturing economy is likely to continue to contract and 3. There will be more geopolitical risks.

Businessmen and investors Don’t just trust the global economy.


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