Economic surprises explain (nearly) everything

inflacion escalera recurso1 TC

US Treasury yields are being partly driven by global (ex US) growth surprises

The past few years have also seen a tighter correlation between US Treasury yields and growth surprises from the Eurozone and China. US growth surprises in contrast are not as highly correlated. Developed economy wage surprises moreover do a good job at explaining the structural downward trend in US yields which makes sense given the former’s links with consumer growth and inflation fundamentals.

There is little in the data at present that challenges the US decoupling thesis

Forecasting the future evolution of surprise indices – by definition – is not easy. Still, we think that US growth could surprise positively in the immediate weeks ahead; that global (ex US) growth may continue to surprise on the downside at least for a short time; and that global inflation outcomes will similarly surprise on the downside. That’s rooted in some analysis concerning our surprise indices, PMI surveys and their inventory-related sub-components, and the drop in oil prices.

About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.

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