Previous Research US Manufacturing Activity Slows
One of the ways we estimate M1 (money supply) at Airtham is to look at changes in the rate environment of an economy. Using 3-Month bond yields as a proxy for near-term policy rates helps in accurately forecasting M1.
Usually, M1 changes lag rate changes by 6 months, thus changes in 3-month bond yields help in predicting M1 for the next 6 months. This is also a reason, why we believe central bank policy rates impact the economy with a 6-month lag.
For now, India’s M1 growth is estimated to decline for the next 6 months.
Note: The large movement in M1 YoY% during 2016 and 2017 is due to demonetization.
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Can US Skip the Recession?
The most recent labor market data paints a concerning picture of overall weakness. Typically, the effects of changes in interest rates take some time to ripple through the economy. Historically, this lag has been around 18 months. Interestingly, this pattern held true as, precisely 18 months after the initial rate hike in March 2022, we are now witnessing the visible impact this month. The Federal Reserve consistently raised rates throughout 2022, suggesting that the consequences of these consecutive hikes will continue to materialize as the year unfolds.
SP500 & Inflation Update: Aug 2023
Airtham Macro Research: The July headline CPI release followed predictions of a slight increase, yet the actual magnitude was less significant than anticipated. This outcome sparked optimism within the market, leading to a surge in activity and speculation of a potential pause in rate hikes. However, this optimistic rally was short-lived as market participants quickly adjusted their expectations. The weaker-than-expected inflation reading meant a potential decline in economic demand. This perspective gains support from jobless claims data released a few days back, that showed claims rising to a 1.5-year high. Consequently, there's now a debate over whether further inflation reduction is beneficial or detrimental to the markets.
What’s Happening to US Tax Receipts?
One of the most crucial indicators for gauging the health of a country lies in its government tax receipts. When tax receipts rise in tandem with economic growth, it signals a thriving nation. Conversely, economic downturns often witness an accompanying decline in tax receipts. However, what's truly concerning is when tax receipts decline despite a healthy and expanding economy.