Global regional disparities leading to currency tightening tolerance.
2023-07-12
■Given the long-term observation of high inflation, many developed countries have strengthened their monetary tightening attitudes.
■ However, the economic conditions of various countries are becoming increasingly dispersed, and their tolerance for monetary tightening is also different.
The global linkage of the economy is weakening, and the differences in economic conditions between major countries are becoming clear.
The Economist Surprise Index * 1 calculated by Citigroup in the United States directly displays this trend. Looking at the recent trend of the index, in the United States, while in Japan, the trend continues to rise. In the Euro area, China has declined sharply. The Euro area is a significant negative level since January, immediately after the corona disaster in May 2020, and immediately after the release of China's zero novel coronavirus infection policy. The level of the index only shows the size of the dispersion rate above and below the consensus of market expectations and does not necessarily indicate the quality of economic conditions. However, based on the results of previous economic indicators, the dispersion rate of market prediction consensus has increased, and the understanding of experts on changes in economic status has exceeded the suggestion, resulting in the confirmation of short-term prosperity and high correlation display tendency.
After the weakening of the novel coronavirus, the inconsistency of labor supply and demand centered on some service industries has become the norm. With the exception of China, it is one of the reasons for many countries to improve the long-term observation of inflation. In developed countries outside of Japan, indicating policies to continue the loose monetary policy, even if prices rise, monetary tightening attitudes in June have further strengthened, increasing the possibility of additional interest rates even in July. It is said that the impact of monetary policy on economic activity has a lag of about six months to a year, and it is expected that additional monetary tightening will have an effect in the future. As shown in the Economic Surprise Index, the economic conditions of various countries are becoming increasingly dispersed, unlike the economic confidence of the United States, as symbolized by the Eurozone. Countries and regions facing further monetary tightening amidst the strengthening trend of economic decline are expected to face even more difficult conditions in the second half of this year.
*For more information on this indicator, please refer to Chart Focus 2023.07.10, "Global: Economist Surprise Index Dispersion Rate Expansion"
■ However, the economic conditions of various countries are becoming increasingly dispersed, and their tolerance for monetary tightening is also different.
The global linkage of the economy is weakening, and the differences in economic conditions between major countries are becoming clear.
The Economist Surprise Index * 1 calculated by Citigroup in the United States directly displays this trend. Looking at the recent trend of the index, in the United States, while in Japan, the trend continues to rise. In the Euro area, China has declined sharply. The Euro area is a significant negative level since January, immediately after the corona disaster in May 2020, and immediately after the release of China's zero novel coronavirus infection policy. The level of the index only shows the size of the dispersion rate above and below the consensus of market expectations and does not necessarily indicate the quality of economic conditions. However, based on the results of previous economic indicators, the dispersion rate of market prediction consensus has increased, and the understanding of experts on changes in economic status has exceeded the suggestion, resulting in the confirmation of short-term prosperity and high correlation display tendency.
After the weakening of the novel coronavirus, the inconsistency of labor supply and demand centered on some service industries has become the norm. With the exception of China, it is one of the reasons for many countries to improve the long-term observation of inflation. In developed countries outside of Japan, indicating policies to continue the loose monetary policy, even if prices rise, monetary tightening attitudes in June have further strengthened, increasing the possibility of additional interest rates even in July. It is said that the impact of monetary policy on economic activity has a lag of about six months to a year, and it is expected that additional monetary tightening will have an effect in the future. As shown in the Economic Surprise Index, the economic conditions of various countries are becoming increasingly dispersed, unlike the economic confidence of the United States, as symbolized by the Eurozone. Countries and regions facing further monetary tightening amidst the strengthening trend of economic decline are expected to face even more difficult conditions in the second half of this year.
*For more information on this indicator, please refer to Chart Focus 2023.07.10, "Global: Economist Surprise Index Dispersion Rate Expansion"