While expectations about how far investors’ discounted interest rates will rise continue to be below what the Reserve estimates, US inflation data continues to moderate; the definition most loved by the Fed, the private consumption deflator is already at 5.5% in November. Markets price in a faster slowdown in inflation, but think that monetary policy will be too tight and lead to a recession.
If we go to the East, in China, official government sources estimate that since the relaxation of the ‘Zero Covid’ policy in which we have been in December there are 250 million people who have contracted the virus, which would explain the collapse of health services. Health. In some crematoriums in Beijing, daily cremations are multiplied by four. In China, there is a key piece of information to understand future inflation in the West: exports continue to fall because in the final recipient countries, that is, the West, either demand has moderated or inventory levels of these products are at maximums. For example, let’s think about the importation of furniture for new homes and the drop in home sales in the US. In Europe, with the energy crisis, the only thing that grows in imports are appliances conditioned with heat pumps: 64% in the first eight months of the year.
This reduction in demand, partly and as a result of the rise in interest rates, reduces inflationary pressures, container freight costs fall from the order of nine to two. The rise in non-energy industrial goods will moderate more quickly than the consensus expects… the famous underlying, come on. Given all this, I believe that inflation in Spain will clearly fall below 4% in 2023.
Another thing is the Spanish GDP, recently under the new presidency, the INE informs us that we did not grow in the third quarter of 2022, well yes, 0.05: remember that if it were 0.04 it would be rounded to zero, and that growth is also It is explained by the accumulation of inventories and public consumption, not by consumption or investment. If we look forward, that is, to the fourth quarter, that is, the current one, we see how exports moderate, due to lower demand from China and from European countries, and how consumption continues to moderate, given the most recent indicators, except for the car sales, everything points to a slowdown or stagnation in growth. Especially with the delayed effects of interest rate hikes. But it’s not all bad news, given the tax collection voracity, the deficit as a percentage of GDP is reduced.
