October Reports Uncover Rising Inflationary Pressures
With the International Monetary Fund bumping up its forecast for global economic growth and the markets continuing to experience a āGoldilocksā rally – synchronized expansion with limited inflation – global conditions call for cautiousĀ optimism. But what do the fundamentals for global production and manufacturing tell us about future price developments?
OurĀ Industrial ProductionĀ report, which is the timeliest release for global production figures, supports the positive notions. Global industrial production grew 3.6% year-on-year in August in a further sign of the dynamism of the global economy. Additionally, production growth is being experienced in 19 out of 25 of the worldās largest economies. These are positive signs which support the upbeat mood of central bankers during the recent IMF and World Bank meetings in Washington.
Global manufacturing treads a similar path with factory output climbing 4.1% year-on-year, again supported by strong growth rates in both advanced and emerging markets. Based on our output gap analysis, tight operating conditions have started to exert upward pressure on producer prices.Ā As the September results roll in, we expect global PPI inflation to come in at 0.5%, an increase of 4% year-over-year. This begs the question, are the three bears finally coming to awaken Goldilocks?
