10 to 16 July: Splitting Up

The global economy continues to enjoy a growth recovery, with recent data suggesting there has been renewed strength at the beginning of the Northern hemisphere’s summer. However, from a cyclical perspective, there is clear a difference in the maturity of this expansion across different regions:

• North America continues to look late cycle, with interest rates and inflation on an upward trend. Last week, the Bank of Canada raised rates for the first time in 7 years, Mexican inflation touched a near 10 year high and US data continued its tepid trend.
• Conversely, across Emerging Markets inflation is slowing and growth accelerating. Last week, Indian inflation fell to 1.5% and Brazilian inflation touched 3% (both the lowest levels since the 90s). Meanwhile, Chilean inflation also came in lower than expected, Peru cut rates and (this morning) Chinese GDP growth came in better than expected. This suggests the world’s largest economy will post its first year-on-year growth improvement since 2010.

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