The newly released industrial production and capacity utilization data of the United States in March show the resilience of the U.S. economy, the outstanding contribution of the automobile side and the improvement of the supply side. In March, the industrial production index increased by 0.9% and the manufacturing output increased by 0.9%, mainly due to the 7.8% increase in the production of automobiles and their parts (the former value was - 4.6%). At the same time, the utilization rate of automobile manufacturing capacity increased, which comprehensively shows that the shortage of chips has been alleviated in the short term, which is conducive to the decline of inflation. In addition, the month on month change of US steel capacity interest rate was - 2.46% (the previous value was - 3.06%), coal mining was 5.26% (0.98%), and oil and gas mining was 1.02% (- 0.48%), indicating the current decline in demand and the expected improvement of investment on the energy supply side.
The US inflation index burst again in March, and the core inflation fell month on month. Us CPI rose 8.5% year-on-year in March (expected 8.5%, previous value 7.9%), continuing to hit a new high since January 1982, but core inflation fell month on month. The main reason is that the prices of used cars and trucks fell by 3.8%. The price of education and communication products decreased by 0.6% and the price of entertainment products decreased by 0.1%, which shows that at present, the service industry is unlikely to become a new fuse for inflation, but the inflation risk caused by energy problem is still serious.
The expectation that the US economy will peak is becoming stronger and stronger, and the high debt leverage of residents inhibits the space for monetary tightening. Although the recent U.S. economic synchronization indicators, housing new construction and inventory, manufacturing capacity utilization and consumer retail are still in a resilient state, which provides space for the Fed's short-term hawk monetary policy, the forward-looking indicators increasingly show that the economy is expected to peak in the future, and the leverage ratio of U.S. residents is close to the level of 2008, which is consistent with the judgment of the recession expectation that the long-term interest rate spread of the United States is about to hang upside down.
In other countries, the interest rate hike in the eurozone was cautious, the growth expectations of East Asian developing countries were lowered, and the global financial risks intensified. On Thursday, the European Central Bank announced its latest interest rate resolution and expected the asset purchase plan to end in the third quarter. However, Lagarde said that the interest rate increase is expected to be "a week to a few months" after the end of bond purchase, which corresponds to the purpose of long-term low interest rates and expansionary fiscal policies in overseas developed countries in the future. In East Asia, Thailand, Indonesia and Malaysia lowered their growth expectations for 2022 respectively. According to the recent statistics of the world bank, the economic recovery of some developing countries after the covid-19 epidemic has been sluggish, and many countries have not started the recovery process at all. They have found it increasingly difficult to repay their debts. From 2010 to 2020, the ratio of total foreign debt repayment to exports has roughly doubled, which makes the global financial risks accumulating.
To sum up, we believe that the Fed decided to raise interest rates in May, which may be higher than expected, but it is unsustainable in the long term, so the impact is limited. More attention should be paid to the peak expectation of the US economy, the inflection point of inflation, and the progress of global risks.
