“Inflation will continue to fall”. Candace Browning, head of research at BoA Securities, the investment arm of US bank Bank of America, is adamant. In the summary that she makes every weekend, for her clients, of information that should not be missed during the week, this banker, whose analysis counts on the stock market, returned to a study that its team of “data” analysts had published a few days earlier according to which global inflation will fall to 5.4% in the first quarter of 2023, before 2.7% in the last quarter of next year, against 8 .6% in the second quarter of this year. BofA Data Analytics provides “faster-than-expected moderation in inflation” world, implying, for the United States, a price index “Broadly in line with the Fed’s 2% mandate by the end of 2024.”
To reach this conclusion, the bank’s analysts relied on 37 leading indicators, covering several economies, ranging from heavy goods vehicles in the United States to the automation of Japanese factories.
“Globally, the number of indices [d’activité] Manufacturing PMIs that are still in expansion territory have plunged from 85% in June (equivalent to 35 out of 41 countries) to 61% now (equivalent to 25 out of 41 countries)”, note the analysts, in their monthly update on the question. Global economic activity is contracting, demand is weakening due to soaring prices, supply pressures are easing.
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Less pressure on supply
Of the 37 indicators, 49% clearly point to an easing of inflationary pressures, while 24% send a neutral signal. The proportion of bullish indicators fell to 27%, from around 80% in May 2021 and 50% in March. “Supply tensions show signs of easing, with a decline in the index that measures pressures on the global supply chain and improved delivery times from suppliers in the manufacturing industry”summarizes Candace Browning.
The index, which measures, in the United States, the demand for freight by trucks over a maximum horizon of three months (based on a survey conducted by BofA Securities among carriers) “is below the average level of recession after having reached its lowest level since May 2020 a fortnight ago. » In Europe, ocean freight rates continue to fall despite port congestion. There are now too many stocks. “Inventory that arrived too late or is considered excessive in the face of slowing consumer demand”explain the analysts of the bank.
The occasion of the publication of quarterly accounts by companies showed a “significant increase” the number of mentions “weakened demand” in the speeches of the bosses. The data stored in Bank of America’s credit cards also points in this direction. During the conference calls presenting the results for the second quarter, it also emerged “a number of ‘excessive inventory’ mentions at their highest level in several years. » Results ? “The percentage of sale items on clothing retail sites is now above 2019 levels”, we see at BofA Securities. And “Although new car inventories have barely bottomed out, our data analysis indicates that used van prices are now stable year-on-year. »
Energy prices are also showing signs of a lull, bank analysts said. “Years of underinvestment have been compounded by the West’s ban on Russian energy imports as well as severe heat waves around the world, which have pushed up oil and gas prices before that prices have not come back a little since May in the face of the growing risk of recession. [Mais] energy inflation could decrease significantly in the coming months if there are no new supply problems. »
Towards lower rents?
Another piece of good news, which confirms the thesis that the peak of inflation has passed, can be found in the real estate market. “Spiking mortgage rates (currently around 5%, from 3.1% at the end of 2021) have brought affordability down to their lowest level since 2006 and have squeezed many buyers out of the market, which together with falling confidence consumers, led to a considerable moderation in demand. » Analysts predict “a pause in the housing market that could extend into 2023, putting downward pressure on the ‘housing’ component of the US price index [IPC] year-on-year. The landlords’ equivalent rent is perhaps one of the biggest concerns for policymakers today. This component, which accounts for nearly a quarter (24%) of the US CPI basket, is rising rapidly and sharply. However, the reversal of the Zillow rent index [à partir des annonces publiées sur le site qui donne son nom à l’indice], which is ahead of the CPI by about six months year-on-year, provides some comfort. »
” Shopping list “
Bank of America Securities also sees less pressure ahead in the job market which, although currently ” tense “ (with wages therefore rising, posing a risk of self-sustaining inflation), this might not last much longer: ” He Interestingly, new job openings for S&P 500 companies have been steadily declining since last October. »
Although the US central bank, the Fed, remains committed to raising interest rates, Bank of America Securities is already projecting, given the lull in prices, when it eases monetary policy again, ” whataccording to the bank’s economists, will occur in the second half of next year. » Also, “It’s not too early to draw up some kind of shopping list” to start positioning. “Interestingly, consumer sectors are outperforming even before the Fed starts cutting rates. » Among the companies which, on the stock exchange, should benefit from it, BoA Securites cites Starbucks, Lululemon, Harley Davidson, Home Depot, Lowes, Floor & Décor and DR Horton’s.