At the time of writing (but not of reading the Intelligence Report) the second round of the French presidential elections was yet to take place, and the outcome was unknown. We plan to address the result in another publication. Instead, our theme this week is conundrums. In this week’s Intelligence Report, we discuss two particular puzzles occupying the minds of global investors.
Unsurprisingly, the first of these puzzles emanates from China, which remains the defining “riddle wrapped in a mystery inside an enigma” of our age, to use Churchill’s famous aphorism – although at that time he was talking about Russia. Chi Lo, our Senior Economist for Greater China, explores the seeming contradiction between the authorities’ avowed intention to support growth through stable monetary policy, and recent People’s Bank of China rate hikes. Selectivity, and the use of very targeted measures, a typically nuanced approach, can help resolve this inherent tension.
Many commentators have noted the wide disparity between buoyant “soft” economic data, such as business surveys and other leading indicator measures, and “hard” data, which point to more moderate growth. This gap is particularly wide in the United States, but the same phenomenon is observable in Europe. Geoffry Dailey and Daniel Morris examine this conundrum in the second of this week’s articles, and draw some tentative conclusions about the prospects for US corporate investment and consumer spending.Download to read more