Breaking SLOOS survey: The US economy is accelerating and inflation risks are back!
Is inflation going to re-accelerate? The bottom is in for the SLOOS survey, which tends to be a strong cyclical indicator in the US economy.
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The demand- and supply for money has bottomed out and inflation risks are likely to return during the spring! That is the overwhelming conclusion from the quarterly survey on banking standards released by the Fed.
Here is our findings in headlines:
- The SLOOS improves further from Q4 to Q1, and especially the supply side has eased quite a bit and is almost back in neutral territory
- The rebound in demand is underwhelming, but it also typically lags supply/financial conditions by another quarter, meaning that Q2 is the likely big rebound in loan demand
- The SLOOS leads wage growth by 6-9 months and empirically the wage-growth will re-accelerate from roughly April and onwards again. Inflation is likely going to return with a vengeance.
- If the Fed cuts in May, they will end up cutting straight into a cyclical upswing. There may be sound reasons to do so, but that is the conclusion for now.
Chart 1: The supply of money is improving
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