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Contents
 * Biggest wheat exporters and importers
 * Impact of India’s wheat export ban
 * Link between rising food prices and political instability
 * China industrial production
 * China GDP forecasting
 * China credit conditions
 * China box office revenues
 * Euro area inflation distribution
 * Sensitivity of global equity benchmarks to US interest rates
 * US equities

‍

Home  /  Charts of the Week  /  
Wheat prices, exports and consequences; China slowdown; global equities



WHEAT PRICES, EXPORTS AND CONSEQUENCES; CHINA SLOWDOWN; GLOBAL EQUITIES

This week’s charts highlight world’s biggest wheat exporters and importers,
impact of India’s wheat export ban, link between rising food prices and
political instability, China industrial production, China credit conditions,
China GDP forecasting model, China box office revenues, Euro area inflation
distribution and sensitivity of global equity benchmarks to US interest rates.

By 
Julius Probst PhD, with contributions from Arnaud Lieugaut, Patrick Malm and
Karl-Philip Nilsson
on 
May 20, 2022
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Biggest wheat exporters and importers

Food price surges are hurting consumers across the globe as Russia’s war with
Ukraine disrupts wheat supplies from the two nations – the world’s biggest and
fifth-biggest wheat exporters, as the chart below shows. 

While emerging market economies are suffering most as the biggest wheat
importers, low and middle-income households in advanced economies are also
feeling the pinch as inflation eats into real incomes. 


Macrobond users, access the chart here

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Impact of India’s wheat export ban

With wheat prices soaring, some emerging markets such as India are now banning
exports of the commodity to ensure supply for local consumers. But that plan
could lead to more severe problems further down the line. 

The chart below shows the extent to which neighbouring countries rely on Indian
wheat. Not only has the number of nations risen over the years, but so too the
amount they import. 

In Sri Lanka, one of the biggest buyers of Indian wheat, people were already
rioting over rising food prices before India started banning exports on 14 May.


Macrobond users, access the chart here

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Link between rising food prices and political instability

The events unfolding in Sri Lanka show the impact of rising food prices on
political stability, a relationship that has long been highlighted by political
scientists and economists. Some believe the Arab Spring protests that erupted
across the Middle East and North Africa in the early 2010s were partly driven by
the high cost of food. 

Our chart below, which we have published before, takes this seeming correlation
further. It shows the correlation between rising food prices and fatalities from
terrorism four years later.


Macrobond users, access the chart here

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China industrial production

Over to Asia’s biggest economy now and the data from China is looking ever
grimmer as the government’s zero-Covid strategy continues to disrupt activity. 

The chart below shows the impact on industrial production, which has fallen to
the lowest on record if you exclude the brief plunge at the onset of the
pandemic. 


Macrobond users, access the chart here

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China GDP forecasting

Using China’s industrial production data, as well as retail trade figures, we
created a linear regression model for forecasting the country’s GDP. 

The model below predicts economic growth to fall to 1% in the coming quarter.
This would probably push Chinese GDP growth well below the 5.5% target the
Chinese government had set for 2022. 

While it’s also considerably lower than the 4% forecasted by Goldman Sachs for
2022, a 1% growth rate in the coming quarter is not implausible given the data
we have presented above, which does not even take into account the country’s
current slowdown and real estate bubble that is threatening to burst. 


Macrobond users, access the chart here

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China credit conditions

Social financing in China, a broad measure of credit and liquidity in the
economy, is also declining rapidly alongside the longer term fall in government
bond yields. 

While China’s M2 money supply rose to a record CNY250 trillion in April, its
differential with social financing has narrowed into negative territory for the
first time. It appears even with increases in money stock, borrowing is not
getting any easier. 


Macrobond users, access the chart here

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China box office revenues

With many parts of the country in lockdown, it is no surprise that fewer people
are going to the cinema. The chart below, based on high-frequency data, shows
the impact of Covid-19 on box office revenues – both during the first year of
the pandemic and now. 


Macrobond users, access the chart here

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Euro area inflation distribution

We all know headline inflation is surging across advanced economies. But what do
the underlying measures of inflation – such as energy, food, clothing, etc. –
tell us? 

The chart below shows the distribution of consumer price rises in the euro area
across some 43 sub-components – categorised by the inflation bracket they fall
into. As you can see, more items have now shifted right -- into the higher
inflation brackets. 

The number of components that show price inflation of 3% is well above the
historical average. This shows that inflation today is affecting all sectors and
goods in the economy rather than being driven by specific factors, as was the
case last year. 


Macrobond users, access the chart here

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Sensitivity of global equity benchmarks to US interest rates

Turning to markets now and with interest rates rising, we look at how that may
affect global equities. 

The beta coefficient is based on a simple regression and shows the sensitivity
of global benchmarks to changes in US real interest rates.

As you can see, it varies significantly across countries and time periods,
showing that some equity markets are more reactive to rising US interest rates
than others. 

With the Federal Reserve planning to raise rates throughout the year and as
global credit conditions tighten, we can thus expect any resulting stock market
losses to vary significantly across different markets.


Macrobond users, access the chart here

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US equities

Our last chart tracks the S&P 500 against its long-run exponential trend. 

It shows the extent to which equities have surged above trend in recent decades
– including the periods leading to the dot-com bubble and the global financial
crisis. Asset prices have also climbed to new highs in the last two years
following unprecedented crisis intervention from fiscal authorities and central
banks.

But overpriced assets don’t necessarily indicate a bubble. Several factors,
including the long-term decline of real interest rates, have pushed up the
fundamental value of financial assets across the board. 

Tip: The change region function works for this chart.


Macrobond users, access the chart here

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