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Demand Destruction Has Begun

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“As a result, JPM now sees activity contracting in March and April, prompting a 1.1%-pts cut to China’s 2Q GDP growth. With the downward revisions to the Euro area and China, the largest US commercial bank now projects 1H22 global growth dipping below potential. Displaying limited sensitivity to near-term downside growth risks, major central banks continue to tilt hawkish. Chair Powell reiterated prospects for an accelerated pace of hikes and reinforced the notion that the Fed could soon start moving in 50bp increments. EM central banks also remain on the move.

The clearest example of demand destruction can be seen in Eurasia, a region which includes both Russia and Ukraine, where mobility has fallen to its lowest level since early 2021…

The good news is that for now, US mobility has been relatively resilient in spite of higher oil prices, but here too we are seeing the first signs of hampered driving demand recovery in California, where on-road fuel prices are more than $1.50 above the national average. California vehicle miles traveled (VMT) has been tracking closely to 2018-19 levels since late last year, but has deviated from the 2019 trend twice so far this year: once, as Omicron cases spread through the state, and again starting at the end of February.”

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