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Weekly Economic Report 5.3.24

It looks to us like the next several months in the US economy are going to be a battle of very sharp elbows for the narrowing amount of dollar liquidity growth available – globally. This is hardly a surprise as that process has been going on ever since the money drops ended – but a rising tide for the rest of the world means increasing competition for dollar money supply, which is rising very slowly since the SVB crisis a year ago. The strengthening dollar had been attracting liquidity from the rest of the world – supporting US nominal GDP growth and asset appreciation. However, Asian currency weakness may now be in the rear-view mirror. The tradeoff created by slow money growth is apparent in recent PMIs, which were disappointing on growth – but even more disappointing on price, as many firms appear to be prioritizing maintaining or fattening margins over volume expansion.

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