Inflation this week came in higher than expected at 9.1%, but the list of reasons why inflation will soon be coming down keeps growing, see below. Our weekly Slowdown Watch with daily and weekly indicators for the US economy is available here.

We have built a model where oil prices are explained by US supply, OPEC supply, World consumption, and lagged oil prices. All variables are statistically significant. With slower economic growth ahead and supply increasing, the model currently forecasts that oil prices will decline over the coming 12 months, see chart below.

Since employment declined by 22 million jobs during the pandemic, about 21.5 million jobs have been created. But the distribution of the jobs created has been uneven, with some sectors today having employment above February 2020 levels and others having employment levels below. Most noteworthy was the fast recovery in the goods sector and the current strong growth in jobs in the economy’s service sector. The table shows the level of employment in different industries with February 2020 = 100.

IG index duration has been declining, and HY index duration has been increasing, see charts below. If inflation starts to come down over the coming months as the consensus expects, this shift has important implications for the expected performance of IG relative to HY in case 10-year rates rally from 3% down to, say, 2%.