The reflation narrative, especially within energy- and metals, has taken a beating after a few weeks of “stagflationary” vibes in key figures. Manufacturing gauges have weakened, the Q1 GDP report disappointed and yet price trends remain elevated.

We have seen plenty of head-fake signals from the PMIs this cycle. In 2023, everyone concluded that Manufacturing would lead the economy into a recession, and in early 2024 everyone pivoted on that view as the early signs of a comeback for the cyclical economy started emerging.

We are seeing some setbacks for that manufacturing recovery story in April, but a couple of the most interesting gauges actually continued to rebound. If we look at the Swedish PMI, and more importantly the orders/inventories, we are likely still amidst a positive impulse for the Manufacturing sector globally.

Sweden ranks among the top-3 most  interest rate sensitive economies on earth, which evidently means that it is more cyclical in nature. Looking at the Swedish PMI details versus the US ISM, we get a pretty decent lead/lag pattern of 3-4 months. Maybe the Swedish bounce in April is what you need to consider and not the noise from the Rest of the World?

Chart 1: Is Sweden trying to tell us something here?