ZURICH | By UBS analysts | Will a strong dollar much weaken overall U.S. growth and inflation? The answer importantly depends on how much export and import prices respond to changes in the dollar’s foreign exchange value. Exporters may cut dollar prices and profit margins in order to blunt a stronger dollar’s impact on their market shares and volumes. In fact, over the three months through October, dollar prices of nonagricultural exports fell steadily (by a cumulative 1.3%).
By UBS analysts | As the US economic recovery completes its fifth year, direct policy stimulus is no longer being applied, but the economy is poised to move ahead on its own self-generating momentum. Real GDP growth is expected at 2.9% in 2015 and 2.8% in 2016. Less slack in the labor market along with accelerating labor demand should soon be accompanied by somewhat faster wage gains to boost household incomes, confidence and spending. A rising industrial capacity utilization rate should help trigger more sustained gains in capex. And a falling residential rental vacancy rate should further stimulate rents and residential construction.
MADRID | The Corner | As expected, the Fed confirmed the end of its QE3, although the announcement was slightly more restrictive. According to experts at Link Securitites, “while the decision shows that US economic conditions have improved (especially the labour market) and inflation remains at low levels, the message tone was more hawkish.”
ZURICH | UBS | The impact of an EU slowdown on US growth would be minimal: US exports to the EU are a small proportion of GDP (2.8% in 2013), and the secondary effects—the impacts on major US trading partners’ incomes and import demand—are even smaller. For example, a hypothetical 1 percentage point slowing in EU real GDP growth would likely translate into only a 0.1 pct pt drag on US real GDP growth via weaker exports to the EU and to other US trading partners affected by the EU slowing.
SAO PAULO | Benjamin Cole via Marcus Nune’s Historinhas | Well, if a Martin Wolf can call for permanent QE by all Western governments, and if a John Cochrane can suggest the U.S. Federal Reserve should completely liquidate the U.S. national debt, than I guess my USE-ME program is worth trotting out as well. I mean anything goes these days, no?
Guest post by Jean-Sylvain Perrig, UPB Chief Investment Officer | The US economy is back on track. Its second-quarter bounce was sharper than previously thought and it is expected to stay on a reasonably good path of 3% in the coming quarters, thanks notably to a rebound in capex, a falling unemployment rate and a sharp improvement in the real estate sector. That will further boost consumer confidence, which has already reached its highest level in seven years.
WASHINGTON | By Pablo Pardo | Mark Zandi is chief economist at Moody’s Analytics, the department in charge of consulting, advising and providing services for businesses and financial institutions. Among its many activities, the firm advices several European banks with regard to the EBA’s and ECB’s stress tests. Moody’s created this department in 2007, after buying Economy.com –Zandi’s analysis company.
MADRID | The Corner | BNP Paribas shares rose more than 4% on Tuesday after the French lender said it could pay the landmark $8.9bn settlement with US authorities for transferring billions of dollars on behalf of Sudan and other Washington-blacklisted countries. More actors in the EU banking sector might need to pay billionaire fines.
MADRID | By The Corner | The Federal Reserve cut its asset purchase plan by $10,000 million more, as expected. Experts at Bankinter Broker point that from now on the FED will buy $20,000 million in treasury bonds and $15,000 million in MBS every month.
MADRID | By Luis Arroyo | Experts at Afi made an analysis of the US’ labour market to forecast a possible turn in the economic policy. The answer is that such market is yet far from standardization. We can see three different moments according to the standard deviation in the chart above.