Different elements must be noticed this week to understand the macroeconomic outlook
The first element is Janet Yellen’s speech. She talked one week after the press conference following the last Fed’s monetary committee. In her discussion of the US monetary policy, everyone was able to find what he wanted to find. Pros and cons of a rate hike have arguments in her speech to feed their own perception. The situation remains highly uncertain on monetary policy side
The second point is related to the French economy. With the second GDP estimate for the second quarter, we have details on behaviors. Before that, we note that the French profile is marginally stronger. The first quarter GDP growth is still at 0.7% (non-annualized rate) and the second at 0% but the carry over growth for 2015 is higher at 0.87% versus 0.83%. To converge to 1% which is the government target, a mere 0.18% is needed in each of the two remaining quarters of this year. Before the new estimate it was 0.25%. Continue reading →
In its decision not to increase its interest rates, the Fed simply suggests that it prefers to act later than too early. It still has the feeling, particularly with regard to the global environment and the risk associated with it, it’s a bit too early. A shock to the global economy could change the profile of the US economy and the Fed does not want that. It prefers that the trajectory of the economy is more robust. In other words, even if it considers thatthe economyis robust,it does notmake the assumptionthat itisa sufficientlystrong and stable trajectory to withstand amarkedshockfromthe outside. The low rate ofinflation andexpectationsof a slowerconvergence towardsthe target of2%account for a largeshare of theFed decision. In fact,there isstill nopressure onthe productive apparatusand thusthere isno reason,for theUScentral bank, to rush intothe tighteningof its monetarystrategy.
Will these conditions have changed in December? Or will it be necessary to wait until 2016? It is too early to say but the Fed seems in no hurry to act.
(13 of the 17 members of the monetary policy committee expect a higher fed funds rate at the end of this year. Nevertheless, at the end, it’s Janet Yellen who decides)
Thedynamics of employmentismore robustin theEuroarea.In the 2nd quartertheemployment rose by1.3% annualized rate. This upward trendwill continue; the employment index in the Markit survey is still trending upward.
The first point is the upward revision of the Euro Area growth figures for the first and the second quarter of this year. During the first three months, the economic activity was upgraded by 0.1% to 0.5% and during spring GDP figure was inched up by 0.1% to 0.4% (2.1% and 1.5% at annual rate respectively). Carry over growth for 2015 is 1.2% at the end of the second quarter (average growth for 2015 if the GDP level remains at Q2 level for Q3 and Q4) The growth number for 2015 should be close to 1.5%. It will probably be not hard to converge to this figure; I expect that oil price (Brent) will remain below USD 50. This would be a little higher than ECB’s forecasts at 1.4% published last week. Continue reading →
The Chinese external trade surplus is almost at its highest in August 2015. It is close to USD 60bn. Cumulated on twelve months, the surplus is at its highest ever. That’s what we see on the graph. Comparing exports and imports’ profiles allows a better understanding of the trade surplus and of the impact China has on the world trade momentum. Continue reading →
Syntheticpublication byThomas Philippon(NYUniversity)on the state ofthe European Monetary Union. Itdistinguishesdifferent timesdepending on whether oneis interested inthe financial crisis, economic crisis orpolitical crisis.These three dimensionsoverlapbut donot fall withinthe same period. He suggeststo go fasteronthe UnionBankand the union ofcapital marketsbut alsocreateEurobillsto preventmoney marketdisruptions.