Monthly Archives: January 2011

In this regular series of weekend blogs on the major events in the world of global macro, the last blog of the month will reflect on the main themes of the whole month, not just the latest week. Read more

The UK GDP data for 2010 Q4 were so bad, and they are potentially so important as a signal for other countries which are about to embark on fiscal tightening, that they are worth another look. Read more

The UK GDP figures for Q4 2010 have been eagerly awaited far beyond Britain’s shores, because the country is currently being seen as a laboratory experiment in what might happen when the rest of the world tightens fiscal policy.  Read more

In a fairly quiet week in global macro, inflation fears remained at the centre of investors’ concerns as data suggested that the UK and China are both struggling to contain price pressures. Rising inflation in the emerging world is fast becoming a headache for the global economy. The eurozone seemed to make some progress on the sovereign debt crisis. And global activity data remained encouraging. Next week, the Fed meets, and US real GDP figures for 2010 Q4 should look pretty good. Read more

China’s economic data for December, released on Thursday, clearly suggest that the authorities have not yet succeeded in slowing the economy enough to bring inflation pressures under control. Read more

The UK consumer price figures for December have certainly thrown the cat among the pidgeons. Repeating a pattern which has now been seen for many months, the figures were not just bad, they were also worse than the markets or the Bank of England expected. In a reversal of the normal order of things, there are suggestions that the government might now see a political case for higher interest rates, while the monetary policy committee still prefers to keep rates at close to zero. Whichever way you look at it, this is a tricky moment for the Bank, but it is probably doing the right thing. Read more

This is the second in a series of weekend comments on what I have learned in the past 7 days about the global economy and financial markets.  This week, there has been a notable rise in inflation concerns as higher food and energy prices start to impact consumer prices. There have been signs that European governments are discussing a more comprehensive package to address the sovereign debt crisis. And China has continued down the path of gradual monetary tightening. Next week, Mr Hu visits Washington, Ecofin meets to discuss sovereign debt, and China publishes its macro data for December. Read more

There have been definite signs of progress this week on European sovereign debt. The ECB is pressing governments to get “ahead of the markets” and come up with a comprehensive solution to the crisis in the next few weeks. Meanwhile, there is talk that Germany may have at last decided that its own narrow national interest would be best served by agreeing to a larger and more generous package of European support for the troubled nations.

Although the optimists may be over-stating the degree to which German thinking has actually changed, something is clearly afoot. For the first time since the crisis started last May, there is a chance that the EU could surprise the markets with a coherent response to the problem. Read more

In recent blogs in this series, I have described the immediate outlook for US GDP growth as “surprisingly strong”.  By coincidence, Jim O’Neill, my ex-colleague at Goldman Sachs, wrote a piece for the FT on Tuesday in which he argued that the strength of the recovery in the US economy would be one of the surprises of the year. These assessments have been seen by some as far too optimistic. Clearly, the US economy remains plagued by excessive debt and a chronically under-employed labour market. Furthermore, in a longer term context, the present recovery has not been sufficient to reverse the slow growth rate in the US economy in the past decade. So I have been re-assessing the case for “optimism” on the US. Read more

This is the first of a series of (usually) weekend comments on what I have learned this week about the global economy and financial markets. It will not attempt to be comprehensive. It will simply give my interpretation of the news which strikes me as particularly important for global macro, both in the recent past and the near future. This week, there was a great deal of new evidence suggesting that the global upswing is gathering powerful momentum as the year begins, especially in the US. But the problems of the eurozone periphery show no sign of ending. Rising food prices are becoming a severe headache. And the Aussies have lost interest in cricket. Read more

Although US GDP growth has now been positive for 6 successive quarters, unemployment has remain stubbornly stuck at close to a 10 per cent per cent rate throughout that time. Until today, the jobs data each month had poured a dose of cold water on the idea that the economy was embarking on a “normal” recovery. However, the December labour market data, published today, show the unemployment rate dropping to 9.4 per cent. This suggests that the last and most crucial leg of a normal economic upswing may finally be kicking in, although the rise of only 113,000 in private sector jobs was a tad disappointing. Read more

The batch of new year forecasts for the world economy have been almost uniformly positive this year, at least from economists in the financial markets. Only a few months ago, forecasters were talking of increasing risks of a double dip recession, but the surge in risk assets since the Federal Reserve announced QE2 in the autumn has swept away most of this pessimism. JP Morgan this week said simply that “strong global growth is baked in the cake”. Although nothing in economic forecasting is that certain, there is plenty of evidence in favour of the recent outbreak of optimism.

First, the most reliable and timely indicators of global economic activity have recovered strongly in recent months. Although QE2 may have helped somewhat in this regard, it is much more likely that the pause in the global economy was anyway about to end when the Fed took its expansionary decisions in the early autumn. Read more