OK so it’s not exactly Goldilocks. But maybe we are seeing a post-recession version of Goldilocks – call it Goldilite. The markets must be not too hot and not too cold, but just right.
The Fed marked up its assessment of growth yesterday but made no change to its assessment of inflation. In fact recent data suggest inflation risk has gone down not up: core inflation is flat, surveyed inflation expectations have edged lower and the dollar, commodities and gold have stabilised. Read more
Pity Japan’s Democratic party. When they took power less than three months ago, party heavyweights were hoping to use the fat from a huge stimulus package drawn up by the former ruling Liberal Democratic party to help fund implementation next year of some of their generous manifesto pledges. Read more
The many City economists who have been accused of having egg on their faces because they thought the initial UK third quarter growth figures looked funny, no longer look silly. The Office For National Statistics has just revised up its estimate of construction output in the third quarter from an estimate of -1.1 per cent to +2.1 per cent.
Alone, this will almost eliminate the recorded contraction in the third quarter (reducing the quarterly decline to 0.1 per cent), makes the Bank’s growth forecasts appear less outlandishly rosy, brings Britain’s official figures closer into line other indicators of the period and the European norm, and brings the eventual exit from 0.5 per cent interest rates and £200bn of quantitative easing a small step closer.
For officials and the minority of economists who insisted the initial figures were accurate and the City was whinging because it had got things wrong, this is a tad embarrassing. This is how the ONS put it this morning.
Competitive devaluations threaten trade wars, says Michael Pettis, citing the Vietnamese devaluation. The theory is that countries unable to devalue will be forced to raise tariffs. This comes as North Korea strikes two zeros off its currency, the won. But the picture is more complex than that. Chris Giles agrees that competitive devaluations could lead to currency trade wars, but argues the devaluation of the dong – still under pressure – is not the trigger. Neither is the won.
Creditors of Dubai World, including hedge funds and banks, have formed a group. It seems that investors in $3.5bn of Nakheel’s bonds will form 25 per cent of the issue, meaning they can block bond restructuring plans. Read more
In the great Japanese debate on how to balance the contradictory demands of reining in the deficit and continuing stimulative spending, chalk up another political point for Shizuka Kamei, Japan’s minister for financial services. Read more
Andrew Sentance, an MPC member has become the first Bank of England official to match his rhetoric to its rosy forecast, writes Chris Giles of the Financial Times. Good for Sentance. This is a very welcome development. The Bank was stretching its depleted credibility to the limit in persisting with forecasting a strong recovery while saying the opposite. Read more
Krishna Guha of the Financial Times discusses the hawks and doves of the FOMC Read more
More encouraging unemployment figures from the UK exacerbate the divide between most European labour markets and that in the US this recession. There are many possible explanations writes Chris Giles of the Financial Times, but the result must be a more optimistic Bank of England when it examines the prospects for recovery. Read more
Banks face higher refinancing costs as $7,000bn of short-term debt is due to mature in the next three years. The IEA is accused of overstating energy reserves and the chief economist of the World Bank says China should not be forced to allow appreciation of the renminbi Read more
An increasingly bitter dispute among economists is raging over the accuracy of the preliminary official figures showing a 0.4 per cent economic contraction in the third quarter. But a spirited defence of the official figures from Danny Gabay of Fathom Consulting is seriously flawed writes Chris Giles of the Financial Times. The logic of his view is that the benefit of hindsight is strictly time-limited.
Decoupling? Asian economies discuss increasing intra-regional trade that is less dependent on exports to the West. Conflicting indicators from the US and warnings of bubbles in the UK Read more
By any account, the UK’s third quarter contraction of 0.4 per cent is bad, writes Chris Giles of the Financial Times Read more
Money Supply, a Financial Times blog, rounds up the top economic news for Tuesday, October 20 Read more
Money Supply, a Financial Times blog, rounds up the news for Monday, October 19 Read more
Trichet has called for a “change in mentality” in banking, writes Ralph Atkins of the Financial Times Read more
Money Supply, a Financial Times blog, wraps up the news of the day for Thursday, October 15 Read more
The fall in the US dollar should be welcomed, as it will help correct global imbalances. The recovery
in China’s economy is gaining new impetus, amid concerns about the transition to a more balanced economy. Read more
The Financial Times has an interview with Paul Fisher, head of markets, in tomorrow’s paper. Here are some initial impressions from an interesting chat, writes Chris Giles of the Financial Times Read more
China’s push for materials and energy leads it to be South Africa’s biggest trading partner. In spite of this, questions over China’s continued recovery and further questions on whether we are seeing the end of the rally in equities Read more