Looking for Certainty in an Uncertain World

U.S. Overview

Looking for Certainty in an Uncertain World

The forecaster’s dilemma has always been that forecasts are needed most when times are most uncertain. Forecasting is difficult, particularly when you are missing key pieces of data. How much more difficult is a matter of debate. The key is to first separate what is certain in the outlook and then make intuitive assumptions about what is missing. While the process is imperfect, it can be improved by making conservative assumptions, so that when you miss you miss small.

The government shutdown began on the first day of the fourth quarter, so the first three quarters of 2013 are in the books. Real GDP growth has averaged just over two percent during the past four years, and our third-quarter forecast is in that ballpark at 1.8 percent. The fourth quarter is just getting started. Many forecasters have speculated that the government shutdown will shave 0.1 to 0.2 percentage points a week off fourth quarter GDP growth. We see those estimates as a bit high, as much of the losses from the shutdown likely will be recouped in the fourth quarter. We see real GDP rising at a 2.4 percent pace in Q4, with stronger gains from the consumer, home building and business fixed investment.

Economic activity is expected to accelerate in 2014, as home building and consumer spending drive growth. The economy is also getting an unexpected tail wind from lower gas prices and the recent pull back in long-term interest rates. The wind down of the Fed’s securities purchases and timetable for hiking short-term rates has also likely been lengthened.

International Overview

Modest Synchronized Expansion

After a few years of up-and-down economic growth in Europe and Japan, the world’s developed economies are again in geosynchronous expansion.

Some advanced economies, notably Canada, Australia and the United States are firmly in a new cycle expansion having long ago surpassed pre-recession highs. While the Eurozone and the United Kingdom are growing again, their economies remain smaller today than when they were at their respective pre-recession highs. Although it posted the largest peak-totrough decline among the developed economies, Japan is nearly back to its 2007 high.

Many economies in the developing world initially bounced back from the 2009 global recession more swiftly than did the advanced economies. The lessons of the Asian crisis in 1997 were to keep fiscal budgets in balance and run a current account surplus to build foreign currency reserves. This put many developing economies on sound financial footing and less systemically vulnerable to the credit crunch and subsequent global slowdown. China and India were able to achieve double-digit rates of economic growth in 2010 while Brazil and Mexico both grew more than 5 percent.

As we look at how the global economy will evolve over our forecast horizon through 2015, we see a modest synchronized expansion. The advanced world is picking up the growth pace as parts of the developing world are moderating.

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis

Latest Forex Analysis

Editors’ Picks

EUR/USD bounces from 1.18 after robust German Manufacturing PMI

EUR/USD is trading above 1.18 after German Manufacturing PMI beat estimates. Other PMIs missed expectations. US fiscal stimulus and the election developments are eyed.


GBP/USD retreats amid mixed Brexit headlines

GBP/USD has retreated from the highs around 1.31 after UK minister Truss reiterated that the UK could leave without a deal. Ireland´s Coveney expressed more optimism. UK retail sales beat estimates while PMIs were mixed.


XAU/USD's reversal from $1,914 contained at $1,895 support area

Gold’s upside attempt witnessed during the Asian and European trading sessions has been halted at $1,914 on the Early US session as market sentiment plunged and the precious metal has dropped to find support at $1,895.

Gold News

Forex Today: Dollar clings to gains after the presidential debate, Bitcoin extends gains, PMIs eyed

The US dollar is holding onto Thursday's recovery, The presidential debate was more civilized than the previous one and post-event opinion polls are awaited. Earlier, hopes for a stimulus bill faded and allowed the dollar to recover. PMIs and COVID-19 statistics stand out on Friday.

Read more

WTI hits one-week low at $39.55 after Baker Hughes’ report

Front-month WTI futures’ reversal from day tops near $41 has extended to one-week lows at $39.55 on Friday after Baker Hughes reported that US oil and gas rigs increased to their highest level since May last week.

Oil News

Forex Majors