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.

Feed news

Latest Forex Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD skyrockets to 1.2150 on poor US jobs figures

EUR/USD has hit a new multi-month peak above 1.2150 after the US reported an increase of only 266,000 jobs in April against nearly one million expected. The dollar is under immense pressure. 

EUR/USD News

GBP/USD soars toward 1.40 after disappointing Nonfarm Payrolls

GBP/USD has been extending its gains after the US Nonfarm Payrolls badly disappointed with an increase of only 266,000 jobs in April, nearing 1.40. Earlier, sterling benefited from the UK Conservative Party's gains in local elections. 

GBP/USD News

XAU/USD soars above $1,835 after weak Nonfarm Payrolls

Gold has leaped above $1,835 after the US reported an increase of only 266K jobs in April, far below expectations. Lower US yields support the precious metal.

Gold News

Judge reaffirms order SEC must produce documents on Bitcoin, Ether and XRP in Ripple case

Ripple's victory granted the firm access to the SEC's documents on the three leading cryptocurrencies. The regulatory agency recently denied the possession of these documents.

More Dogecoin News

S&P 500 and Nasdaq: Can the Fed pump anymore after weak jobs report

Well, that was an interesting jobs report. Not too many people were forecasting that one. Just in case you missed it NFP were forecast to come in around the 1 million jobs gained but instead the US only added 266k.

Read more

Majors

Cryptocurrencies

Signatures