Mixed Signals on the Domestic Front

U.S. Review

Mixed Signals on the Domestic Front

• The U.S. economy grew at a 2.6 percent annualized pace in the final quarter of 2014. The outturn was weaker than expectations. Equipment spending fell at a 1.9 percent annualized pace as businesses put cap-ex plans on hold, in part, amid the steep drop in oil prices.
  
• The fourth decline in five months for durable goods orders this week offers no reason to expect investment spending to pick up meaningfully any time soon.
  
• On the upside, housing and consumer confidence figures reported this week highlight bright spots for future growth.

Global Review

Will Greece Leave the Eurozone?

• The rise to power of the far-left Syriza party in Greece has raised the specter of Greek default and exit from the Eurozone. It will be a game of brinkmanship between the Greek government and its creditors, which are mostly other European governments and the IMF, in the coming weeks and months.
  
• If Greece were to leave the Eurozone, the probability of an extreme market dislocation in Europe is lower today, than it was three years ago. There are now institutions in place to help prevent contagion spilling over to other countries.