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United States: Q3 consumption growth likely to be lacklustre

As expected following the publication of upbeat nominal retail sales data two weeks ago, last week’s figures show that nominal personal consumption expenditure rose by a solid 0.5% m-o-m in August 2012. However, as surging gasoline prices pushed the deflator up by almost the same percentage, in real terms, consumer spending rose by a much […]

Markets prone to twin influences of monetary policy and systemic risk

he US and European central banks are widely perceived as committed to a path of frantic monetisation in order to avert the risk of deflation. However, the unlimited QE (quantitative easing) of the US and its European cousin OMT (‘outright monetary transactions’ – of peripheral sovereign debt) differ significantly in terms of the likely monetary […]

Systemic risk and the business cycle: the two main risk factors driving the global economy

The state of the world economy is currently dominated by two main risk factors (drivers): 1) the global business cycle, currently in a slowdown and 2) the systemic crisis, driven primarily by the European debt crisis. Over the past few weeks however, the systemic crisis has been somewhat relieved. In particular, the liquidity risk has […]

United States: Total net new credit reached a new cycle high in Q2 2012

Encouragingly, total net new credit bounced back strongly in Q2 2012, reaching a new cycle high. However, what is driving economic growth is not the level of net new credit but its change. To quantify that factor, we are calculating a “credit impulse”, which is actually the year-on-year change in net new credit, measured as […]

Risks of euro falling apart forcing the ECB out of its shell

The September 2012 issue of Perspectives is now available for reading and downloading. Here is September’s topic of the month: unless interest rates fall swiftly round the eurozone’s periphery, the eurozone will be fated to come apart at the seams. By hinting at the possibility of buying up sovereign debt, the ECB is making its […]

United States: strong headline retail sales in August, much softer core figure

Confirmation of an improvement in consumption growth in Q3 US core retail sales were soft m-o-m in August but auto sales grew robustly. While last week’s retail sales figures were not particularly strong, they nevertheless bring comfort to our expectations that consumption growth will pick up from 1.7% q-o-q annualised in Q2 to around 2¼% […]

Risk indicators falling back

The September 2012 issue of Perspectives is now available for reading and downloading. Today, we look at asset classes and currencies: Implied volatility, a key parameter we use for drawing up our forecasts for how financial markets are likely to behave, diminished quite noticeably over the summer. This reflects the driftdown by most indicators of […]

Swiss franc weakness unlikely to last

We believe the weakening of the Swiss franc downward move is unlikely to last over the medium run. The EUR/CHF exchange rate will again become a two-way bet and we remain cautious on the eurozone crisis. Peripheral countries are in recession and Germany is slowing. Austerity programmes are a powerful drag on growth and public […]

Monetary policy still being relaxed

The September 2012 issue of Perspectives is now available for reading and downloading. Here are this month’s headline news from around the world. Central banks in the developed world are thinking about further quantitative-easing measures even with official interest rates already at or close to zero. Central bankers in the emerging world have been pressing […]

United States: QE3 officially launched

The Federal Open Market Committee (FOMC) from the Federal Reserve Board announced in its yesterday statement that it was launching a new asset purchase programme, the so-called QE3. The intentions of the FOMC are to purchase $40bn per month of agency mortgage-backed securities. The programme will begin today (some 23bn are expected to be bought […]

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