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British pound (GBP): Consolidating first, strengthening later

Long-term fiscal sustainability is a prerequisite for a strong currency. The British pound (GBP) is well positioned in this respect: the United Kingdom is ahead in its austerity cycle compared to other developed economies. This may prove damaging for growth in the short term and temporarily weighing on the GBP, but we think that the […]

United States: Manufacturing output grew robustly in Q3

The bounce back in US industrial production was quite sizeable in Q3, and encouragingly, not limited to auto production. The overall set of data confirms that the sharp deceleration in manufacturing output growth witnessed in Q2 was partly linked to temporary factors such as the supply-chain disruptions linked to the Japanese earthquake. Indeed, industrial production […]

United States: Strong retail sales in September and sizeable upward revisions for July and August

Nominal retail sales rose by a strong 1.1% m-o-m in September, well above consensus expectations (+0.7%). Moreover, figures for the preceding two months were revised sharply upward. August’ figure was revised from unchanged to +0.3% and July’s reading from +0.3% to +0.4%. Nominal retail sales: % change annualised: Overall in Q3, retail sales increased by […]

European Central Bank: will add liquidity but refrains from rate cut

Jean-Claude Trichet announced yesterday several measures designed to guarantee large amounts of liquidity throughout 2011 and 2012. A 12-month liquidity supply operation will be launched on 25 October and another 13- month operation on 20 December. The unusual 13-month maturity is probably designed to cover end-of-year liquidity needs which are traditionally important due to accounting […]

Foreign exchange: What to expect next from the US dollar ?

The US dollar has bounced back sharply in September after it depreciated against virtually all currencies in the first part of the year. A the same time, emerging market and commodity currencies have dropped significantly. The Brazilian real for instance lost about 15% against the greenback. Another important change in the currency landscape has been […]

China: September manufacturing PMI shows that a stabilisation is more likely than a hard landing

The September manufacturing PMI in China rose to 51.2 from 50.9 in August and 50.7 in July, above market expectations (51.1). This reading was positively distorted with September being the eve of the national holidays. Therefore, the data can hardly be taken to suggest that the Chinese economy is accelerating. However, even if we do […]

Trapped between hopes of resolving the debt crisis and an economic slowdown

We have been pursuing an ever more defensive approach to investments in our portfolios since late spring this year, expressed in our steadily increasing exposure to US Treasury bonds and German Bunds. Yields on these benchmark government bonds had sunk from around 3.3% in late spring to about 1.7% by end-September. Such rock-bottom levels for […]

United States: Q3 modest reacceleration confirmed in consumption growth

Nominal personal consumption expenditure rose by 0.2% m-o-m in August 2011, in line with consensus expectations. However, July’s strong m-o-m figure was revised down from +0.8% to +0.7% and June’s reading from -0.1% to -0.2% m-o-m. In real terms, consumer spending was flat m-o-m in August, following +0.4% in July (revised down from +0.5%). As […]

United States: The Fed launches “Operation Twist”

As widely expected, the FOMC announced that it will sell short-term securities held in its portfolio to purchase longer-term securities. This action contributed to lower long-term rates. However, it is likely to support economic growth only very modestly. With GDP growth likely to continue to prove lacklustre, more monetary easing measures are likely, but probably […]

United States: Net new credit positive for the third quarter in a row in Q2 2011

Encouragingly, overall credit to the nonfinancial private sector increased further in the second quarter ($351bn annualised) for the third quarter in a row (see chart). Moreover, the pace of lending was substantially higher than in Q1 (36bn). Net new credit to non-financial private sector: in USD bn, annualised However, while net new lending to the […]

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