UK household finances: low saving as dangerous as high borrowing

UK household spending is as extended relative to income as in the late 1980s and mid 2000s, ahead of the 1990-91 and 2008-09 recessions. Those earlier episodes were associated with rapid and unsustainable credit growth; current spending excess, by contrast, … Read More

Posted in UK economy, UK politics | Leave a comment

Will US / Chinese economic divergence reverse?

Current negative sentiment in markets reflects perceived US / Chinese economic divergence. Chinese weakness is widely thought to be intensifying, dragging down global growth, while the US economy is deemed sufficiently solid to keep the Fed on track for an … Read More

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Chinese money growth responding to policy easing

Chinese monetary trends suggest an improving economic outlook. With recent easing measures yet to have their full impact, money growth may lift further during the second half. The preferred monetary aggregate here is the narrow “true M1” measure, comprising currency … Read More

Posted in China | 1 Comment

Chinese “currency war” unlikely but policy intentions opaque

Investors have been fearful of the market fallout from a rise in US official rates in September or December. In the event, it has been the unfixing of another central bank-controlled price – the RMB / US dollar exchange rate … Read More

Posted in Uncategorized | 1 Comment

UK MPC news: hawkish forecast more important than August vote

Bank of England Governor Mark Carney managed to suppress hawkish dissent at the August MPC meeting but the latest Inflation Report forecast creates a strong presumption in favour of an interest rate rise before year-end. It was always unlikely that … Read More

Posted in Inflation | 1 Comment

Global growth: business surveys supporting H2 pick-up

Previous posts suggested that global economic growth would revive from mid-2015, reflecting stronger developed-world demand following a pick-up in real money expansion in late 2014 / early 2015. Incoming business survey results are consistent with this forecast. The first chart … Read More

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Eurozone money trends still solid

Eurozone monetary trends continue to suggest a positive economic outlook. Narrow money M1 rose by a strong 0.9% in June, with the broader M3 measure up by 0.3%. Loans to the private sector, adjusted for sales and securitisation, were unchanged … Read More

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EM equities: get ready to buy?

Emerging market equities have underperformed developed markets by a further 5.5% so far in 2015, according to MSCI indices. The price to book ratio of the MSCI Emerging Markets index stood at 1.55 at end-June versus 2.24 for the MSCI … Read More

Posted in Emerging Markets | 4 Comments

Global economic / liquidity backdrop benign, supporting equities

The MSCI All-Country World Index in US dollars was down by 6.5% from its 21 May all-time peak as of Wednesday, the recent low. The modest response to “Grexit” risk and Chinese stock market chaos is consistent with the assessment … Read More

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UK Budget: big changes, few winners

The big story of the Budget is a dramatic reduction in the squeeze on departmental spending. The Chancellor made room for less spending restraint by cutting deep into the welfare budget and raising taxes significantly. He also allowed his borrowing … Read More

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