Archive

Reuters blog archive

from MacroScope:

Shock now clearly trumps transparency in central bank policymaking

Photo

The days of guided monetary policy, telegraphed by central banks and priced in by markets in advance, are probably coming to an end if recent decisions around the world are any guide.

From Turkey, which hiked its overnight lending rate by an astonishing 425 basis points in an emergency meeting on Tuesday, to India which delivered a surprise repo rate hike a day earlier, central banks are increasingly looking to "shock and awe" markets into submission with their policy decisions.

A wide sample of economists polled by Reuters on Monday already expected a massive rise of 225 basis points by Turkey's central bank to stop a sell-off in the lira. Instead it doubled the consensus and opted for the highest forecast.

Gizem Oztok Altinsac, chief economist at Garanti Securities in Istanbul, who correctly called the size of the Turkish rate hike said:

from MacroScope:

If at first you don’t succeed… Fed’s Evans sticks to strong forecast despite misses

It’s nice to know Federal Reserve officials have a sense of humor about their own forecasting errors. Chicago Fed President Charles Evans was certainly humble enough to admit to some recent misses in a speech on Friday .

Still, he’s sticking to his guns, arguing that U.S. economic growth will finally break above 3 percent next year, allowing the Fed to gradually pull back on its bond-buying stimulus.

from MacroScope:

Why is the Reserve Bank of India so quiet on the rupee?

 

When nobody's listening, sometimes it pays to shout from the rooftops.

Based on the rupee's daily pasting, the Reserve Bank of India might do well to look to the European Central Bank's strong verbal defense of the euro just over a year ago.

In July last year ECB President Mario Draghi declared he would do "whatever it takes" to safeguard the euro's existence.

from MacroScope:

Morgan Stanley cuts second quarter U.S. GDP forecast to 0.3 percent

The surprising weakness in June housing starts is probably only temporary, according to Morgan Stanley economist Ted Wieseman, but the softness in June nonetheless prompted him to cut Morgan Stanley's Q2 GDP estimate to 0.3 percent from 0.4 percent.

After a 9.4 percent pullback from the February cycle high, single-family starts are now running far below the pace of new home sales. Unless sales roll over -- which was certainly not the message from the surging homebuilders' survey -- supply of unsold new homes will fall to record lows in coming months, likely spurring a sharp renewed pickup in new home construction.

from MacroScope:

Regarding second quarter GDP, beware the benchmark revisions!

If there ever was a time to discount estimates of an advance GDP report, now is the time, says Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities. That's because the first snapshot of U.S. Q2 GDP growth, due out on July 31, will occur alongside the Bureau of Economic Analysis’ (BEA) comprehensive benchmark revisions.

These revisions occur about once every five years and go back to the beginning of GDP reporting in 1929. The BEA will also incorporate research and development and royalties from film, television, literature and music into the GDP accounts. The net effect could be a 3 percent upward revision to the level of output.

from MacroScope:

What’s a Fed to do? Taper talk persists despite missed jobs, inflation targets

As the Federal Reserve meets this week, unemployment is still too high and inflation remains, well, too low. That makes some investors wonder why policymakers are talking about curtailing their asset-buying stimulus plan. True, job growth has averaged a solid 172,000 net new positions per month over the last year, going at least some way to meeting the Fed’s criteria of substantial improvement for halting bond purchases.

So, either policymakers see brighter skies ahead or they want to get out of QE3 for other reasons they may rather not air too publicly: worries about efficacy or possible financial market bubbles.

from MacroScope:

Still not thinking the very thinkable on Britain’s future

Mark these words. Not only is Britain going to avoid a triple-dip recession, but the economy won’t shrink again as far as the eye can see.

If that sounds ridiculously optimistic, don’t tell the more than 30 economists polled by Reuters last week, none of whom predict even a single quarter of economic decline from here on.

from MacroScope:

Economists boosts U.S. December jobs forecasts after strong ADP data

After a “significantly better than expected” ADP employment report, Goldman Sachs has raised its estimate to 200,000 for the U.S. Labor Department’s December nonfarm payroll report due Friday, the firm’s team of economists said. Separately, initial jobless claims were higher than expected for the most recent week, but the Labor Department reported some holiday distortions, the economists noted. “Overall, the data since our preliminary estimate last Friday have been strong enough to prompt us to revise up our forecast for nonfarm payrolls to 200,000,” the economists concluded.

Goldman wasn't the only firm to revise its estimates. Jeoff Hall, Thomson Reuters' resident economist, counted as many as five, though not all of the forecast changes hinged solely on ADP.

from MacroScope:

Economists revise down third quarter U.S. GDP forecasts as business investment missing in action

Richard Leong contributed to this post

U.S.durable goods orders rebounded a solid 9.9 percent in September following the prior month’s plunge. However, a proxy for business investment was essentially stuck in neutral. This was sufficiently worrying to JP Morgan economists to force them to revise down their estimates for third quarter U.S. economic growth down to 1.6 percent from 1.8 percent. Barclays economists also marked down their Q3 GDP forecast by 0.2 percentage point, putting it at 1.8 percent. The Reuters consensus forecast for the number, due out on Friday, is 1.9 percent.

JP Morgan economist Mike Feroli:

Don't let the headline fool you: the September durables report was a big disappointment. In particular, the weakness in the capital goods figures leaves intact our concerns regarding the capex outlook. In light of today's report we are revising down our expectations for tomorrow's 3Q GDP report from 1.8% to 1.6%. We continue to look for 2.0% growth in 4Q, though there is now some downside risk to our business investment projection for next quarter. […]

from MacroScope:

India inflation consistently tough to pin down

High inflation is a drag on economic growth in the world’s second most populous country and matters immensely to over 400 million people, or over a third of India’s total population, who struggle to earn enough to feed their families three meals a day.

The particularly volatile nature of inflation in India has confounded policymakers and small business owners and has left economists, who are often running complex statistical models based on a dearth of reliable data, with a poor forecasting record.

  •