MacroScope

Small rays of hope brightened Canada’s economic outlook last week

 All data released last week point to a far better first quarter growth in Canada than previously expected, prompting economists to revise up their predictions.

In a Reuters poll conducted early last month, forecasters predicted that Canada’s economy expanded by just 1.6 percent on an annualised basis in the first three months of this year.

But that consensus could prove to be too low, with many now expecting growth to be close to 2 percent or even higher, likely a welcome sign for Stephen Poloz who was named Bank of Canada’s new governor last Thursday and will replace Mark Carney on June 3.

Last Tuesday brought the first bit of good news, with the monthly gross domestic product (GDP) by industry growing at a faster pace than forecast in February, lifted by strength in potash mining, oil and gas and manufacturing.

Another pleasant surprise came on Thursday when the March report card on trade showed surging exports propelled the country to its first trade surplus in a year.

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.

Even the Bank of England, not exactly famous these days for its accuracy in economic forecasting, has said for a long time that a quarter or two of contraction here and there is to be expected. That was underlined by Wednesday’s unexpected news some policymakers voted for more bond purchases this month.

Ignore the noise around Britain’s GDP figures

One of two stories will probably emerge from Friday’s first reading on how the British economy fared at the end of last year.

If it shrank 0.1 percent in the fourth quarter as the consensus of economists polled by Reuters expects, or worse, we will hear it raises the disastrous spectre of a third recession in four years, or a “triple-dip”.

If it defies expectations by growing slightly, that risk is averted and the government will say it shows the economy is getting back on its feet.

UK’s independent forecaster takes a reality check

An unusual thing happened on Wednesday amidst all the shouting over British finance minister George Osborne’s autumn budget update which, depending on who you asked, outlined an increasingly dire or healthy state of the UK economy.

On the very near-term economic  outlook at least, officialdom actually sounded more pessimistic than most of even its harshest critics.

Britain’s independent Office for Budget Responsibility said it expects the UK economy will contract in the period ending this month by 0.1 percent — a gloomier forecast than the consensus of economists polled by Reuters, for 0.1 percent growth.

The euro zone: choose your own adventure

Forecasts about the future for the euro zone economy are starting to resemble a multiple-choice novel. Are you an economist working for an Anglo-Saxon institution? Then turn to p.65 — “Recession for the euro zone”. A German bank? Go to p.80 — “Happy days are here again!”

That simplifies the case slightly, but there’s more than a grain of truth in it. We’ve noted repeatedly that predictions about the euro zone are coloured heavily by whether someone works for an employer based inside the currency union or not.

In the past, analysts have been reluctant to forecast outright contraction for major economies.

An unpleasant surprise may lurk in euro zone GDP numbers

The euro zone economy may be doing far worse than most economists want to believe. That’s not good news for a central bank trying to rescue the single currency through a hotly-contested bond purchasing programme that has yet to get started.

The latest flash purchasing managers’ indexes, which cover thousands of euro zone companies, suggest the third quarter will mark the euro zone’s worst economic performance since the dark days of early 2009, according to Markit, which compiles them.

They predict the economy likely shrank by 0.6 percent in the quarter that finishes at the end of this month.

Biggest analyst split on ECB rate decision since euro launch

Some say the European Central Bank will cut rates. Some say they won’t.

The odds that either prediction could turn out to be true on Thursday are more even than since Reuters first began polling on ECB rates in 1999.

Even during the highly volatile, uncertain time that followed the collapse of Lehman Brothers, Reuters polls of ECB watchers always resulted in a clear majority of economists leaning toward one particular rate cut size.

In the Reuters poll taken last week, 36 of 70 economists expected the ECB to leave the refi rate at 0.75 percent, while almost as many, 34, said it would cut it to 0.50 percent.

U-turns aplenty in predicting U.S. jobs growth

 

The past year of forecasting U.S. payroll growth marks a bumpy road of U-turns on the timing of an elusive turning point to sustainable recovery, an analysis of Reuters polls shows.

In early 2011, an overwhelming majority of economists — 48 of 52 in the April poll and 38 of 46 in the May poll — said that turning point already had been reached.

More than a year later, it still seems a way off.

The U.S. economy added jobs at a monthly rate of 165,000 so far in 2012, far short of the 200,000 most say is representative of strong growth in a recovering economy.

Forecasting gymnastics on the BoE’s printing presses

The fluctuating fortunes of the British economy in the last year have left forecasters in a fix, unable to make up their minds how much longer the Bank of England’s money printing presses need to roll on.

Forecasting gymnastics on the subject could make many economists Olympic contenders for the gold medal.

Deutsche Bank, Morgan Stanley and Lloyds Bank are the latest to predict the BoE will announce that it will buy an additional 50 billion sterling worth of government bonds, taking the total amount spent in the programme to 375 billion sterling.

What have a trillion euros done for the economic outlook? Not much yet

The trillion euro sugar rush that made Q1 the best start to the year for global stocks in more than a decade has already worn off, but what is most striking is not how quickly it ended. It’s how little the economic outlook has changed.

Cheap central bank money mainly seems to have boosted stocks and the optimism of stock market forecasters, who generally are the most bullish of the lot with or without wads of cheap money.

An analysis of Reuters Polls over the past three months, starting just before the European Central Bank made the first of two gargantuan injections of cheap three-year money into the banking system, reveals what many have fretted might happen.