Fiscal cliff could help U.S. avoid road to Japan – but probably won’t

November 12, 2012

The “fiscal cliff” is widely seen as a massive threat looming over a fragile U.S. recovery. But with a little imagination, it is not difficult to see how the combination of expiring tax cuts and spending reductions actually presents an opportunity for tilting the budget backdrop in a pro-growth direction, even if political paralysis makes this scenario rather unlikely.

Roaring auto sector could charge up U.S. growth

November 2, 2012

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Economists love motor analogies, and for good reason: they are very useful in illustrating the ebb and flow of economies. In coming months, maybe even years, the help from the auto sector could become a lot more literal, argues Paul Dales, senior U.S. economist at Capital Economics in London. In particular, he expects rising sales following years of depressed consumer spending on vehicles in the wake of the Great Recession could add as much as 0.25 percentage point to U.S. gross domestic product growth per year over the next four years. Here’s why:

Resurging inflation to put a dampener on India’s festive spend

November 1, 2012

A perfect storm may be gathering over India’s economy, brought on by a peak in inflation just as the country’s festive season, which is critical to consumer demand, gets under way.

Unsaving the U.S. economy

October 30, 2012

The U.S. savings rate sank last month to its lowest since November, official data showed this week, in a sour reminder of how the economy is still dangerously exposed to any financial downturn or other shocks like the fiscal cliff. Following are some facts about this usually overlooked indicator:

When interest rates rise, credit growth should… accelerate?

October 29, 2012

Latin America has defied one of the most elementary rules of macroeconomics in the past decade, Citigroup economists Joaquin Cottani and Camilo Gonzalez found in a report.

Spain’s house of cards

October 26, 2012

Looking at some of the recent trends in the euro zone debt market, one could be forgiven for thinking the region is doing alright.

Latin America: the risks of being too attractive

October 25, 2012

Ironically, an increase of capital inflows to Latin America in the last few years due to unappealing ultralow yields in industrialized countries and the region’s relative economic success is posing a threat for development, according to a recent paper that provides wider background to BRIC criticism of the latest U.S. Federal Reserve´s quantitative easing.

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

October 25, 2012

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.

Deciphering the Fed: Guideposts for progress on jobs

October 24, 2012

The Federal Reserve’s open-ended bond-buying stimulus announced last month was coupled with a promise to continue purchasing assets “if the outlook for the labor market does not improve substantially.” Central bank officials are expected to continue discussing what parameters they will take into account to define such progress, but are not expected to come to any hard and fast decisions just yet.

Could renewed U.S. economic strength turn the fiscal cliff into a fiscal ramp?

October 18, 2012

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The term ‘fiscal cliff’ has now safely transitioned from economic jargon to popular cliché. But how worried should Americans be about the growth-stunting mélange of expiring tax cuts and spending reductions set to begin kicking in at the start of next year?