MacroScope

Most accurate U.S. growth forecasters say to brace for stronger data this week

Arrows shot by Olympic hopeful and member of the U.S. archery team Gibilaro are seen in the target in BranfordThe two forecasting teams that came closest to predicting the U.S. economy would nearly stall in the first quarter expect other key economic data due this week to be strong.

This gives some support to the view — which some say is more hope than a forecast — that a snap-back is already taking place as the Federal Reserve and most other analysts expect.

UBS and First Trust Advisors both forecast the world’s largest economy grew by a meager 0.5 percent on an annualized basis during the first three months of the year.

All but a handful of the other 99 economists polled by Reuters over the past week expected growth of 1 percent or more, instead of the meager 0.1 percent reported.

FT Advisors has even revised up forecasts for Thursday’s ISM purchasing managers’ index for manufacturing and Friday’s non-farm payrolls releases. The Reuters consensus is for the ISM index to rise to 54.3 from 53.7, and for 210,000 new jobs in April after a gain of 192,000 in March.

ECB still the major source of funding for banks

European Central Bank President Draghi smiles during the monthly ECB news conference in FrankfurtThe European Central Bank is still the main funding source for banks even if it is not acting as lender of last resort for governments in the currency bloc.

On Tuesday, banks took nearly 173 billion euros from the ECB at its weekly tender, the highest since June 2012 and well above a Reuters poll consensus of 130 billion euros.

The spike in actual allotment versus expectations is the highest in over a year. The amount maturing from last week was just shy of 122 billion.

Britain’s economic sprint probably tripled U.S. growth in Q1

What a difference a year makes.

This time last year, analysts and investors were nearly unanimous in their expectation for a whole lot of nothing from Britain’s economy which, after a valiant leap higher from a spectacularly successful 2012 Olympic Games hosted in London, was back to just bumping along.

Now the UK is looking to clock the best sprint in the G7 for the first three months of a year – and by a wide margin.

The Reuters poll found a consensus for 0.9 percent growth in the UK in the first three months of the year on the quarter before. That would be the best in nearly four years, and just slightly below the Bank of England’s newly upbeat prediction. The data are due on Tuesday.

U.S. new home sales: the good, the bad and the ugly

What’s happening with the U.S. housing market?

Ask three different economists and you’ll get three different answers.

While that’s not anything new, the different ways some analysts have spun the surprise — one of the biggest on U.S. data in many months — is exceptionally far from anything resembling a consensus.

New home sales – a leading indicator for housing – plummeted by 14.5 percent in March, totally wrong-footing the Reuters consensus of forecasters. They were expecting modest improvement after a decidedly poor winter for the U.S. economy on nearly all measures.

 

 

 

 

 

 

 

 

 

Here’s how some of them explained away the data.

 

The good

“Based on the data, it is easy to conclude that housing demand is rolling over, perhaps due to higher mortgage rates. Yet, this conclusion is out of synch with home prices which continue to appreciate rapidly and indeed show no sign of slowing. We believe that the answer to these seemingly diverging trends lies on the supply side. Measured as a percentage of the housing stock, total housing inventory – including shadow or pending supply – stands at the lowest level since 2005, when the housing boom was in full swing. While inventory shortages may be curtailing sales, they are unambiguously positive for residential construction and for the broader economy going forward.” – Aneta Markowska and Brian Jones, Societe Generale

How to play down a housing boom like it’s 1999

Here’s some of the top reasons from a 1999 Reuters poll on why a housing bubble wouldn’t form, which are re-appearing 14 years later.

The Bank of England will stop a bubble forming

    2013: “If there’s another bubble, the Bank of England and the Government of course have means by which we can anticipate that and ensure that that doesn’t happen again.” – Danny Alexander, chief secretary to the UK Treasury.
    1999 Reuters poll: ”Economists and property specialists say the Bank of England won’t let another inflationary boom happen. The Bank has already said it will monitor house prices closely. ‘It’s unlikely to become inflationary unless the monetary policy stance becomes too loose and that’s highly unlikely,’ said economist Trevor Williams of Lloyds Bank TSB.”

 

House prices expressed in real terms are below their peak and affordability is better

Stocks to rise? 85 percent say yes – as ever

Even a government shutdown and the prospect of an unprecedented U.S. government default – no matter how small – couldn’t shake the conviction among equity analysts that stock markets only have further to rise.

Published on Tuesday, the latest Reuters poll collected more than 450 points of data from hundreds of analysts worldwide on how 20 of the world’s biggest stock markets will perform from now until the end of the year.

Some 85 percent of forecasts predicted a positive return for stock markets between now and end-December. Thursday brought firming hopes of a  deal to ensure the U.S. does not default on its debt, and global shares have lifted for a second day on Friday. That strong consensus could well prove correct.

Forecasts for the euro zone depend more on head office location than analysis

Ask an economist a question about the euro zone, and the answer will as much depend on the location of their head office as any analysis of the data.

It’s been noted before (herehere, and here), but economists and fund managers working for euro zone-based banks and research houses tend to be optimists about the euro zone. Everywhere else – including Britain, North America and the Nordics – they tend to be pessimists.

That familiar pattern was plain to see in the latest Reuters poll this week, as economists were asked on whether borrowing costs for struggling euro zone countries like Spain and Italy were likely to return to danger levels in the next few months.

Yellen likely to replace Bernanke at Fed, but beware “overwhelming” top picks

Reuters has just published a poll of economists that shows Federal Reserve Vice-Chair Janet Yellen is the overwhelming favorite pick for President Obama to replace Ben Bernanke as Fed Chairman next year.

The poll conclusions are based on the collective thoughts of dozens of professionals who are not only paid to make these kinds of predictions, but who are also likely to have been in a conversation with people who ought to know.

But it is worth noting one spectacularly wrong call from recent history.

In a similar Reuters poll, this time just days before UK finance minister George Osborne reported that he had chosen Mark Carney, Governor of the Bank of Canada, as new Bank of England Governor, the overwhelming conclusion among forecasters was that outgoing governor Mervyn King’s deputy, Paul Tucker, would get the job.

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.

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.