US slowing on schedule, monetary trends reassuring
Simon Ward
Post a Comment
A post in September noted that six-month growth in US real narrow money growth had fallen sharply, suggesting a loss of economic momentum in early 2015. This scenario seems to be playing out: Citigroup’s US economic surprise index turned negative at the end of last week after a five-month positive run. The Eurozone index, meanwhile, has recovered and is now above the US level – see first chart.
Should investors worry about US economic weakness? Reassuringly, real narrow money growth rebounded in late 2014 – second chart. It is, however, still lower than a year ago and below the level in the Eurozone. The recovery, moreover, reflects a temporary oil-driven fall in inflation rather than faster nominal monetary expansion. 
Housebuilding activity is a longer leading indicator and is also giving a comforting message, with single-family starts and permits at new recovery highs in December – third chart.
A lower oil price is a net positive for the US economy but the impact is much smaller than in the past and in the Eurozone / Japan – fourth chart. Among the large economies, Korea and India are the biggest winners.
The US economy should perform respectably during the first half of 2015 but growth may fall short of bullish consensus hopes. Positive economic surprises are more likely in the Eurozone / Japan.
View Printer Friendly Version
Email Article to Friend
Reader Comments