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The best of times, the worst of times

  • The best of times are (sort of) in evidence in the US, with the Congressional Budget Office projecting a lower Federal deficit this year - at 4% of GDP. Temporary factors do flatter the numbers, but economic growth is helping with revenues and welfare costs.
  • US industrial production is forecast to decline, but this is reversing the cold weather induced surge in utility output in March (adding credence to the view that the 'soft patch' was just a weather effect). Housing data should mirror that, showing a gain in April.
  • The worst of times seem in evidence in the Euro area, where French GDP fell 0.2% on the quarter (the third time in four years France has had two consecutive quarters negative GDP). The real threat here is this spurs the French government to push for policies that are odds with those of Germany.
  • German GDP was also worse than expected at 0.1% (though positive 0.1%). Italy reported yesterday that non performing loans are at a two year high in the banking system. The Euro area's good news was that Greece saw its credit rating raised by a credit rating agency.

Listen to the audio version of this briefing.