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Revising growth and risks

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  • Our US team revised down 2014 average GDP (from 2.5% to 1.7% yoy), but also flag upside risks. How so? Because the existing data shows a surprising weakness in healthcare spending, which has weakened the history, but this has made GDP the anomaly in the pantheon of economic data.
  • We get confidence data from the Chicago PMI and the Dallas Fed indices today. We are positive on the Chicago figures (caveated with the normal health warnings about sentiment data tending to overreact to reality).
  • Europe shows the world its consumer price inflation (structural deflation is not in evidence, in our view). M3 money supply is also due - significant as the ECB's policy to tackle the non-existent deflation threat is to try and stimulate lending with the TLTRO, which is likely to fail in its objective.
  • The UK offers mortgage lending and consumer credit data. The Bank of England may well have an incentive to hike rates this year to head of a return of consumer leverage (as the consumer may have forgotten that rates can rise).
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