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Are banking problems economic problems?

| Posted by: Paul Donovan | Tags: Paul Donovan

  • Two European presidents and the Canadian prime minister come together to talk about the wreckage of a free trade deal. It is hard to describe the veto by a region representing less than 0.5% of the EU population as "populist", but it is a reminder that markets can be complacent about political risk.
  • The market expects UK third quarter GDP to have grown over 2% y/y. The economic consequences of the referendum result are more likely to seen in trend growth data than in the near-term cycle (price data is where the economic consequences are likely to be more immediate).
  • Euro area M3 money supply is one means by which economists can assess whether banking system problems have translated into the real economy. If the credit transmission mechanism is weakened, broad money supply growth will be impacted.
  • US durable goods data is not necessarily as exciting as it sounds as there is a legitimate question as to whether the data accurately captures capital spending, or whether definition problems create a distortion.