Growth, stimulus, and economists

Posted by: Paul Donovan

17 Feb 2020
  • The US markets are closed for a holiday. Last week's data showed the consumer is doing OK, but isn't necessarily very strong. However, the consumer should still provide a fairly solid foundation to growth. It is investment spending that has been the main problem.
  • In Japan, GDP growth was very weak, collapsing on an annualized basis. Annualization exaggerates things. This is particularly true when there are one-off events in a quarter. Japan had two one-off events – a consumption tax increase and a typhoon. Nonetheless, this will not stop the media from dragging out the word "recession". This is a meaningless word (literally).
  • China offered economic stimulus over the weekend, with tax and interest rate cuts. This was expected in the wake of the coronavirus. This means economists are tweaking their patterns of growth – obvious weakness in the first quarter, then stronger growth on the stimulus thereafter.
  • There is an undercurrent of tension between the US and China over the coronavirus. This may cause investors to revise hopes of further trade deals (economists were never optimistic, seeing this as a "one and done" deal). In the Eurozone, ECB Chief Economist Lane speaks. You can never hear too much from a chief economist.

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