Strong Performance of the US Economy Surprises the Mainstream

Yet another confirmation of my hunches.

From Reuters, (bold highlights mine)

The U.S. economy is gaining steam as factories churn out more cars and slowing inflation boosts spending power, putting the country on stronger footing to resist an economic storm gathering over Europe.

Recent readings of the U.S. economic pulse have steadily topped analysts' expectations. Many now think the fourth quarter will prove stronger than the third, when the economy expanded at a 2.5 percent annual rate. Forecasting firm Macroeconomic Advisers, for example, sees a growth rate of 3.2 percent over the final three months of the year.

While a widely expected European recession will likely drag on the U.S. economy next year, the United States will be able to lean into that headwind more than was possible just a few months ago.

"There is enough momentum in the near term to withstand some pain from overseas," said Michelle Meyer, an economist with Bank of America Merrill Lynch in New York.

U.S. industrial output rose last month by the most since July, helped by higher production of motor vehicles and parts.

The current upswing points to a continuation as evidenced by leading economic indicators (LOI)

From Bloomberg, (bold highlights mine)

The index of U.S. leading indicators climbed more than forecast in October, signaling the world’s largest economy will keep growing in early 2012.

The Conference Board’s gauge of the outlook for the next three to six months rose 0.9 percent, the biggest jump since February, after a 0.1 percent September increase, the New York- based research group said today. The median forecast of 56 economists surveyed by Bloomberg News projected the gauge would advance 0.6 percent.

Gains in consumer spending, manufacturing and homebuilding, combined with fewer job losses, point to an economy that is weathering the turbulence in financial markets caused by the debt crisis in Europe. Nonetheless, a 9 percent jobless rate and political gridlock over deficit-cutting have hurt confidence, which may be a hurdle to a further pickup in the pace of growth.

Many popular mainstream analysts mainly of the Keynesian persuasion have been predicting an economic downswing that would lead to a recession. The news above only contravenes their forecasts.

And like momentum traders, many of the mainstream analysts (experts), given their wrong assessment and forecasts, appear to be chasing the upside momentum by adjusting their forecasts. One doesn’t need to be an expert to seek “comfort of the crowds”.

Here is what I wrote at the end of October,

Importantly, as I have been repeatedly saying, I don’t see the imminence of a recession risk for the US economy for the simple reason that money supply growth has been exploding.

And a possible evidence of the diffusion of money supply growth has been the very impressive record breaking growth of US capital spending. Capital spending growth should be seen as a leading indicator which should mean more improvement in the employment data ahead. Besides, record capital spending growth demolishes the popular mythical idea of a liquidity trap.