All the many excuses over the .2% 1Q GDP has yet transform into reinvigorated growth momentum.
The Federal Reserve of Atlanta, whose GDPNow nailed the 1Q GDP, still projects growth rates of .8% which has been vastly below consensus expectations. The gap as shown below has been astounding.
Previous estimates 2 weeks ago was at .9%.
The Fed Atlanta (bold mine)
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2015 was 0.8 percent on May 5, unchanged from May 1. The nowcast for the second-quarter change in net exports in 2009 dollars declined from -$14 billion to -$24 billion following this morning's international trade report from the U.S. Census Bureau.
And the economic growth forecasts seem as being projected into earnings growth (chart from yardeni.com). Analysts have been downscaling earnings projections.
Finally has changes in the Fed’s balance sheets been responsible?
The Federal Reserve assets relative to…
Citi econ surprise index and Non Transport Durable New Orders
...as well as ISM Manufacturing and Leading Indicators…
...reveals that negative changes in Fed assets has coincided with the recent economic downturn.
Notes the Gavekal Team (bold mine)
The quiet, subtle decline in the Federal Reserve's balance sheet continued in April. As of May 1st, the Fed's balance was at $4.47 trillion. While undoubtedly still incredibly large, the Fed's balance sheet is about $45 billion less than its peak level on January 16, 2015. Total assets at the Fed are back to levels last seen on October 17th. Total assets at the Fed have declined by nearly $29 billion over the past three months. On a rolling three-month basis, the Fed's balance sheet has been declining for the last two months.
Has the implied tightening (through the Fed balance sheets) taken the winds out of the sails of the US inflationary boom? If so, how will this impact the world?
Aside from liquidity issues, has this been a contributor to the recent spike in the yields of global 10 year bonds?
Worry not. Economics be damned, stocks will rise forever!
No comments:
Post a Comment