There are increasing signs that 2013 could be a repeat performance for the US economy, with a strong start to the year followed by weaker growth over spring/ summer and growth recovering again during the autumn.
Short-term headwinds are gathering in the US with a very negative mix for household incomes of tax increases and a sharp rise in gasoline prices. In addition, additional fiscal tightening from ‘the sequester’ puts a temporary drag on growth. We expect this to result in a short-term US soft patch in the coming quarters.
In Asia and Europe, we look for slightly stronger growth in H1 13. Asia is lifted by stimulus in China, Japan and a positive inventory effect. In H2 13, growth is expected to taper off again as policy stimulus fades and tightening measures might begin in China. The stronger growth in Asia should have a positive spill-over to the euro area. Domestic demand in Europe will continue to be very weak.
In H1 13 and into 2014 we expect global recovery to strengthen as short-term headwinds ease and structural forces improve.
Markets vulnerable to negative news
Markets seem complacent about risks at the moment as reflected in strong momentum, and investors overweight in risk assets. However, we would expect an increase in perceived risk fairly soon, as US consumption hits a soft point and policy uncertainty resumes with the US sequester, and later negotiations on the budget resolution and increase of the US debt ceiling.
Other risk factors stem from the election in Italy and recent weakness in the French and Dutch economies.
To Read the Entire Report Please Click on the pdf File Below.
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Global Macro Views: Beware Of US Soft Patch
Published 02/25/2013, 06:33 AM
Updated 05/14/2017, 06:45 AM
Global Macro Views: Beware Of US Soft Patch
Global recovery intact, but US soft patch can create new fears
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