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The Link Between “Positive Economic News” And Consumers’ Wallets

Published 12/31/2000, 07:00 PM
Updated 04/26/2009, 11:40 PM

Some analysts are beginning to argue that the equity markets have bottomed, and are currently in a bull-run that will continue in the coming periods, while the economy has reached a vital turning point. 

The main arguments for these claims are recent reports, which, overall, have beat analysts’ expectations. However, an overview of the vast majority of these reports will only suggest that the economy has merely bounced from its low, and the overall economic data is still not very encouraging. 

Friday gave us another example, when the European equity markets and the euro rallied after the German Ifo Business Climate rose 1.5 point from a 26-year low.” It depends on what the market is focusing on, either, that the index is at a record low, or that the index rose 1.6 points,” TheLFB-Forex.com Trade Team said. 

However, these so-called “positive reports” come at an expensive cost. In order to see the pace of economic contraction slow (as is being suggested in some circles), the government will run a huge deficit over the medium to long term. “This means that the government will cut costs as much as it can once the economy is in a recovery phase or in some cases even before, and will probably raise taxes to raise additional cash,” TheLFB-Forex.com said.

 According to government projections public deficits are likely to stay at very high levels for years to come from now, something that will be reflected in the consumers’ wallets. 

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