Batch of good data continues
Whilst the situation in Europe is stabilising, in the United
States there are increasing signs, such as durable good orders and vehicle
sales, that the recovery is spilling over from housing to other sectors of the
economy. This is not only a welcome, but also a necessary development. Indeed,
house prices have risen significantly this year and higher interest rates
affect first and foremost these prices. As such, if the spill-over from housing
to manufacturing and other services does not hold up, Bernanke's "tapering
plans", might not be sustainable
Labour market and vehicle data confirm recovery beyond
sequester
In fact, the drop in public spending, which should peter out
in 2014, has been compensated by a temporary reduction in the savings rate. The
continuous pick-up in vehicle sales and the steady improvement in job creation
confirm that after the "sequester", i.e. in 2014, growth should
further pick-up. This means that the policy divergence might well persist into
2015, which ultimately should lead to further US dollar strengthening.
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