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27 Feb 2015
Greenspan: Effective US demand extraordinarily weak – Rabobank
FXStreet (Barcelona) - The Rabobank Team reviews yesterday’s US data release and further shares Alan Greenspan’s comments on the economy.
Key Quotes
“Yesterday saw the US stumble into deflation on a headline basis with CPI dropping 0.7% MoM and 0.1% YoY. However, core CPI increased a tick more than expected at 0.2% MoM, with the last month revised up to 0.1% from flat, and on a headline basis was unchanged at 1.6% YoY (i.e., still well below target).”
“Perhaps as important, US durable goods orders saw a headline bounce of 2.8% MoM but on a core basis ex-transport rose only 0.3% (less than expected) and capital goods shipped ex aircraft/defence) were -0.3% MoM, failing to back the view that there is a pick-up in investment.”
“But please allow Mr Greenspan, who keeps popping up like an Octogenarian Jack-in-the-Box to deflate us further: he argued “Effective demand is extraordinarily weak – tantamount to the late stages of the Great Depression,” that “Lower long-term rates is not a conundrum, it’s an indication of how weak global economic growth is,” and - drumroll – that the “Stock market is great – the economy is not”.”
“Indeed, our US strategist Philip Marey says that the Fed might huff and puff, but deflation gives it no incentive to blow any markets down until Q4.”
Key Quotes
“Yesterday saw the US stumble into deflation on a headline basis with CPI dropping 0.7% MoM and 0.1% YoY. However, core CPI increased a tick more than expected at 0.2% MoM, with the last month revised up to 0.1% from flat, and on a headline basis was unchanged at 1.6% YoY (i.e., still well below target).”
“Perhaps as important, US durable goods orders saw a headline bounce of 2.8% MoM but on a core basis ex-transport rose only 0.3% (less than expected) and capital goods shipped ex aircraft/defence) were -0.3% MoM, failing to back the view that there is a pick-up in investment.”
“But please allow Mr Greenspan, who keeps popping up like an Octogenarian Jack-in-the-Box to deflate us further: he argued “Effective demand is extraordinarily weak – tantamount to the late stages of the Great Depression,” that “Lower long-term rates is not a conundrum, it’s an indication of how weak global economic growth is,” and - drumroll – that the “Stock market is great – the economy is not”.”
“Indeed, our US strategist Philip Marey says that the Fed might huff and puff, but deflation gives it no incentive to blow any markets down until Q4.”