My Weekly Column – September the 28th

It was initially published in French here

Different elements must be noticed this week to understand the macroeconomic outlook

The first element is Janet Yellen’s speech. She talked one week after the press conference following the last Fed’s monetary committee. In her discussion of the US monetary policy, everyone was able to find what he wanted to find. Pros and cons of a rate hike have arguments in her speech to feed their own perception. The situation remains highly uncertain on monetary policy side

The second point is related to the French economy. With the second GDP estimate for the second quarter, we have details on behaviors. Before that, we note that the French profile is marginally stronger. The first quarter GDP growth is still at 0.7% (non-annualized rate) and the second at 0% but the carry over growth for 2015 is higher at 0.87% versus 0.83%. To converge to 1% which is the government target, a mere 0.18% is needed in each of the two remaining quarters of this year. Before the new estimate it was 0.25%. Continue reading

The Fed Keeps Its Rate Unchanged

In its decision not to increase its interest rates, the Fed simply suggests that it prefers to act later than too early. It still has the feeling, particularly with regard to the global environment and the risk associated with it, it’s a bit too early. A shock to the global economy could change the profile of the US economy and the Fed does not want that. It prefers that the trajectory of the economy is more robust. In other words, even if it considers that the economy is robust, it does not make the assumption that it is a sufficiently strong and stable trajectory to withstand a  marked shock from the outside.
The low rate of inflation and expectations of a slower convergence towards the target of 2% account for a large share of the Fed decision. In fact, there is still no pressure on the productive apparatus and thus there is no reason, for the US central bank, to rush into the tightening of its monetary strategy.

Will these conditions have changed in December? Or will it be necessary to wait until 2016? It is too early to say but the Fed seems in no hurry to act.
(13 of the 17 members of the monetary policy committee expect a higher fed funds rate at the end of this year. Nevertheless, at the end, it’s Janet Yellen who decides)

My Weekly Column – September the 14th

Different points to keep in mind from last week

The first point is the upward revision of the Euro Area growth figures for the first and the second quarter of this year. During the first three months, the economic activity was upgraded by 0.1% to 0.5% and during spring GDP figure was inched up by 0.1% to 0.4% (2.1% and 1.5% at annual rate respectively). Carry over growth for 2015 is 1.2% at the end of the second quarter (average growth for 2015 if the GDP level remains at Q2 level for Q3 and Q4)
The growth number for 2015 should be close to 1.5%. It will probably be not hard to converge to this figure; I expect that oil price (Brent) will remain below USD 50. This would be a little higher than ECB’s forecasts at 1.4% published last week. Continue reading

3 Graphs on Chinese Trade Surplus

The Chinese external trade surplus is almost at its highest in August 2015. It is close to USD 60bn. Cumulated on twelve months, the surplus is at its highest ever. That’s what we see on the graph.
china-2015-august-comexComparing exports and imports’ profiles allows a better understanding of the trade surplus and of the impact China has on the world trade momentum. Continue reading

On the state of the Monetary Union

Synthetic publication by Thomas Philippon (NY University) on the state of the European Monetary Union.
It distinguishes different times depending on whether one is interested in the financial crisis, economic crisis or political crisis. These three dimensions overlap but do not fall within the same period.
He suggests to go faster on the Union Bank and the union of capital markets but also create Eurobills to prevent money market disruptions.