Most major economies still in slowdown mode

The OECD has just published its latest growth forecasts, and the outlook is not great. Composite leading indicators (CLIs), designed to anticipate turning points in economic activity relative to trend, continue pointing to a slowdown in activity in most OECD countries and major non-member economies. The assessment is little changed compared to last month for most countries. The CLI for … Continue reading

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International Monetary Fund powerless to act

The word ‘war’ has been on the lips of international negotiators in recent months. This is nothing to do with Afghanistan or Iraq, but is just as significant. This is about the possibility of a global currency war. There are imbalances in the global economy which were at the heart of the recent collapse of the world economy. What are … Continue reading

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Record US budget deficit in February

So you think we have problems in the UK? In February the US recorded a budget deficit of $220.9bn which is just under £150bn. This figure was up 14% on the same month a year ago and the biggest monthly deficit ever recorded in the US. The country has now been running a deficit for seventeen consecutive months which is … Continue reading

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US economy bounces back

Figures published at lunchtime today show that the US economy grew during the third quarter from July to September at an annual rate of 3.5%. This follows four consecutive quarters of decline from the third quarter of 2008 of -2.7%, -5.4%, -6.4% and -0.7%.   It should be noted that the US states its GDP figures in a different way … Continue reading

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US fiscal policy and the multiplier effect

Traditional Keynesian theory suggests that a change in government expenditure on real GDP has an effect greater than one-for-one. In other words as a government pumps money into the economy this will put unemployed resources to work which will have a one-for-one effect initially. However, as households receive additional income they will spend some of this and thus there will … Continue reading

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Is price deflation being overstated?

Professor Greg Mankiw of Harvard University has just pointed out that the CPI figure in the US which has moved into negative territory, may be exaggerated because it is based on a “trimmed mean estimate”, which removes the large relative price changes in each month.   He says: “As every grade school student learns when the teacher reports results of … Continue reading

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The pain is spreading

I was on the phone to a friend in South Africa last night who works in the construction industry. He told me that sales made by his company were down 25% this year, and they were giving up any wage increases in order to save jobs. This was backed up by the news released yesterday that the South African economy … Continue reading

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Deflation – coming to a country near you!

  US consumer prices fell in March by 0.1% on the previous month, and 0.4% on the same month a year ago. This is the first time that deflation has been seen in the US since 1955.   Deflation is of particular concern because it can persuade consumers not to buy now, but to wait for a bargain as prices … Continue reading

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Over 5 million US jobs lost since December 2007

According to the US Bureau of Labor Statistics last Friday, US employment fell sharply in March by 663,000 and the unemployment rate rose from 8.1% to 8.5%. Since the recession began in December 2007, 5.1m jobs have been lost, with almost two-thirds of the decrease coming in the last five months.   Justin Fox, who compiles a “comparing-the-recessions” chart shows … Continue reading

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Bad Czech and the road to hell

Just a week to go before the G20 meeting in London and the EU has stirred up trouble with the US. Yesterday, Mirek Topolanek, prime minister of the Czech Republic and currently holding the EU presidency set the 27-nation EU bloc at loggerheads with the US, by describing the US fiscal stimulus as “the road to hell.”   Topolanek said: … Continue reading

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