http://bloomberg.com/apps/news?pid=20601109&sid=aspyu0OPzV1M&refer=home
Merrill Cuts 2009 U.S. GDP Forecast: Chart of the Day (Update1)
By Mark Gilbert
July 22 (Bloomberg) -- Merrill Lynch & Co. economists clipped their forecasts for U.S. growth, making revisions that they described as ``adjusting to the new reality.''
``Just like consumers, who are insulating their windows and making fewer trips to the malls, we are adjusting our economic forecasts to the new high-oil-price reality, not to mention the latest round of trauma in the mortgage markets,'' New York-based economists Sheryl King and Drew Matus wrote in a report.
The chart of the day shows the quarterly change in U.S. gross domestic product in green, with the annualized figure in red. Merrill now expects the economy to contract by 0.5 percent in 2009, after previously forecasting growth of 0.5 percent.
``We expect GDP to plummet 2.5 percent in the fourth quarter, and see a similar decline in the first quarter'' of 2009, wrote King and Matus. ``With the consumer likely to remain under duress into 2009 and inflation fears likely to abate, we continue to expect the Federal Reserve to cut interest rates early next year.''
Figures scheduled for release on July 31 are expected to show that the U.S. economy grew at an annualized 1.8 percent in the second quarter, according to the average forecast of 23 economists surveyed by Bloomberg News, up from 1 percent in the first three months of the year.
To contact the reporter on this story: Mark Gilbert in London at magilbert@bloomberg.net
Wednesday, July 23, 2008
Tuesday, July 1, 2008
David Rosenberg wrote:
"We are still astounded over all the inflation calls out there
And, as the latest ML fund manager survey showed, not one investor is bullish on
bonds: Many investors are confusing absolute with relative price shifts and
believe that commodities are the only source of the inflation process. This is pure
bunk, in our view. We had plenty of cyclical bear markets in bonds (early and late
1980s; 1994 and 1999) when commodities were still in their secular bear markets.
Those periods cited in parentheses were notable for booming domestic demand
and tightening labor and product markets. Clearly that is not the case today. And
then there are those that claim that the CPI is being understated. No, no, no. It is
actually overstated.
Look at the real world – the owners’ equivalent rent index is running at +2.6%, but
anyone who follows KB Homes knows that home prices are actually down 17%
(and net orders have collapsed 42%). The Manheim index of auto prices sank
0.8% MoM in May and is down 6.3% YoY – the most negative trend in five years.
But in the official CPI data, auto pricing is shown to be just -0.3% on a YoY basis.
So guess what? If we substitute the KB home price print and the Manheim auto
transaction price index for what the BLS uses, the headline inflation rate is
running at -4% as opposed to +4%. Add to that the department store inventory
price index which is now running at -0.6% YoY – is that a well publicized retail
sector deflationary statistic?"
The question is does the retail idea that inflation is uncontrollable become a self fulfilling prophecy?
"We are still astounded over all the inflation calls out there
And, as the latest ML fund manager survey showed, not one investor is bullish on
bonds: Many investors are confusing absolute with relative price shifts and
believe that commodities are the only source of the inflation process. This is pure
bunk, in our view. We had plenty of cyclical bear markets in bonds (early and late
1980s; 1994 and 1999) when commodities were still in their secular bear markets.
Those periods cited in parentheses were notable for booming domestic demand
and tightening labor and product markets. Clearly that is not the case today. And
then there are those that claim that the CPI is being understated. No, no, no. It is
actually overstated.
Look at the real world – the owners’ equivalent rent index is running at +2.6%, but
anyone who follows KB Homes knows that home prices are actually down 17%
(and net orders have collapsed 42%). The Manheim index of auto prices sank
0.8% MoM in May and is down 6.3% YoY – the most negative trend in five years.
But in the official CPI data, auto pricing is shown to be just -0.3% on a YoY basis.
So guess what? If we substitute the KB home price print and the Manheim auto
transaction price index for what the BLS uses, the headline inflation rate is
running at -4% as opposed to +4%. Add to that the department store inventory
price index which is now running at -0.6% YoY – is that a well publicized retail
sector deflationary statistic?"
The question is does the retail idea that inflation is uncontrollable become a self fulfilling prophecy?
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