United States: Q4 GDP and FOMC Meeting this week24 January, 2011, 15:05. Posted by Zarathustra
Tags: Economy, FOMC, GDP, Inflation, United States
Source: St. Louis Fed
The first estimate for the fourth quarter Gross Domestic Product of the United States will be out on Friday. Consensus forecast is looking at a growth rate of 3.5%. Retail Sales would appear to be a strong driver for the last quarter GDP. In nominal terms, retail sales have returned to the pre-crisis level, while it is still way behind in real terms.
Source: St. Louis Fed, Census Bureau
Although the US economy seems to be in a better shape now, I feel rather uneasy to say that the global economy is on the right track, and I find the idea of the economy entering a long-term growth cycle absurd. Despite my initial pessimism on the quantitative easing, the US economy is indeed picking up some momentum over the past few months, even though the housing market remains quite weak. And despite the fear of deflation, we are actually now seeing inflation edging up around the world, so the danger of deflation seems to have subsided for now. If the risk of deflation did indeed subside, there will then be the danger of inflation. Inflation has been high in the emerging economies due to quantitative easing, and China economy is overheating, which, if not handled correctly, will produce disastrous result. That alone will put global economy back into recession given the size of the China economy now. Not to mention the terrible state of public finances in the United States, both at the federal government level and states and local government levels. You will never know for how much longer will bond investors remain confident in the ability and willingness of the US government to repay the debts.
On the same week, the Federal Reserve Federal Open Market Committee (FOMC) will be meeting on Tuesday and Wednesday. No change should be expected from this EOMC meeting, while we will be paying attention to any changes in the tone of the statement after the meeting, and see if there are any major disagreements among members on their assessments of the economy and the need to maintain the extremely loose monetary policy.