Yes, I think we have a nice L shaped economy with modest GDP growth and modestly improving employment, so far mostly evidenced by the increased hours worked that you’ve been pointing out. Acceleration happens when/if some aspect of private sector credit growth takes off.

If euro solvency risks are indeed fading, it should be back to an ok market for stocks (which could have a large one time shift upwards to reflect the reduced euro risk), and low rates from the Fed until something changes.

Like Japan, the budget deficit may be large enough to keep it all from collapsing but not enough for the kind of growth that would trigger higher rates from the Fed.

Karim writes:

Data off recent peaks but still firmly in expansion territory:
Anecdotes mixed:

June May
Index 56.2 59.7
Prices paid 57.0 77.5
Production 61.4 66.6
New Orders 58.5 65.7
Inventories 45.8 45.6
Employment 57.8 59.8
Exports orders 56.0 62.0
Imports 56.5 56.5

3 Responses

  1. True, long supported by dollar accumlation, which they pretty much ended with the Paulson talks which has in general resulted in the yen getting strong enough to slow their net exports. Same process that tends to drive the euro higher

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