One of two desk anchors - the significant flaw to St estimates regarding US consumer activity. This anchor was set in September when observers were preparing their estimates with their eyes in the mirror.
Because our job is to isolate price change ahead, we are not so much interested in results in the absolute as vs expectations. Thus, clients knew the odds were very high that spending results would flatten estimates. This is what happened.
Now most economists, having been caught with their pants down, have hitched up and corrected their models. Not by enough. Thus, clients are to expect spending results to strengthen into year and through Q1, and, by more than forecast.
Fed recklessness (QEII) spiked commodity prices. Earlier, the so-called Arab Spring played its role. Now that price pressures have eased, and key - now that consumers have accepted the E-Z mess as a permanent fixture, not to worry, they are back at the malls. (Consumers may have something there. As E-Z banks contract lending, which they will, US banks will swoop in.)
Finally, based on this surprising consumer activity economists have now elevate their Q4 GDP forecast from an average of 2.4%, Nov/1 to an average of 3.3% today.
Better to anticipate, than to react to such a change.
Robert Craven
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