US economic momentum has continued to ease but is still consistent with a soft landing, with the Q3 Atlanta Fed GDPNow projection at 3.2%. However, the Federal Reserve (Fed) has implied that the economy is now growing below potential, with Jay Powell (the Chair of the Federal Reserve) stating that, “My confidence has grown that inflation is on a sustainable path back to 2 percent,” at the Jackson Hole Symposium. In addition, he went on to say that “we do not seek or welcome further cooling in labour market conditions.” A wide range of labour market data (Job Openings and Labor Turnover Survey (JOLTS), average earnings and nonfarm payrolls) supports the Fed chairman’s view and the Sahm unemployment rule is also consistent with the possibility of a much weaker economy ahead. Canadian economic data is consistent with a period of growth remaining well below trend, leading to a continued adjustment within the labour and housing markets.
The European economy is mixed with a much softer landing than in the US. German economic confidence has taken a hit, with the Ifo Business Climate Index heading lower and the short-term outlook remaining negative. The Chinese stimulus package may help somewhat, but the key data around the labour market, capital spending and tighter lending standards are consistent with growth remaining well below potential growth rates. The UK seems to be holding up a bit better with an upward revision to GDP and retail sales rebounding. Corporate confidence also remains in positive territory. However, the data is merely confirming below trend growth.
China unveiled a multi-pronged stimulus package in the face of weak economic momentum and risk of prolonged deflation. On the surface, it seems to be a significant intervention, but success will be highly dependent on the ability to resolve deep underlying issues in the property sector.
To find more about the latest house views from London & Capital’s Investment Desk, read the full AndPapers Q4 2024 here.
