After traveling to Asia for nearly two weeks and enjoying the warm and friendly nature of the region, I return to grumpy America where airport staff seem hardly inclined to focus on what a customer means. Try comparing the welcome from airport staff at Narita (Japan), Changi (Singapore), and Atlanta (USA). And this is with the same airline! But beyond the grumpiness in me, due mainly I am sure to the lack of sleep in the last few days, I noted with some depression that several articles and data points, called out in today’s US print edition of the Wall Street Journal, point to a flagging world economy. Data points to rate rises in the New Year, and even beyond, and less likely in 2015.
Worker Pay Stagnates on Soft Productivity – new data on wage growth and productivity suggest that firms are not yet having to pass pay increases onto employees. This suggests that though unemployment is now low (5%), the apparent squeeze on employment is not real or widespread. The lack of wage growth is one of the main factors holding the US Fed back, when it comes to a rate rise. The lack of productivity is more long term and also effecting the West in general – and portends a deeper concern with the economy. For without productivity growth, our abilty to pay ourselves more (for a given unit of work/output) will remain flat, or even fall.
Europe Sees Slow Growth – New forecasts for growth in Europe has led ECB leaders to reinforce the likelihood that they will infact increase QE in Europe, this promoting again the “race to the bottom” among competing currencies around the world. Competitive devaluations by (first) the US, then the ECB, and then Japan, are in a viscious cycle. The US effectively started the last round when it did not raise rates in September. The ECB and Bank of Japan have signalled their willingness to increase QE and we are just waiting for them to take action. This will likely push the US into respond through either delaying the rate rise again, or even adding to QE themselves.
From today’s US print edition of the Financial Times: UK Central Bank Signals Later Rise in Rates – True to form the data around is attracting central bankers as a lamp attracts moths. The Bank of England presented new data suggesting lower growth and inflation and this in turn signals a later rate rise. The following is from the article in
All together now….