So, now what?
Today’s 3.4% advance estimate of second-quarter gross domestic product arrived a touch short of the 3.5% forecast that the dismal-science consensus called for, and landed even further astray of the 3.8% pace registered in the first quarter. But today’s GDP report wasn’t weak enough for the bond market, which quickly interpreted this morning’s data as being more of the same, namely, the continuation of an economic expansion that’s been rolling along.
Monthly Archives: July 2005
M IS FOR MOMENTUM
The government’s first crack at second-quarter GDP hits the streets tomorrow. The crowd’s looking for an inflation-adjusted annualized rise of 3.5% in the U.S. economy for April through June, according to The Street.com. If so, that would be slower than the 3.8% posted in the first quarter. What are the chances that the pace of second-quarter economic growth surprises on the upside? Something more than zero, to judge by recent measures of the economy’s pulse.
THE EARNINGS TRAIN CHUGS ALONG
The stock market in July has been setting new highs in the post-crash era. The S&P 500 for a time on Monday traded over 1238, the highest since mid-2001, and yesterday closed nearby that level at 1231.16. Yes, equity prices generally are still a long way from the glory days before the tech bubble burst. The close of 1527.46 set on March 24, 2000 still stands as the all-time high for the S&P 500, or roughly one-quarter higher than yesterday’s close.
BODMAN’S CLARITY
Government leaders so rarely speak directly that when they do embrace clarity it’s a striking pose. And a sign of the times.
DISSECTING THE MANAGED FLOAT
The People’s Bank of China announced yesterday the release of its currency from the chains of its former peg. Or, to be precise, the yuan will ebb and flow as defined by a managed float administered by its central bank master. Think of it as a cross between a peg and a true float: a little of each and something less than either.
DISSING THE GOLD STANDARD
In case you hadn’t heard, gold’s historical role as a monetary medium is no longer relevant. That’s the message from Federal Reserve Chairman Alan Greenspan, who suggested as much yesterday during testimony to Congress, which is expected to be his last in an official capacity before his term as a Fed governor expires in January.
THE DEMAND TRAIN ROLLS ON
Oil demand will soon outpace oil supply, warned Matthew Simmons in a July 1 talk to the American Association of Professional Landmen, an oil and gas trade group. Simmons, an outspoken voice warning of looming energy challenges, is also chairman of Simmons & Co., an energy-focused investment bank in Houston. “Demand has become a runaway train,” he warned, echoing a message in his recently published book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.
RESEARCH ROOM UPDATE
Is inflation targeting worth the effort? It’s a topical question considering that a fan of the mechanical system for managing a nation’s money supply is reportedly on the short list of potential successors to Alan Greenspan, who retires in January as chairman on the board of governors at the Fed. Meanwhile, a new piece from the St. Louis Fed weighs in on the subject of inflation targeting by way of an essay titled “The Effectiveness of Monetary Policy,” which today joins the other tenants in the Research Room.
THE NEW NEW SENTIMENT SHUFFLE
The bond market today found more incentive to sell the benchmark 10-year Treasury Note. That includes fresh admonitions from Morgan Stanley’s Richard Berner, the firm’s chief U.S. economist, to “buy TIPS, sell bonds.”
INFLATION BEATS A HASTY RETREAT
Inflation may or may not be dead as a long-term threat, but after digesting this week’s serving of price reports for June it’s harder to lose any sleep over this erstwhile enemy of central banks everywhere.