Bernanke’s ‘it could have been worse’ does the trick
LIkE an ageing though talismanic football star, the US economy is being willed by the world to deliver again, but the world is worried his knees are shot. Recent data on the economy has triggered worries that the US is in for a long period of slow recovery at best; at worst, double-dip recession, miring the rest of the world in the downwards stateside slipstream.
The fears are real, but not conclusive. yesterday’s revised data from the US did indeed show that the US economy grew by just 1.6 per cent on an annualised basis during the second quarter of this year, down from a first estimate of 2.4 per cent.
This is not good, but Wall Street did not go into meltdown. It figured that after recent depressing data, such as poor sales of durable goods and a sickly US housing market, the news could have been even worse.
Many economists feared the downward GDPrevision between April and June might have been as low as 1.3 to 1.4 per cent. Even so, it is still a big fall in American economic activity from the first three months of 2010, which stood at 3.7 per cent and now looks a bigger false dawn with each passing week.
Meanwhile, US Federal Reserve chairman Ben Bernanke’s intervention yesterday was straight out of central bank casting. He recognised the downside, said the Fed had tools at its disposal, but didn’t say anything definite enough to turn the equity or bond markets into either a rout or a fresh buying excuse. Job done, even if US unemployment is still well up.
Bernanke said the economic recovery had softened more than expected, and that the Fed was ready to take further steps to help that limping recovery.
He indicated quantitative easing might be used again, but did not say when or what the triggers would be. As it looked like the buying by the Fed of long-term securities was therefore not imminent, the price of US Treasuries fell as some bondholders took profits.
And as it clearly does not look like US interest rates will rise from their lows any time soon either, the stock market stayed calm as well.
It all had the feeling of “it’s bad, we knew it would be, but it could have been even more bad so let’s not panic – for now”. It helped sentiment. The FTSE 100 was up about 45 points at the close, at which time the Dow Jones index across the Atlantic was ahead 1 per cent.
Coalition's dilemma is bordering on impossible
I WoNDER whether Business Secretary Vince Cable may be going out on a limb with both his fellow coalition government ministers (ok, the Tory ones) and a fair swathe of the public in urging that Britain’s competitiveness should not be hamstrung with excessive border controls.
Cable’s intervention, which will be strongly welcomed by the Confederation of British Industry, came after new data showed a jump in net migration to Britain of 20 per cent last year – up to 196,000 from 163,000 in 2008.
The Business Secretary can fairly point out that the rise was due to a fall in the number of people leaving the Uk to live overseas as the number of non-EU work permits fell.
But it remains a ticklish issue because for many people business efficiency is just one important factor to be considered in immigration policy, not an unthinking touchstone for common sense.
It looks like the Tories with their trumpeted cap on work visas at the last election were the quickest of the three parties