19 Jan 2015
Don't bet against the Us consumer - Rabobank
FXStreet (Guatemala) - Analysts at Rabobank noted the recent surge in the Michigan confidence survey.
Key Quotes:
"The Michigan confidence survey surged to 98.2surged to 98.2, the highest reading since the boom years of the mid-2000’s, and with both current conditions and expectations rising."
"It used to be said that one should never bet against the US consumer, and clearly lower oil prices (and inflation expectations dropping from 2.8% to 2.4% this year in response) are seeing shoppers feel ‘old-’ rather than ‘new normal’."
"That said, there was a massive underlying problem in the details of the survey: a further rise in those expecting to get a pay-rise this year. That consistently hasn’t happened so far, and if hopes for a sustained recovery are based on such expectations then they are arguably built on very shaky ground; deflationary gloom would then lurk round the corner. Conversely, however, if there are US pay-rises ahead, we will also be looking at a much higher Fed Funds rate in a world that is still saturated with debt, in which case we can also expect massive market volatility."
"In short, there is no easy escape from the predicament we find ourselves in, despite the escapist (equity) view that there is."
Key Quotes:
"The Michigan confidence survey surged to 98.2surged to 98.2, the highest reading since the boom years of the mid-2000’s, and with both current conditions and expectations rising."
"It used to be said that one should never bet against the US consumer, and clearly lower oil prices (and inflation expectations dropping from 2.8% to 2.4% this year in response) are seeing shoppers feel ‘old-’ rather than ‘new normal’."
"That said, there was a massive underlying problem in the details of the survey: a further rise in those expecting to get a pay-rise this year. That consistently hasn’t happened so far, and if hopes for a sustained recovery are based on such expectations then they are arguably built on very shaky ground; deflationary gloom would then lurk round the corner. Conversely, however, if there are US pay-rises ahead, we will also be looking at a much higher Fed Funds rate in a world that is still saturated with debt, in which case we can also expect massive market volatility."
"In short, there is no easy escape from the predicament we find ourselves in, despite the escapist (equity) view that there is."