A fairly inconclusive set of minutes released by the Federal Open Market Committee on Wednesday evening, however it did appear to reinforce the view the Federal Reserve are not moving rates in April, and this once again gave a modest sugar rush to equity prices. Rather like the impact of sugar in the blood stream the effects wore off fairly quickly as the day wore on. This continued desire to not move further on rates seems as much driven by fears over the global economy as a lack of inflationary pressures in the US economy. The oil price was likewise boosted from a report by the US Energy Information Agency that crude oil stocks in the US fell by almost 5 million barrels, the first draw down in seven weeks. Another boost for the oil price could be a piece in Thursday's FT suggesting that demand for oil from India will soon match that from China.
Global growth concerns persist, the Federal Reserve last night, and Christine Lagarde a few days ago referring to the concerns the IMF have that global growth remains sluggish. She encouraged central banks to do more, perhaps several central bankers may ask Ms Lagarde for a few helpful tips. Some papers reported that they believed that the IMF were likely to cut growth forecasts again.
One could argue that despite all this negative sentiment the global picture has started to look a little brighter. Unemployment in the US remains at the bottom end of the range, on Thursday the weekly jobless claims number came in below expectations. The recent Purchasing Managers surveys, hardly stellar, but better than expected. Recent Institute for Supply Management service sector new orders, business activity and employment came in higher than anticipated. Likewise, the recent Chinese economic data has beaten expectations. If nothing else the fear the US economy is entering a recession appears to have receded.
Not only oil but other commodity prices have recovered from lows. As for Europe the picture is a slightly hazier one, 2nd estimate for Q4 GDP came in no worse than expected. January’s industrial production for the euro area beat expectations, however February was more disappointing. The final March Purchasing Managers composite index came in at 53.1, this was slightly below expectations but well above the critical 50 mark that is considered the difference between an expanding and contracting economy. It is fair to say inflation and rising employment remains elusive in the euro area.
One is definitely not trying to paint a rosy picture of the global economy, but I think it’s worth making the point that economies grow on optimism and not pessimism. World leaders keep wanting the individual to spend and corporates to invest yet they continue to tell everyone what a gloomy world we live in. Perhaps it may be worth every now and again suggesting the world leaders at least try and make us feel a little more optimistic and maybe some of it will rub-off.