Federal Reserve Remains Bullish
NEW YORK: As American economic guru Barry Asmus memorably observed: "Economists are pessimists: they've predicted eight of the last three depressions."
Of such ilk is David Rosenberg, chief North American economist at Merrill Lynch, whose prognostications for US business in 2006 are characteristically downbeat, telling the Financial Times: "The typical (US) chief executive sees a slowing economy and acts accordingly."
And although no-one on Wall Street sees Rosenberg as Little Mary Sunshine, agencies and media owners are crossing their fingers that his latest forecast, delivered on the eve of the Easter holiday, is unduly pessimistic.
The Merrill Cassandra reduced his earlier forecast of 2.2% economic growth in the year's first quarter to 1.8%. This seemed peanuts to an innumerate onlooker like this scribe, but as his more savvy colleagues point out, it equates to a fall in GDP of over 18 percentage points.
Meantime, in the wake of historically high profits, economists and policymakers alike are scratching their heads at the stubborn weakness in business spending, with major companies apparently reluctant to reinvest their gains in the form of capital expenditure.
The latest official figures for Q4 2006 indicate US economic growth reached 2.5%.
March saw a fall in US unemployment to 4.4%, to some extent countering the gloom surrounding the frail US housing market and boosting the Federal Reserve's confidence that consumer demand will keep the economy rolling at a "moderate pace" of roughly 2% annual growth.
But for every silver lining there's a cloud. The employment data underscores the fragility of the Fed's baseline forecast that inflation will "moderate over time".
Data sourced from Financial Times; additional content by WARC staff