tony's blog

Tuesday, July 5, 2011

The US Connection

The Federal Reserve has announced that it has cut its growth forecast for the US economy in the face of higher energy prices. It now estimates that the US economy will expand between 2.7%–2.9% this year, down from its April forecast of 3.1%–3.3%.

This follows on the back of recent figures published by the IMF, which has lowered its UK growth forecast expecting growth of only 1.5% this year, well below its 1.7% forecast in April and the 2% it predicted last autumn.

While the US and UK markets are very different, economic indicators across the Atlantic seems to have been plotting a parallel course to its UK counterpart. Of course, these days it is very much a global thing: a crisis in the euro zone can have a huge impact on the US markets via contagion. However I would argue that the UK rather than any of its other euro colleagues mirrors what’s happening in the US, albeit lagging a little way behind. So it’s worth keeping an eye on the US economy. Until their economy picks up we can see little hope of ours making a meaningful recovery.

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