We’re not quite sure what’s got into him, but Evolution Securities’ chief economist Ian Harwood seems to be on a one-man mission to shout bullishness from the rooftops lately.
Here’s his latest missive:
Industrial production data worldwide tells an increasingly upbeat story. Aggregated G7 data only exists for February but March will have seen a strong surge, to judge by the national data emanating from North America, Japan and Europe. And Asian production has bounced even more strongly, as has that in key LatAm economies.
Q1 GDP data has also been robust, with the G7 aggregate likely to have expanded at an annualised pace of almost 3% – its fourth consecutive quarterly gain. Again, GDP growth in Asia and LatAm has been stronger still.
World trade metrics have also been increasingly robust. Individual countries’ trade statistics have been telling an increasingly upbeat recovery story, one which is reflected overall in the CPB aggregate. And, significantly, air freight traffic – a useful leading indicator of overall trade growth – has displayed a strong upward momentum.
More timely business surveys, moreover, suggest that the “hard” economic data will keep gaining altitude. The most recent clutch of world-wide purchasing managers’ surveys, those for April, was exceptionally upbeat, with both the US ISM and Global PMI indexes reaching their highest levels since the early summer of 2004, with the forward-looking new orders components signalling still better news to come.
Suck it, bears! The problem, though, is this:
…markets world-wide have been worrying increasingly about what might go wrong, rather than focusing upon what is actually going right.
Well… you could argue that this is the whole point in making investment decisions.
Plus, when it comes to Libor, for example — which is by its very nature a hypothetical structure — fears of the possible can quickly infect the actual.
Still, this is Harwood’s closing catechism of confidence against current fears:
…the major central banks – notably the Fed – aren’t about to hike rates in the face of a non-existent inflation threat.
…the Chinese government isn’t going to see the need to come down on the economy so hard that it suffers a hard landing.
…We’re also highly sceptical that sovereign debt default fears are likely to spread from the Euro area periphery throughout the world – notably the US and Japan – as long as credible medium-term deficit reduction strategies are put in place.
And there’s even an export-led case for the Drachmark:
The Euro’s recent fall from grace should be seen not as a problem but, rather, as part of the solution for the beleaguered EMU periphery. Not only will the export growth of the largest economies – Germany, France and Italy – be boosted by the weaker currency but, in addition, the latter should aid the recovery prospect of Spain, the fourth largest.
Well, all this bullishness is a breath of fresh air, at least.
Related links:
Your global economy counterprogramming note for the week – Dan Drezner
ING’s pictorial guide to the market – FT Alphaville
Candide, ou l’optimisme (Voltaire) – Wikipedia