Chart of the Month

February 2020


Source: Thomson Reuters Datastream
 

By most reckonings, the US labour market is at its tightest since the 1970s yet the usual improvement in government finances is strangely absent. If the economic cycle is mature, as we suspect, then even larger deficits will unfold in the next couple of years. As the yield on 30-year bonds dips under 2 per cent, the ability to fund a larger US budget deficit is not in doubt. The same cannot be said of the capability of fiscal policy to revive the economy.
 

January 2020

Source: Thomson Reuters Datastream
 

There is a gaping chasm between the reported confidence of US consumers and company CEOs, which has an eerie likeness to the 2006-08 period. Maybe, since October, corporate executives have lifted their mood as global interest rates have fallen, central bank balance sheets are growing again and US-China trade tensions appear to be easing. Or maybe, CEOs are battening down the hatches and consumers will discover all too soon that their expectations will not be fulfilled.


 

December 2019


After a long, if unimpressive, global economic recovery, a select group of nations has brought its budgets into balance but a much larger group is sinking back into deficit. Seriously underfunded spending burdens, such as pensions, healthcare and social care systems, are interacting with new forms of internet-based tax avoidance and corporate profit-shifting to create a structural bias to fiscal deficits. As the global activity cycle turns down and the clamour for fiscal activism grows louder, the gulf between the fiscally responsible and the rest threatens to become a chasm.

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