We have noted a few times recently that the US economy faces a hiccup later this year and early next as its fiscal stimulus growth pulse crashes with year-on-year comparisons. This goes to the often overlooked fact that when it comes to GDP growth inputs, it is the rate of change in spending that matters not the absolute amount. There will be considerable growth offsets as the private economy roars back open and enjoys catch-up growth but the fiscal downdraft will be strong while we wait for the second round stimulus of the Biden infrastructure plan. Albert Edwards at Societe General has more:
With cyclical optimism so high, should investors look out for a ‘shock’ growth pause?
Reading the financial press, it seems that most commentators believe we are set for a repeat of the Roaring Twenties, most especially in the US. Optimism abounds that the consumer will unleash a wave of pent-up spending as economies reopen, backed by a handy stash of surplus savings. Combined with a new ‘can-do’ (or rather a ‘can-spend’) attitude of the fiscal authorities, all things economic and cyclical look tickety-boo – if not a tad frothy.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
