美国近期经济观察

For the recent U.S. economy, I would like to highlight a couple of key issues here.中国华尔街博客空间)@j)C/ct%l

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First of all, as expected, the Fed kept the Fed Funds rate unchanged at 5.25% in its January FOMC meeting. In its statement, the Fed viewed the higher inflation as the dominant near-term risk. Yesterday, Fed Chairman Ben Bernanke updated Fed’s view on inflation and told the Congress that there were signs that inflation was waning, but warned the Fed was prepared to take action if necessary. Both equity and bond markets took his words as a sign of no further rate action from Fed in a foreseeable future yet.

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Secondly, several weeks ago, it seemed like nearly all the data pointed to a much stronger-than-expected economy, robust labor market and stabilized housing markets, some people even started to think the soft patch/slowing-down might have been behind us. However a new series of data and news coming in last week seemed to have disconcerted, if any, some of those optimistic beliefs. Based on last week’s weaker-than-expected wholesale inventory data, GDP in 4^th quarter of 2006 will be revised downward significantly. The estimate suggests that the 4^th quarter GDP will be revised down from 3.5% to around 2.5%.

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Meanwhile, the housing market also started to show some spillover effects to some consumer segments. First we were told that HSBC’s US sub-prime businesses turned south recently; then we learned from the Fed’s Senior Loan Officer Opinion Survey that banks tightened both residential and commercial real estate lending standards considerably over the past three months. Based on prior experience, tightening itself should exacerbate the current imbalances in the housing market---slowing demand vs. excessive inventory.  Moreover, in its recent conference call, Toll Brothers stated the cancellations was starting to abate, however, the numbers were still well above the company's historical average of about 7 percent.中国华尔街博客空间hNNKBc/]*fb

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All these messages seem to reinforce that many data we’ve seen over past several months might have been distorted by the temporary boost from lower oil prices and unusually warmer weather of this winter. Looks like the economy will continue to moderate for, at least, one to two quarters before coming back to the trend-like growth rate.