The news on the economic front continues to be mixed.
In Germany, business confidence fell to a 19-month low in April, according to Ifo, the Munich-based research group, yesterday. The institute said its business climate index fell to 93.3, the third drop in a row, from 94 in March. Ifo said that three consecutive declines signal slowing economic growth.
Elsewhere, the news is a little better.
In the US, sales of existing homes rose 1.0 percent in March to a seasonally-adjusted annual rate of 6.89 million units as an increase in single-family sales offset a dip in sales of condominiums, the National Association of Realtors said yesterday. The national median home price rose 11.4 percent from the same month a year ago, the biggest price increase since December 1980.
Japan also saw some relatively rare good news. Its unemployment rate in March fell to 4.5 per cent from 4.7 per cent the previous month, lower than market expectations, the Ministry of Internal Affairs and Communications reported today. In addition, the ministry reported that salaried household spending in March expanded a real 1.7 per cent from a year earlier, reversing a 3.8 percent fall in February. The rise in March spending came despite a real 1.0 per cent year-on-year decline in overall income of households headed by salaried workers.
Deflation in Japan also seems contained. Core consumer prices fell 0.3 percent in March from a year earlier, the government said today, but month-on-month the core consumer price index (CPI) rose 0.3 per cent, the first rise in three months. Meanwhile, core consumer prices in Tokyo, a leading indicator of nationwide trends, rose 0.2 percent in April from March.
Brad Setser, however, identifies three risks to the global economy: the US trade deficit, US consumer debt and China's investment bubble.
Meanwhile, Morgan Stanley's chief economist Stephen Roach lays much of the blame for today's precarious economic situation on the Federal Reserve.
The day is close at hand when US monetary policy must get real. At a minimum, that will require a normalization of real interest rates... Fedspeak has taken us into the greatest moral hazard dilemma of all -- how to wean an asset-dependent system from unsustainably low real interest rates without bringing the entire House of Cards down. The longer the Fed waits, the more perilous the exit strategy.
As if it is not already perilous enough.