Tuesday, 5 October 2010

As US growth slows, global decoupling makes a comeback

US economic data on Monday were mixed. Reuters reports:

Pending sales of previously owned U.S. homes hit a four-month high in August, a sign the housing market was stabilizing at very low levels following its sharp drop after a home-buyer tax credit expired.

Another report on Monday showed new orders received by U.S. factories fell 0.5 percent in August, although they were up 0.9 percent excluding volatile transportation bookings.

With US economic growth looking likely to be anaemic in the near term, the global decoupling theme has made a comeback. Bloomberg reports:

Wall Street economists are reviving a bet that the global economy will withstand the U.S. slowdown.

Just three years since America began dragging the world into its deepest recession in seven decades, Goldman Sachs Group Inc., Credit Suisse Holdings USA Inc. and BofA Merrill Lynch Global Research are forecasting that this time will be different. Goldman Sachs predicts worldwide growth will slow 0.2 percentage point to 4.6 percent in 2011, even as expansion in the U.S. falls to 1.8 percent from 2.6 percent.

Underpinning their analysis is the view that international reliance on U.S. trade has diminished and is too small to spread the lingering effects of America’s housing bust. Providing the U.S. pain doesn’t roil financial markets as it did in the credit crisis, Goldman Sachs expects a weakening dollar, higher bond yields outside the U.S. and stronger emerging-market equities.

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