Wall Street down 1.5% and FTSE 100 falling 0.9% on worries about US economySigns of weakness in the US economy have sent markets, already nervous after the Greek election result, tumbling sharply.Investors had been betting that the US was on the growth track, making up for slowdowns elsewhere, particularly in China and the eurozone.A global slowdown, strong dollar and weakness in the oil sector all likely contributed to orders weakness in the second half of last year. The drop in capex will weigh on growth, though stronger consumer spending should keep GDP from slowing too much.The Census Bureau just reported that US durable goods orders unexpectedly dropped 3.4% in December. In addition, the number for the previous month was revised down to -2.1% (was -0.7%). This weak performance in the fourth quarter comes on the back of a very strong rise in capex shipments in the third quarter. So to us, the decline in the fourth quarter does not point to a sharp deceleration in investment activity. It does, however, dash hopes that the strong performance in the third quarter marked the beginning of an accelerated upward trend. And the lackluster performance of capex orders, the leading indicator, at the end of last year does not suggest any significant improvement for the coming quarter, either. As a result, and as we have pointed out on several occasions before, the US economy continues to rely primarily on its proven engine of growth: the consumer. Continue reading...
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