Salient to Investors:
Vincent Reinhart at Morgan Stanley said:
- The US economy is on the verge of taking off even as the federal government shuts down. citing a pickup among leading indicators including the ISM factory index and homebuilder confidence.
- The economy’s resiliency in the face of broad federal spending cuts and flagging global markets is proof of its underlying strength, so as tight credit and consumer de-leveraging begin to fade, companies and households will boost spending, leading to a 2.75 percent average growth rate through 2015.
- Wealth losses, including a sell-off in stocks, would cause the constituent pressure to drive politicians back to the negotiating table – if the shutdown goes into next week, people will begin to increasingly worry.
Morgan Stanley said increases as large as the 7.2 points gained since May are historically associated with economic turning points.
ISM readings as high as last month’s typically coincide over time with an economy growing at a 4.4 percent pace.
Carl Riccadonna at Deutsche Bank Securities said manufacturing growth, employment gains, and improving housing market means economic growth is more likely to catch up with the forward-looking measures such as ISM, rather than the other way around – over the past decade, the ISM gauge has had a 67 percent correlation with GDP. Riccadonna said households are more willing to take on debt, there are stronger income prospects, housing is accelerating from record-low levels, all contribute to a domestic story.
Chris Rupkey at Bank of Tokyo-Mitsubishi UFJ said recent data indicates the economy is now better positioned to overcome any hurdles, amid a resurgence in manufacturing and world growth coming back online faster than people think. Rupkey said we are in the fifth year and seeing sustainable momentum.
Read the full article at http://www.bloomberg.com/news/2013-10-02/reinhart-inflection-point-sees-u-s-shaking-off-torpor-economy.html
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