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Roubini Topic Archive: United Kingdom
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Temporary Employment: A New Ugly Rearing its Head in Europe?
Last week Clive Crook opined on some fallacies of labor reform, specifically related to the unions and through the Spanish experience. Labor reform is a highly contentious subject, given its close ties to welfare and politics. Based on Clive Crook’s article, I delved into global temporary employment using OECD data and noticed two things: (1) [...]
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The UK Faces a Serious Inflation Issue if Oil Pops!
Bond markets are pricing in rate hikes this year by the ECB and the BoE. Both are inflation targeters, so which one should react first to a possible spike in oil prices? What’s your answer?
(1) Neither. As FX appreciation and fiscal austerity pass through to domestic prices, the core will drag down the headline. If they hike, stagflation will result.
(2) The ECB, because it is the most hawkish of all central banks, in my view. The ECB mandates a rigid targeting scheme compared to that of the BoE. Since the January 2005, the BoE has successfully targeted inflation slightly under 2% just 27% of the time, while ECB has done so 61% of the time.
(3) The UK. The January 2011 UK inflation rate was 4% Y/Y (3.2% in November on a harmonized basis) and near-double that in the Eurozone, 2.4% according to the flash estimate.
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Comparing the Fed, the ECB, and the BoE Before Policies Diverge
This week is G4 central bank week. The Federal Reserve Bank (Fed) announces its policy decision on November 3; the European Central Bank (ECB) and the Bank of England (BoE) will make policy announcements on November 4; and the Bank of Japan pushed forward its November 15-16 meeting to be held now on November 4-5.
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Household Leverage: What Does the U.S. Have that the UK Does Not?
Earlier this week I compared household saving rates across the US, UK, Canada, and Germany. My conclusion was pretty simple:
So generally, this simple analysis would suggest that Menzie Chinn’s skepticism of a “status quo” of US consumer imports is worthy. But with the status quo firmly in place in Germany, the household saving data paint a foreboding picture – certainly for the Eurozone, but possibly for the global economy as well.
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Household Saving Rates in the U.S., UK, and Germany: (Possibly) Light at the End of the Tunnel
Menzie Chinn at Econbrowser breaks down US import data by sector to argue the following (see entire article here):
What is clear is that consumer goods do not vary that much; now, part of auto and auto parts is going to satisfy consumer demand as well, and here we do have some evidence in support of the hypothesis of the consumer going back to his/her old ways of sucking in imports. … Consumption hardly seems resurgent, so attributing the increase in imports to consumers means that one is assuming a very high share of imports to incremental consumption — something I’m not sure makes sense. So, I think the book is still open on whether the consumer is going to drive the US back into a rapidly expanding trade deficit.
Another way to look at this is by comparing global household saving rates. Specifically, I look at the household saving rates across the US (the world’s largest economy in 2007, as measured in PPP dollars – download the data at the IMF World Economic Outlook database), UK (6th largest economy), Canada (a small-open economy), and Germany (5th largest economy). The household saving ratio is calculated as gross household saving divided by personal disposable income, as reported in country National Accounts.
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Crib Notes for G7 Unemployment Rates
Unemployment rates across the G7 illustrate a broad-based labor recovery. Fantastic – now let’s get to the underlying stories.
(Note: The US is the first to release the June 2010 figures. All other unemployment rates, except for the UK, are current as of May 2010.)
Germany, France, and Italy: Germany’s labor market is ostensibly improving, as the unemployment rate continues its descent. However, don’t be fooled by these statistics: the German government is subsidizing firms to drop hours in lieu of outright layoffs.
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Global Consumer Confidence is Currently Less than Stellar
Today I wrote an article on Angry Bear, Consumers around the world are generally more upbeat, but not uniformly so, highlighting the still melancholy consumers around much of the world, especially in the U.S. Here is an excerpt from the article:
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What Would Friedman Say?
I have argued that the ECB didn’t do enough to support the Eurozone (a few examples here, here, here) – further monetary policy was warranted. As the financial crisis abates and key economies mend, I want to revisit this issue just one more time. Now, it seems that the Fed could beef up its lending, [...]
