The Global Economy is Counting on The US

As we get the first reading on Q1 US GDP growth today, it is widely acknowledged that the global economy is looking to the US economy to pull it through the 2nd half of 2015.

In his testimony to the House of Commons Standing Committee on Finance yesterday, Bank of Canada Governor Poloz stated: 

"The segments of non-energy exports that we expected to lead the recovery are doing so, and we expect this trend to be buttressed by stronger U.S. growth..."

more here: http://www.bankofcanada.ca/2015/04/opening-statement-28-april-2015/

• The Euro area (led by Germany) is showing some improvement and with the Quantitative Easing by the European Central Bank, bank lending to the private sector has reported its first increase in 3 years:

• The weaker Euro/$US has been helping exports.
• However business and investor confidence has slipped in recent data and
• The issues surrounding Greece have been overshadowing.
• China's 7% target growth rate for 2015 appears to be in jeopardy and the Chinese central bank has eased on reserve requirements to encourage borrowing.
• Despite aggressive monetary stimulus, Japan's economy has been sluggish.
• Emerging market economies have also slowed considerably, despite central bank monetary policy stimulus.

All eyes are on the US economy and the US Federal Reserve's interest rate policy:

It is expected (according to a Bloomberg poll) that US Q1 GDP grew at a below average 1%. Led by reduced consumer spending and a greater savings rate.

Much of this slower growth has been blamed on the weather, but the much stronger $US has also been a significant headwind.

As the US Federal Open Market Committee ends its 2 day meeting today (statement at 2pm) it remains to be seen how this weaker economic scenario will be received.

Most expect an interest rate increase in September as the Fed begins the process of normalizing interest rates.

With the global economy needing direction, US data and US economic activity will take on an increasingly larger role and the Fed will have to take this into consideration in its decision making process.

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