AXA GI Research Notes - 09 Feb 2010

Economic growth, global rebalancing and the labour market

Recent global growth and labour market data have been viewed somewhat benignly, even negatively, by equity markets. We’re not so pessimistic.

At this point we are less concerned with the magnitude of the recovery than we are with signs of economic rebalancing and, perhaps more importantly, that we’ve learnt some lessons.
The early signs, in our view, are quite promising.

What, specifically, are we looking for? We’ve written about this many times before. To recap: we want current account deficit countries to consume less and export more. It is in these countries that we need to see production picking up first with consumption following later in the process. In order to facilitate this we need current account surplus countries to consume and import more.

Let’s look at recent data out of the United States. The December 2009 quarter came in at a seasonally adjusted annual rate (saar) of 5.7%. The result was met by equity markets as disappointing on the back of relatively weak consumption and obvious signs that the growth is still being driven by government stimulus measures and the inventory cycle.

View the full report here.

ENDS

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