Charting Economic Surprises - May 2007

In May we wrote, “The bear case is well known. Collapse of housing leads to slowdown in consumer spending and an eventual contraction in the overall economy. Indeed the GDP for Q1 printed at woeful 1.3%. But the US economy has shown remarkable resiliency, generating jobs despite the problems in the housing sector and as long as employment holds up, dollars problems May be contained.” Not only was the greenback slide halted, but the dollar actually picked up 200 points on the euro as doomsdayer?s predictions did not come true. Nevertheless, the buck faces serious challenges ahead. The weather may be getting hot but the economy is cooling and unless US growth picks up dollar?s gains are likely to be capped.
Boris Schlossberg
Senior Strategist