[B]Weekly Bank Research Center 10-29-07[/B]
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[B] Fallout from the Recent Credit Crunch: Plenty to Worry About [/B]
[/B] [/B] [/B]</p> [I][I] Stephen Roach, Head Economist, Morgan Stanley [/I] [/I]
The Bank of England’s Financial Stability Report, published this week, makes fairly grim reading. In assessing the fallout from the market turbulence that began at the end of July, the bank was always going to sound fairly stern – after all, the UK has seen its first bank run since the 19 century. But there is much more to this report than merely a concern from the central bank not to sound too complacent.
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[B] Is Euroland business confidence stabilising or wobbling? [/B]
[/B] [/B] [/B] <em> Niels-Henrik Bjørn Sørensen, Senior Analyst, Danske Bank
The first business confidence indicators for October suggest a gentle fall after the big drop in September. There have been major variations between the different indicators: Belgian and German business confi-dence fell slightly, and the Euroland manufacturing PMI fell sharply, while the Euroland service PMI and the French and Dutch business confidence indicators rose moderately. Overall, though, the picture is of a slight decrease.
<strong style=""> [B][B][B] [B] US Economy: The “R” word is cropping up [/B]
[/B] [/B] [/B] [I][I]John E. Silvia, Ph.D. Chief Economist, Wachovia[/I] [/I]
This week saw a relatively light calendar of economic reports but most of what was reported was on the downside. Sales of existing homes plunged much more than expected and orders for capital goods declined. Weekly first-time claims for unemployment insurance fell slightly, but remain firmly in an upward trend. To cap it all off, the Wall Street Journal ran a story which basically said that we were already in recession. Is such pessimism truly warranted? We do not think so. There is no question economic growth will slow in the current quarter but the economy went into the period with an incredible amount of momentum. We expect third quarter real GDP to come in slightly above our October forecast of 3.5 percent. Strong gains in consumer spending and a significant rise in exports more than offset a larger decline in residential construction. Inventories also likely posted a small drop during the quarter, which sets the stage for a bounce back in production later on.
<strong style=""> [B][B][B] [B] Canadian GDP Growth to Surpass US Despite Canadian Dollar Past Parity [/B]
[/B] [/B] [/B] [I] Steve Chan, Economist, TD Bank Financial Group [/I]
While it’s been three decades since Canadians have seen their currency at par with the once almighty US dollar, the loonie’s flight continues to prove resilient. Boosted by surging oil prices (above US$90/bbl), the loonie is now above US$1.035. However, the Canadian economy has proven equally resilient, with stable consumer spending and ongoing home price gain. US home prices, though, continue to fall on mounting foreclosures and the deepening U.S. housing slump is adversely impacting the American economy. In the past, weakness in the American economy would spill over the border in a hurry, particularly when a high Canadian dollar left exporters fully exposed. But with the developing world, not the US, now driving global resource demand, the once tight relationship between Canadian and U.S. growth has cooled. In fact, Canadian real GDP growth will likely surpass the US this year in spite of the Canadian dollar having appreciated significantly.
<strong style=""> [B][B][B] [B] Other Pre-screened Independent Contributors[/B]
[/B] [/B] [/B] [I] J-Chart [/I]
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