European And Us Markets Diverging
The economies of Europe and the United States may be moving in different directions, according to some analysts.
Monday, October 27, 2014
MarketWatch reported that while European economic growth is inconsistent at best, the US may soon enter its greatest expansion in nine years. Thus far, the fiscal concerns of Europe have remained on that side of the Atlantic.
A new report coming out on Thursday from the US Commerce Department is forecast to indicate a third quarter growth rate of 3%. Additionally, a MarketWatch survey of economists believed the fourth quarter will witness 3% expansion, as well.
The Federal Reserve will likely call an end to its economic stimulus program this week. While the economy has shown positive signs, like low unemployment claims and rising sales, MarketWatch reported that it will take more business investment and uninhibited consumer spending for the US to be in safe territory.
“The fundamentals of the economy are stronger now,” Gus Faucher, senior economist at PNC Financial Services, told the news source. “We don’t have the same drag from government-spending cuts. Corporate balance sheets are pretty good. Households have less debt. The economy is adding 200,000 jobs a month.”
Deflation affects Europe, US differently
The term ‘deflation’ usually conjures up images of plummeting wages, prices and economic growth. But sometimes deflation can actually benefit a nation’s economy, according to Bloomberg.
In the case of Europe, the former is true – the Eurozone is close to an outright decline in prices as inflation reached the lowest level in five years at 0.3%. In the case of the US, it’s the latter – rising supplies of oil and natural gas pushed energy prices down, benefiting the economy.
So far this year, the S&P 500 has gained 6.3% while the Stoxx Europe 600 lost 0.3%. While the Federal Reserve plans to end its asset-buying program, the European Central Bank is likely to increase its purchases as an effort to combat their low inflation.
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