In today’s Breakfast with Dave, David Rosenberg presents five key threats facing the economy.
Of course, he remains bearish overall, but these are very specific issues that could sneak up and slam your GDP outlook.
'China is getting more active in its policy tightening moves as inflation pressures intensify. It's not just food but wages too. Headline inflation, at 4.4%, is at a 25-month high. The People's Bank of China (PBOC) just hiked banking sector reserve ratios by 50 basis points to 18.5% -- the second such increase in the past two weeks and the fifth for the year. This could well keep commodity prices under wraps over the near-term.'
'European debt concerns will not be fully alleviated just because a rescue plan has been cobbled together for Ireland as it deals with its banking crisis. The focus will now likely shift to other basket cases such as Portugal and Spain. Greece has a two-year lifeline before it defaults. This saga is going to continue for some time yet.'
'Massive tightening in U.S. fiscal policy coming via spending cuts and tax hikes. This is the part of the macro forecast that is not given enough attention. See States Raise Payroll Taxes to Repay Loans on page A5 of the weekend WSJ.'
'Gasoline prices are about six cents shy of re-testing the $3-a-gallon threshold for the first time since mid October 2008. On a national average basis, prices at the pump are up 26 cents from a year ago -- effectively draining about $25 billion out of household cash flow. Tack on the coming extended and emergency jobless benefits that lapse at the end of the month and you are talking about at least another $30 billion of lost income for the personal sector in the four quarters. These two effects come to a 1.5 percentage point negative influence on fourth quarter GDP.'
' Many goodies will expire at the end of the year and question marks linger over whether they will be extended. These range from the Build America Bond program that subsidized municipal issuance, the Bush-era tax cuts, the extended/emergency jobless benefits, and the little-known Obama tax benefit called the Making Work Pay Credit. The last initiative could be another $61 billion hit to consumer spending; most individuals don't even realise they are receiving this money as it is typically received by a reduction in federal withholding from each paycheck, typically $60 per month or so.'
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