Photo: babblingdweeb / Flickr
Deutsche Bank economists Joseph LaVorgna and Carl Riccadona wax hugely positive about the U.S. economic outlook in a new note out this morning.Particularly convincing is that they made a prediction for today’s release of leading economic indicators that came in right on the mark for a 0.9% increase.
In fact, with LEI gains for 16 out of the last 17 months, nothing here suggests a recession:
There have never been false upswings in the LEI from which growth upturns did not ultimately materialise. Through September, the twelve-month rate of change in the LEI was +5.9% and if our forecast for October is on the mark, it will produce a year-over-year change of +6.6%. This rate is broadly consistent with above-trend economic growth.
They elaborate, saying that anyone who’s blaming M2 money growth for this increase is just not looking deeply enough at the facts: the economy is actually looking really strong right now.
The pro-growth readings on the LEI at present are due to a confluence of factors and cannot be dismissed as a distortion resulting from a single subcomponent, such as M2.
Photo: Deutsche Bank
But LaVorgna’s concluding statement is the most shocking. He suggests that the only thing holding the U.S. economy back right now is probably fear from Europe:
We have been hesitant to raise our already above consensus growth forecast in light of the sovereign debt crisis in Europe and the possibility, albeit it small, of a systemic shock to global financial markets. However, we will look to revise our forecast if the US economic data continue to surprise to the upside, which has been the case recently. At minimum, more evidence of second half economic improvement is impressive, especially in light of the various psychological shocks the economy has faced over the past several months ranging from the debt ceiling imbroglio to heightened concerns about a European sovereign default. Imagine how the US economy could perform if some of these issues could be even partially resolved.