Evidence is mounting suggesting that the U.S. economy is strengthening while the rest of the world is deteriorating.In their latest FX Pulse note, Morgan Stanley’s currency team write about how the U.S. seems to be the only decent source of growth in the world lately. Here’s their commentary on recent economic data (emphasis ours):
Meanwhile, Japan’s trade balance has slipped back into the red due to an 8.1% export decline. Exports to Asia, which account for more than half of Japan’s total exports, fell by a rapid 9.0%Y pace after a 4.4% decline in June. Shipments to the EU fell 25% in July from a year earlier, the biggest decline since October 2009, while those to China slipped 12%. Demand from the US marginally helped offset the Asia-led weakness, with exports to the US rising for the ninth straight month by 4.7%, but starkly lower than June’s 15.1% gain.
Indeed, US domestic demand conditions have improved, as indicated by recent retail sales data. Rising prices in the housing market have helped keep leveraged homeowners from moving into negative equity. As households see their main assets appreciating, they may somewhat reduce their saving while increasing consumer spending accordingly.
The analysts think that the US can lead the world away from recession. But that all depends on housing.
Once again, the US economy could pull the global economy away from the cliff of economic contraction, but in order for this to occur, the US housing market must to maintain its current momentum. Hence, we continue to watch US housing market data as an important factor driving our risk perception.
So far, the U.S. housing market seems to be getting footing.
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