Macro Weekly – Surging business confidence

by: Han de Jong

  • Big Picture: Business confidence indices around the world have risen sharply during the last couple of months. This strength has yet to come through convincingly in the harder data. Given the track record of such indicators and the widespread improvement, we believe this signals an imminent acceleration of global growth. Meanwhile, we have upwardly revised our government bond yield forecasts, especially for the US.
  • US: Financial markets have moved more quickly than we thought in pricing in the Fed’s tightening cycle and, with economic data set to continue to improve, we do not see bond yields falling back from these levels. We remain of the view that US Treasury yields will rise significantly further next year.
  • Eurozone: We have revised up our forecasts for Bund yields more modestly than for Treasuries, reflecting a slower economic recovery, subdued inflation and efforts from the ECB to anchor rate expectations. Still, as last week’s developments show, the central bank will struggle to prevent yield rises all together given stronger data.
  • Asia: China’s export growth accelerated, led by strengthening demand from the US and a number of Asian economies. Meanwhile, new RBI Governor Raghuram Rajan outlined a number of positive banking sector reforms, though his monetary policy statement later this month will be of crucial importance.

Macro Weekly 9 September 2013 – Surging business confidence