Outlook: America's virtuous circle is unbroken
Saturday 01 May 1999
Not surprisingly, there was some pick-up in the GDP deflator. This very broad measure of prices showed inflation rising - but from a negligible 0.8 per cent at the end of last year to a lowish 1.4 per cent in January- March. About half the rise, moreover, was down to higher oil prices. There is still no sign of the economy hitting the obvious bottleneck of a shortage of workers. Even with just 4.2 per cent unemployment, there seem to be no wage pressures.
It is only human nature, especially for those of us not in the US, to think this is too good to be true. One obvious fault line is the widening balance of payments deficit. As long as foreigners want to keep buying US assets, this doesn't present too much of a problem. In 1987 foreign confidence in the US evaporated suddenly, and a particularly bad trade figure was the trigger for the October stock market crash. In theory this could happen again, but it is worth remembering that as a share of GDP, the deficit is not yet at record levels.
The vulnerability of Wall Street is the second potential weakness. But, again, it is hard to see what - apart from rising inflation - could topple share prices. There are certainly bubble-like characteristics in the technology sector, but if the effect is to pump funds into promising new areas of the economy, who's worrying? This is exactly what stock markets are supposed to do.
Let's suppose the worst - that the S&P does crash by 25 per cent, its average fall with the onset of recession in the post-war era. How catastrophic would that be? There is plenty of scope for stimulating the economy in the event of disaster; real short-term interest rates are no lower than average, and the government has a budget surplus.
There is simply no break yet in America's virtuous economic circle.
- 1 The truth about 'girl things': Three cheers for Heather Watson's honesty
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
- 4 Tennis fan suing Australian Open organisers for 'failing to shade spectators' during Murray match
- 5 Syrian refugee child beaten by Istanbul Burger King manager for eating customer’s leftover food
Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Saudi preacher who 'raped and tortured' his five -year-old daughter to death is released after paying 'blood money'
Rob Lowe hits out at White House decision not to meet Israeli leader
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign
Winston Churchill: From accusations of anti-Semitism to the blunt refusal that led to the deaths of millions
British Muslim leaders outraged after Eric Pickles says followers of Islam should 'prove their identity'
UK terror fears: My jihadist son returned from Syria mentally scarred – now he is being ignored
Nigel Farage: NHS might have to be replaced by private health insurance
Billy Crystal: 'Stop shoving gay sex scenes in my face'
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...