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US should show strong growth despite the turmoil in financial markets - ING

FXStreet (Łódź) - Rob Carnell from ING suggests that the US economy should continue growing at a steady pace despite the renewed market turmoil.

Key quotes

"Aside from a disappointing headline number for US retail sales in September, recent data releases have shown a significant improvement on August’s crop, suggesting that, as is often the case, poor seasonal adjustment or some other artefact was to blame for the preceding soft run of data."

"In particular, further upwards revisions to 2Q14 US GDP (now 4.6% saar) and strong labour market data underpin our sense that the US economy is still managing to grow at something like 2.5-3.0% at an underlying rate. 3Q14 GDP should come in closer to 3.0%."

"The return to strong payrolls growth (+248k in September) was bolstered by a further, and somewhat unexpected fall in the unemployment rate, which dropped from 6.1% to only 5.9% – an even stronger result than it appears – considering unhelpful rounding. Wages growth remains the sole ingredient missing from an increasingly strong labour backdrop, with year-on-year hourly wages growth even falling back slightly."

"Labour slack continues to diminish though not too fast according to the Fed. Eliminating all labour slack might take another year though that does not mean rates should stay on hold for another year."

"Falling oil prices render much of the labour market discussion redundant. Headline US inflation is set to fall sharply. It is hard to see the Fed hiking rates if inflation drops to about 1.0%. The sudden fall in bond yields reflects stock market chaos rather than a considered adjustment in interest rate expectations."

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