America’s neighbors think its economy is poised to bounce back after a disappointing first quarter.
Bank of Canada Gov. Stephen Poloz and Bank of Mexico Gov. Agustín Carstens, in separate interviews, wrote off the first-quarter U.S. growth slowdown to bad weather, the effects of West Coast port strikes and a hit to investment from rapid oil-price declines.
Many economists estimate U.S. output expanded at a rate near 1% in the first three months of the year, well below the near 3% pace many Fed officials were expecting for 2015. But they see it turning around soon.
“We think the trajectory is quite good,” Mr. Poloz said. “Our best judgment is this little period of a few months of off-color data has constituted a wobble in the [U.S.] economy. If it weren’t for the weather and the port strike, I don’t think we would be talking about it. We are expecting the second quarter to come back nicely, good growth rates for the rest of this year.”
Mr. Poloz said Canadian companies are seeing increased demand from the U.S. for capital equipment. “Machinery equipment, building materials, they have really been moving for us,” he said. “Companies can see they’re getting the orders. The phones are ringing.”
Mr. Carstens said he saw demand in the U.S. auto sector. U.S. investment in Mexican capacity is picking up, he noted. The country is producing 3.5 million vehicles a year, 2.5 million of which are exported to the U.S. Capacity in Mexico is on pace to reach five million vehicles a year by 2020, he said.
“There have been some temporary factors that might produce some mixed figures,” Mr. Carstens said. “But all in all we see a strong foundation for recovery in the U.S. economy. There might be some blips, some pockets of sluggishness, but all in all I think the economy is doing well. We feel relatively encouraged by the outlook of your economy.”
Both countries are benefiting from the depreciation of their currencies against the U.S. dollar in the past year, a development that cheapens their products and labor and boosts demand for exports.
In January, Mr. Poloz surprised markets by cutting the Canadian central bank’s benchmark short-term interest rate a quarter percentage point to 0.75%. Though the U.S. economy wobbled, he said Canada’s economy was “slammed.”
The governor has described the move as an insurance policy against the hit the commodity-oriented economy would experience from falling oil prices. In the interview, he said he didn’t see the need for more insurance now.
“We’ve got the right monetary policy,” Mr. Poloz said. “It gets us home.”
On Wednesday, the central bank said it decided to hold rates steady in its latest policy meeting.
Mr. Poloz said he saw Canadian growth lifting to 2.5% in the months ahead, after 1.8% growth in the second quarter, and inflation gradually returning to the central bank’s 2% target. He said the central bank only would consider further rate cuts if the economy underperformed the central bank’s outlook.
Mexico’s policy rate has been held at 3% since mid-2014. Mr. Carstens noted Mexico has an output gap, meaning supply exceeds demand for goods and services produced domestically. That calls for a relatively easy monetary policy to boost demand. But the weak Mexican peso, driven in part by expectations of a U.S. interest-rate increase, offset that.
“We have slack in the labor market. We have slack in the economy as a whole. That would dictate for us to be patient” before raising interest rates, Mr. Carstens said. “On the other side, we have the issue of the U.S. preparing the ground for [interest-rate] normalization. That can generate additional volatility in capital flows and financial markets. It can affect the exchange rate. That could at some point trigger an adjustment in expected inflation. That probably would force us to act.
“We have these two aspects that we need to balance. One part will ask us to be as patient as possible. The other might force us to act sooner than we might otherwise act.”
Source : http://ift.tt/1bjXdvZ
from critical infrastructure alliance http://ift.tt/1J3PSyq
via IFTTT
No comments:
Post a Comment