Little change in slow growth both the data and the debates continue to point toward 2% GDP growth, 2% or less inflation, and near-zero overnight interest rates. The downturn in the Eurozone (Germany excepted) persists and is unlikely to end soon.
Consumer confidence is at a five-year high. It has risen three straight months, reaching 81.4 in June on a 100-point scale set in 1985, highest confidence reading since before the recession. Sales of new US homes rose in May to a rate of 476,000, up 2.1%; however the median selling price fell 3.1%. With the housing market beginning to show life in certain parts of the US, a key piece of the recovery puzzle may be moving into place. Single family housing starts edged up 0.3%. Construction is certainly picking up, and continuing low mortgage rates, price acceleration and a need for increasing inventory in several markets brings confidence that the trend will continue. Builders are more optimistic than they have been in seven years.
The US must come up with some new ideas for its most important alliance, Europe, especially given Germany’s ascendancy as the Continent’s pivotal power. A reluctant Germany is central for America in dealing with China’s cyber-theft, and with Iran. The US must be a forceful and a generous guarantor to the troublesome Eurozone using Germany as the baseline. For historical reasons, Germany wants a limited profile hence the US must have a broader strategy. It cannot merely say, “Stimulate your economies.” Europe is in the midst of a full blown economic and political crisis. Agreeing to negotiate a US-European free-trade agreement is the clearest evidence that President Obama has finally come around to realize this is about the future of the West! This is about engineering an economic rebound, about securing regional stability in Europe, and about shaping the global system of rules and treaties and the legal infrastructure to decide them.