3 Stories in the global economy that should not go un-noticed
Markets continued their rally last week, with the Dow cracking 14,000 for the first time since 2007. Boosted by positive employment news, all the major indices continue their climb. Last week saw the release of a flood of economic data. In an unexpected surprise, U.S. GDP contracted in the fourth quarter by 0.1%. January’s final consumer sentiment number beat expectations, as consumers regained confidence lost during December’s fiscal cliff debate; though people are still worried about the new tax increases and gas price hikes.
Here are the 3 stories this week that rose above the noise:
Brazil to Scrap Food Taxes as Rousseff Fights Inflation
We are keeping a close eye on emerging markets, as they are one of our 2013 growth themes. This article highlights Brazil’s plan to scrap federal taxes on a basket of staple foods in an effort to slow inflation, which increased to 6.02 percent through mid-January.
The Brazilian economy has recovered at a slower-than-expected pace, and the administration is seeking alternative measures to rein in inflation, instead of raising the benchmark interest rate, which sits at a record low 7.25 percent.
Amidst a Banking Dry Spell, Small Businesses Kickstart Themselves
In a recent opinion piece from Reuters, Zachary Karabell discussed the recent phenomenon of “crowdfunding,” in which individuals form a network and provide funding for causes, or in this case, business ideas. Global financial institutions have remained tight and cautious lenders even as the global economy has rebounded from financial crisis of 2007-2009.
This has left small business owners and entrepreneurs with fewer sources of capital. As a result, many promising business ideas have turned to websites like Kickstarter, which allows individuals to collectively fund projects for very small amounts. While this model is still getting off the ground and is not currently competitive with traditional forms of lending, Karabell sees crowdfunding potentially disrupting the banking model the way digital music changed the recording industry.
Housing Packs Punch for U.S. Growth in 2013 and Beyond
Bloomberg published a recent article highlighting the housing recovery’s widespread impact on the U.S. economy, including a rise in consumer purchasing power from rising home prices, acceleration of durable goods orders from increased home construction, and increased bank lending. Additionally, rising home prices have increased property tax revenues, helping state and local governments close budget deficits.
Many economists foresee the housing recovery accelerating in 2013. According to Moody’s Analytics Chief Economist Mark Zandi, “the housing recovery will kick into a higher gear as the year progresses. We’re going to get a lot of juice from the channels through which it affects other parts of the economy.”
