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The summer results season is almost over and so far there is little to indicate a global economy in trouble.
Once again, several of the largest global technology companies have blown up expectations for how much money they should make. Both Amazon, Meta and Alphabet were able to report increased earnings for the second quarter.
The exception was the battle cranes Apple and Microsoft, both of which disappointed the market’s expectations.
– According to the aggregated figures, it was once again better than expected. It is still stronger than expected earnings growth, says Olav Chen, head of allocation and global interest at Storebrand.
He believes that the analysts possibly had too low expectations of the companies.
– It is possible that the consensus estimates were somewhat pessimistic, but there is no recession to track in that sense.
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He reminds us that monetary policy tightening does not have an immediate effect on the economy.
– Many are surprised at how well both companies and households have managed through one of the fastest monetary policy tightening cycles of all time. Nevertheless, we see that the rate of growth is slowing down.
Colleague Anders Johansen, stock manager at Danske Bank, agrees that this summer’s results season went “better than feared”.
– It has been discussed for a long time that a recession could have an impact on the results, but it does not seem to be happening yet, says Johansen.
Recession on the horizon
The question of recession, or economic decline, is something that looms large in the minds of most economists. Ever since central banks around the world started raising interest rates to combat inflation, economists have been trying to estimate whether or not we are facing a global recession.
– Do you think we are facing a recession in the next two years?
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– A recession in the next two years? I’m pretty sure of that. But if you ask me about the next six months, there is much more uncertainty, says Johansen.
Anders Johansen is a share manager at Danske Bank. (Photo: Øyvind Elvsborg) More…
– I think it is highly likely that the US will have a recession in one to two years, which is actually more optimistic than the consensus. An important nuance is that what people describe as a soft landing is precisely a postponement of a recession that will come, says Chen, adding:
– What I am saying now is that we are late in the business cycle, although the cycle can live longer. There were many who thought we were going to have a recession now, a year ago. Now the market has thrown in the cards and believes in a soft landing.
Chen believes that the effects of the interest rate hikes have not yet come into play, while unemployment remains low.
Johansen points out that it is difficult to know exactly when a recession begins. This is because many of the key figures that describe the state of the economy, for example unemployment, are estimates that are revised regularly.
– I think that the labor market is less strong than many people think. There continue to be negative revisions on how many jobs have been created in 2022 and 2023, he says.
Johansen points to an analysis by economist and former Fed employee Danielle DiMartino Booth which shows that 800,000 fewer jobs were created in the US in the 4th quarter of 2022 than previously thought. This only came to light in a later audit.
Different macro image
When it comes to the big picture, Johansen believes that the macroeconomic situation in the USA looks brighter than in Europe.
– The macro picture shows that the USA has done well, while Europe has done a little worse. Inflation in the US has clearly come down and it has been a positive surprise. In Norway it has been the opposite, as one of the few countries in the world where we have rising inflation.
DN and the dog Arthur explain inflation
Why has everything become so much more expensive?
02:17
Published: 17.07.23 — 11:41
This week there will be inflation figures for July for both the USA, Europe and Norway. Johansen refers to estimates that predict that inflation in this country will moderate somewhat. At the same time, he notes that food and rent prices can pull inflation in the opposite direction.
Historic oil haul
Johansen also believes that it is important to keep an eye on the price of oil, which has increased by eleven percent in the last month and is now at USD 85 per barrel with Brent Spot.
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– The oil price has crept up again.
Every week the EIA (US Energy Information Administration) comes up with changes in the US oil stocks.
– Last week there was a record-breaking drawdown of crude oil from the American warehouse. Such a large withdrawal has never been registered since it was established in 1982. It is worth following up on whether this was real or an error that will be corrected next week. (Terms) Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links, which lead directly to our pages. Copying or other forms of use of all or part of the content may only take place with written permission or as permitted by law. For further terms see here.
2023-08-06 18:16:29
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