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Wednesday, December 01, 2010

Misc: Fed's Beige Book, Goldman takes the "over" on GDP in 2011, and more

by Calculated Risk on 12/01/2010 02:05:00 PM

Fed's Beige Book showed the "economy continued to improve":

Reports from the twelve Federal Reserve Districts indicate that the economy continued to improve, on balance, during the reporting period from early/mid-October to mid-November.
Manufacturing activity continued to expand in almost all Districts, with relatively strong growth seen in metal fabrication and the automotive industries.
Housing markets remain depressed, with several Districts reporting further weakening during the past six weeks.
• In a research note today, "A Brighter US Economic Outlook", Goldman Sachs upped their 2011 real GDP forecast (this is the first time their outlook is above consensus in five years):
We have raised our sights for 2011, calling for real GDP growth to average 2.7% for the year versus 2.0% previously. We expect growth to pick up further in 2012—to 3.6% on average for the year—though judgments that far out are clearly tentative. ... Although our revised outlook implies a meaningful drop in the jobless rate, it will remain high by historical standards, ending 2012 at about 8½%.
On the conference call, Goldman highlighted several downside risks: Spillover from Europe, falling housing prices and possible premature fiscal tightening.

Note: I took the "over" during the weekend: The recent improvement in economic news . This forecast is still for sluggish growth and the unemployment rate is unacceptably high.

• Barry Eichengreen writes a scathing review of the Irish "rescue". Reprinted at the Irish Economy blog: Ireland’s Reparations Burden
The Irish “program” solves exactly nothing – it simply kicks the can down the road. ... This is not politically sustainable, as anyone who remembers Germany’s own experience with World War I reparations should know. A populist backlash is inevitable.
• The Federal Reserve released details of borrowing by financial firms, and others during the financial crisis.