U.S. Review

• This week’s data suggest that the economic dive that goes by the alias “double dip” remains a low probability outcome. This view is reinforced by policy presentations suggesting that any future weakness would be met with further monetary easing.
• The roots of the current negative sentiment are found in the disappointing economic and jobs outlook relative to historical patterns. Fiscal stimulus associated with the Kennedy and Reagan tax cuts appeared to be more powerful than today, but the credit context of those stimulus programs was quite different.

Global Review

• More countries released second-quarter GDP data this week, and the results were generally strong. The Australian economy grew nearly 5 percent at an annualized pace in the second quarter, and growth in final domestic demand in Canada was strong.
• Indicators thus far in the third quarter show that the global expansion continues as most purchasing managers’ indices remain in expansion territory. That said, the recoveries in some major economies remain fragile, and we do not expect a truly self-sustaining global expansion to take hold for some time yet.

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