May 16, 2011

U.S. Financial System Is More "Damp Firewood" than "Dry Tinder" Says BNY Mellon's Hoey; "Subcycle Inflation Peak" Expected in Many Countries Later This Year

LONDON and NEW YORK, May 16, 2011 — "We believe that the U.S. currently has more of a 'damp firewood' financial system than a 'dry tinder' financial system, which implies only gradual strengthening of credit-financed spending," says BNY Mellon Chief Economist Richard B. Hoey in his May 2011 Economic Update.  

"While global inflation pressures are rising, this is occurring after a period of disinflation and we expect a 'subcycle inflation peak' later this year in many countries," Hoey continued.  Important subcycle fluctuations Hoey expects include:

  • A  V-shaped pattern in the Japanese economy;
  • A drop and then a rebound in auto production;
  • A moderate subcycle cooling in the industrial sector in the next few months, and
  • An inflation surge with many countries likely to reach a "subcycle inflation peak" later this year.

Hoey expects cyclical expansion to be sustainable even as many economies experience a short subcycle slowdown in the industrial sector following the recent phase of an unsustainably rapid surge in industrial production at a time of higher energy prices and some policy tightening.  

See for Hoey's complete May 2011 Economic Update.

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