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US economy fears are unfounded says Invesco

Fears that the downturn in the US housing market will cause instability and retrenchment in the wider US economy may be unfounded, says Invesco Perpetual.

It adds that despite the sharp falls at the end of last week the US market, measured by the S&P 500 index, actually ended the week up 1.4 per cent.

In Europe markets also recovered some of the sharp losses with the FTSE 100 index rising 2.3 per cent as the intervention from central banks calmed markets.

Invesco Perpetual chief economist John Greenwood says conventional signals suggest that the US economy will continue to grow and will not face recession.

He says: “Moreover, there are numerous offsets to the downturn in the housing and financial sectors, enabling the overall US economy to remain buoyant. It is still possible for a second-round deterioration in the housing market to occur with spillovers to more financial institutions.

“However, provided the current credit crunch does not spread to the larger global banks, then the end of the credit bubble need not spell the end of the business cycle, only the end of some of the more egregious, low yield-induced financial engineering that we have seen in recent months. If this remains the case, then the prospects for an extended US business-cycle expansion remain healthy.”

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Auto-enrolment: pay attention or pay the price

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As a chief executive officer of a business in the financial services sector, I have been dealing with the introduction of auto-enrolment for our clients for some time, but I can also speak from an employer’s point of view, having to go through the process ourselves.

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