US economy is OK and Europe is in a deep mess

Latest data from the US economy points towards a weakening growth and the employment numbers were particularly weak: 411,000 out of 431,000 new jobs were temporary ones for the 2010 census. I view this report as non-significant and it does not change much the fundamentals (I don't care whether the numbers were much worse thane expected by economists - Goldman's ones in particular who were at +600.000: they must have made some nice trading profits by going short before the release).

The Commercial and Industrial Loans at All Commercial Banks, that I follow closely, improved for the first time since November 2008 at +USD 6.5 billion in April. This number is significant. On 23rd March, I was indicating that we were at or near a trough for banks' lending: this confirms my view.

Gowth will not continue at the annualized pace witnessed at the end of 2009, but I expect it to be in the 2.5 - 3% region for 2010 even if H2  will be slower due to the weakening euro that will hurt exports and a domestic situation that remains fragile.

The sick man of the world economy is Europe. Things are really getting ugly here. Politicians are very much behind the curve of events blinded by their dogmatic view of the construction of the euro-zone and the EU as a whole. Very difficult for them to admit they have been dead wrong for the past 20 years. It is much easier to attack markets and point the finger at scapegoats.

Yesterday's cancellation of a dinner between the French President, Nicolas Sarkozy, and the German Chancellor, Angela Merkel, is to me a confirmation of the deep rift between the two engines of the European construction. Germans had enough.

I will write quite extensively on Europe in the coming days.

Source:

Bureau of Labor Statistics: Employment Situation Summary
http://www.bls.gov/news.release/empsit.nr0.htm

St. Louis FED: Commercial and Industrial Loans at All Commercial Banks
http://research.stlouisfed.org/fred2/series/BUSLOANS