Скачать или смотреть Investors are looking for stabilization in economic activity: Invesco's strategist

Brian Levitt of Invesco and Greg Boutle of BNP Paribas join "Squawk on the Street" to discuss the state of the markets with mixed economic data.

The United States, China and the European Union account for one half of the world economy.

With the magnitude and scope of their trade and financial flows, those three large economic systems are fully capable of setting the pace of global business cycle dynamics – especially if they effectively coordinate their demand management policies.

Unfortunately, the policy coordination issue is an old pious wish, despite the fact that the G-20 had been set up precisely for that purpose.

So, as always, the U.S. will continue to be the pace-setter of the global economy at the cost of its half-a-trillion dollar trade deficits serving as net contributions to jobs and incomes in the rest of the world.

The U.S., however, is in no position to do that, but that is the price it has to pay for its failure to organize an appropriate burden sharing of running the world economy with its main trade partners.

With its huge budget and trade deficits, its soaring public debt and alarming deterioration of external liabilities, Washington has no room for tax cuts or higher public spending. All it’s got, figuratively speaking, are the Federal Reserve’s printing presses – as long as the expected cost and price outlook allows the central bank to keep reasonably anchored inflation expectations.

Luckily, that’s what the Fed is looking at now.

The index measuring prices of consumption expenditures, excluding food and energy, has stabilized around an annual rate of 1.5%, comfortably below its 2% target range.

Unit labor costs, the key indicator of underlying inflation, are also stable. During the first nine months of 2019 they came in at an annual rate of 1.9%, roughly identical to readings observed over the previous two years.

The latest business surveys show the same picture of stabilizing or even weakening prices in recent months. And those surveys don’t indicate disruptions of global supply chains in the wake of widespread trade disputes.

Bond markets seem to agree by reflecting stable inflation expectations. The Fed, therefore, has the option to respond with further easing in case of weakening demand and employment creation.

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