Look through the 'patchy and disappointing' US data

ON NORTH AMERICA

Recent data has been patchy and disappointing, with readings on housing and employment causing investors to reassess expectations for economic and earnings growth into 2011.

We believe expectations got ahead of themselves in the first few months of this year, and the recent sense check is reasonable and healthy. Economic incentives introduced during the financial crisis and designed to stimulate consumption are now ending. This places the onus increasingly on the corporate sector to support economic activity. Companies were quick to cut costs in the downturn and we have been impressed with how this discipline has protected profits in recent quarters. However, as wider stimulus is withdrawn, companies need to start hiring and spending if growth is to be maint...