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CPI & PPI point to 0.35% m/m increase in core PCE While final demand and core PPI both surprised to the downside in February, the price increases in the components which matter for the PCE deflator were on the whole hotter than we had anticipated. As a …
13th March 2025
Powell not yet concerned by signs of weak first-quarter GDP growth Still too hot inflation and rising inflation expectations will concern the Fed But new economic projections will probably still point to some loosening this year Comments from Chair Jerome …
12th March 2025
Not as good as it looks The softer 0.23% m/m rise in core CPI in February is not as encouraging at it looks, as the components which feed into the Fed’s preferred PCE price index rose more sharply. While it will depend a lot on the PPI data tomorrow, our …
While January’s JOLTS report was not much to shout about, timelier labour market data suggest conditions look set to worsen amid DOGE’s gutting of the federal workforce. We remain optimistic for now, though, given the health of private sector hiring in …
11th March 2025
Trump tariff push descends into farce Tariff flip-flop amplifies confusion Markets reacted badly this week when President Donald Trump first imposed 25% tariffs on all imports from Canada and Mexico, with the only partial exemption for Canadian energy. …
7th March 2025
Labour market still in decent shape The modest 151,000 rise in non-farm payrolls in February and 0.1%-point rise in the unemployment rate to 4.1% confirms the economy started the year soft but is not plummeting towards a recession. Some of those fears may …
Trade deficit hits all-time high as importers continue to rush to beat tariffs The ballooning of the trade deficit to a record high of $131.4bn in January once again stemmed from a huge surge in imports as businesses rushed to fast-track orders before new …
6th March 2025
Although our forecast for first-quarter GDP growth is now down to -1.9% annualised, we still believe that, on balance, the US economy will escape recession and rebound in the second quarter, as the distortion caused by the unseasonably severe winter …
President Donald Trump's decision to grant a one-month exemption to the Big Three Automakers (Ford, GM & Stellantis) is something of a disappointment given the earlier heavy hints from his Commerce Secretary Howard Lutnick that more widespread relief was …
5th March 2025
Services sector holding up despite policy uncertainty After the slew of weaker activity and survey data in recent weeks, the small rise in the ISM services index in February should provide some reassurance that the floor is not falling from under the …
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
4th March 2025
President Donald Trump’s has claimed that there is “no room left’ for Canada and Mexico to avoid the imposition of 25% across-the-board tariffs at midnight tonight and he has reportedly signed a separate Executive Order raising the tariff rate on Chinese …
3rd March 2025
Prices already surging ahead of tariffs The fall in the ISM manufacturing index in February likely marks the beginning of the end of the recent mini renaissance, as the reality of the disruption to the sector caused by tariffs (including retaliatory …
Following the 0.5% m/m slump in real consumption in January and the massive 10% m/m surge in real goods imports, we now expect first-quarter GDP to contract by 1.0% annualised. Assuming that surge in imports reflects the front-running of tariffs, however, …
28th February 2025
Favourable base effects pull down core inflation The 0.28% m/m rise in core PCE prices in January was a big improvement on last year’s 0.5% m/m gain, but the 2.6% annual core inflation rate is still too hot for the Fed’s liking and, with inflationary …
President Trump’s attempts to reset relations with Russia have led some to suggest that he may be attempting to break apart the Sino-Russian alliance as Nixon did in the early 1970s (although in Nixon’s case, by reaching out to China). But while this may …
27th February 2025
We forecast a 170,000 gain in non-farm payrolls in February, given that most of the recent cuts to the federal workforce won’t yet have shown up in the data and employment in weather-sensitive sectors should have rebounded to a degree. Otherwise, we think …
Durable goods orders rebound thanks to strong Boeing orders The increase in durable goods orders in January was due to the volatile transport component, while core orders were unchanged. Although underlying capital goods shipments fell, business …
Could uncertainty weigh on the global economy? Instead of clearing up the uncertainty about the direction of US economic policy, Donald Trump’s victory in last November’s presidential election has only magnified it, with threats of massive punitive …
Pills, chips and automobiles After last week’s focus on reciprocal tariffs, President Trump shifted his attention this week to product-specific tariffs targeting motor vehicles, semiconductors, and pharmaceuticals. Speaking to reporters on Tuesday, he …
21st February 2025
Fed in no hurry to resume cutting rates The minutes of the Fed’s late-January policy meeting underline that, having cut rates by a cumulative 100bp, officials are in no hurry to resume loosening monetary policy, even though most still thought the current …
19th February 2025
The decision by the US and Russia to “lay the groundwork” to end the war in Ukraine marks a potentially significant turning point after three years of conflict. Negotiations will take time and the macroeconomic implications will depend on the features of …
18th February 2025
The economy continues to do well with GDP growing strongly and employment growth solid. We are concerned, however, that the Trump administration’s policies will weigh on GDP growth over the course of this year. Nonetheless, with downward progress on core …
Reciprocal tariffs will be a big deal January inflation bad, but could have been worse After a hot CPI report this week and a not-so-hot PPI report (at least not in the components that count) we estimate that the Fed’s preferred core PCE price measure …
14th February 2025
Industrial output edged higher The rise in industrial production in January is not as good as it looks as it was driven by a weather-related surge in utilities and a further post-strike recovery in aerospace & parts output. Industrial production rose by …
A weak start to the year The large fall in control group retail sales in January, together with the timelier data showing a slump in vehicle sales, suggests that real consumption fell last month. While weather effects were probably partly to blame, that …
Reciprocal tariffs a bigger deal than universal tariff President Trump appears to have abandoned the idea of imposing a flat universal tariff of 10% or 20% on imports from all other countries. But the broad criteria that will be used to assess his new …
13th February 2025
PPI brings better news on core PCE inflation Final demand PPI increased by a bigger-than-expected 0.4% m/m, but the components that feed into the Fed’s preferred PCE price measure were, on the whole, very tame. As a result, we now estimate that core PCE …
Another big Jan price surge takes rate cuts off the table this year The 0.45% m/m increase in core CPI in January will, after the spike at this time last year, add to the impression that the price data have a residual seasonality problem. Assuming the …
12th February 2025
Due to the relatively small size of the federal workforce and the large number of exempt positions, the federal government hiring freeze should have only a modest impact on payroll employment. More pain would be felt if the President follows through on …
11th February 2025
Powell gives little indication of rate cuts this year Fed Chair Jerome Powell stuck to the line that the Fed was in no hurry to adjust its policy stance in his semi-annual testimony to Congress today. Given that inflation remains above target and the …
The Trump administration’s 25% tariffs on steel and aluminum come at a time when domestic capacity utilisation and import intensity are low, implying they will have less of an impact on overall prices than was the case during Trump’s first term. The …
10th February 2025
Do not write off tariffs President Donald Trump’s U-turn on 25% tariffs for Canada and Mexico this week, seemingly in exchange for a few trivial concessions from both countries, has reignited speculation he is using the threat of trade barriers as a bluff …
7th February 2025
Inflation expectations surge due to tariffs The University of Michigan Consumer Sentiment Survey for February showed a decline in the headline index alongside a sharp rise in inflation expectations, suggesting that consumers are increasingly concerned …
The softer 143,000 gain in payrolls in January is nothing to be concerned about following the upward revisions to payrolls in November and December, which left the three-month average gain at a near-two year high of 237,000. That strength, together with a …
Join our senior economists for this wrap-up of the latest policy decisions from the Fed, the ECB and the Bank of England on Thursday 20th March at 11:00 ET/15:00 GMT. This 20-minute briefing is an opportunity to hear the latest from the team about the …
Survey evidence remains soft The fall in the ISM services index to 52.8 in December lends some support to our view that GDP growth will slow in the next couple of quarters, albeit with the caveat that the surveys have proved to be a poor guide to GDP in …
5th February 2025
President Donald Trump’s eleventh-hour decision to delay the 25% tariffs he had threatened to impose on Canada and Mexico is a good reminder of his unpredictable nature. We don’t think Trump’s U-turn necessarily means he’s bluffing about other tariffs – …
Trade deficit swells as businesses front-run tariffs The trade deficit ballooned to a 3-year high of $98.4bn in December, up from $78.9bn, as imports surged by 3.5% and exports fell by 2.6%. The strength of imports appears largely driven by businesses …
Despite showing a modest fall in job openings, the totality of the December JOLTS data are consistent with a labour market that has stabilised at a healthy level. Despite falling to 7.60m, from an upwardly revised 8.16m in November, job openings have …
4th February 2025
Manufacturing recovery to prove short-lived The ISM manufacturing index finally rose back above the theoretical no-change level of 50.0 in January, but the trade war kicking off across the continent means that the recovery is likely to be short-lived. …
3rd February 2025
Trump hits Canada, China & Mexico with tariffs President Donald Trump’s decision to impose 25% tariffs on Canada and Mexico and an additional 10% tariff on China from this coming Tuesday, (with the only partial exemption for Canadian energy imports that …
2nd February 2025
Fed in no hurry with tariffs coming soon Underlying economic growth remains solid The 2.3% annualised gain in fourth-quarter GDP came broadly in line with the updated nowcast estimate maintained by our data team. (See here .) Although GDP growth slowed …
31st January 2025
Real spending growth solid, price pressures muted December’s personal income and spending report brought news of another strong gain in real consumption, but with price pressures muted. As expected, core PCE prices increased by a muted 0.16% m/m in …
We forecast a 170,000 gain in non-farm payrolls in January, which would mark a slight acceleration from the recent average if we are right in assuming that there will be downward revision to past payrolls figures. Meanwhile, we think the unemployment rate …
30th January 2025
Underlying economic growth remains solid The 2.3% annualised gain in fourth-quarter GDP was a little weaker than the consensus estimate at 2.6%, but expectations would have come down a little after the December advance economic indicators showed a big …
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% today and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
29th January 2025
Fed moves to the sidelines The Fed left its key policy rate unchanged at between 4.25% and 4.50% and the accompanying statement suggests the FOMC is happy to remain on the sidelines, as it awaits more clarity on the potentially stagflationary mix of …
The inflationary impact of tariffs for all President Trump’s various tariff threats would, if implemented in full, trigger a rebound in consumer price inflation later this year to between 3% and 4%, which would make it much harder for the Fed to resume …
28th January 2025
Fourth-quarter business equipment investment set to decline The fall in durable goods orders in December was due to the volatile transport component, whereas core and underlying capital goods orders both rose. While real underlying capital goods shipments …
