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This Update answers some key questions about the likely implications of the US imposing 25% tariffs against Canada and Mexico. Our current forecasts are based on the assumption of a 10% universal tariff and hence growing speculation about more aggressive …
27th January 2025
President Donald Trump’s first week back in office kicked off with a bang. He signed around 100 executive orders and strongly signalled that there were more policy changes to come. The week’s developments give us more confidence in our earlier assumptions …
24th January 2025
The declaration of a National Energy Emergency underlines President Trump’s aspiration to extend the US’s dominance in global energy markets, and his willingness to use the US’s clout as leverage will reshape global energy flows during his term. That …
23rd January 2025
Solid activity data support case for a pause Mildly stagflationary Trump policies imply maximum of two more rate cuts this year Annual voting rotation won’t affect policy outlook We expect the strength of the economy and uncertainty over immigration and …
22nd January 2025
The “America First Trade Policy” White House memorandum makes it clear that tariffs are coming, although we still have little clarity on the timing. There are some signs that a universal tariff could come later than in the second quarter as we have …
21st January 2025
The economy continues to do well with GDP growing strongly, employment growth solid and core inflation pressures easing again. We are concerned, however, that the Trump administration’s policies will weigh on GDP growth over the course of this year. …
The precarious nature of the outlook for the Federal budget deficit is well appreciated at this stage, but arguably the bigger long-term risk is the mounting current account deficit . With the primary income balance no longer in surplus and the dollar …
President Donald Trump returned to the White House today with pen already in hand to sign what is expected to be close to 100 executive orders. That flurry of executive action will set the tone on what we can expect from his administration in a wide range …
20th January 2025
Real economy still firing on all cylinders The strong December employment figures were followed by news this week of solid gains in control group retail sales, industrial production and housing starts. As a result, we now estimate that fourth-quarter GDP …
17th January 2025
Manufacturing output rebounds The strong rise in industrial production in December is consistent with the recent improvement in the survey evidence. However, we do not think this marks the beginning of a sustained recovery in the manufacturing sector. The …
The Shape of the Fractured World in 2025 The share of the fracturing global economy that is accounted for by China and its geopolitical allies contracted in 2024, leaving it under a third the size of the US bloc at the start of 2025. This fall was in part …
Strong control group bodes well for Q4 GDP The 0.4% m/m increase in retail sales in December was a little weaker than expected, with the consensus forecast as high as 0.6%, but this was actually a strong report that boosts our fourth-quarter GDP growth …
16th January 2025
Core CPI consistent with soft gain in core PCE The 0.23% m/m increase in core CPI in December appears consistent with a below-target 0.14% m/m increase in the Fed’s preferred core PCE deflator measure. Although that would leave core PCE inflation …
15th January 2025
Jump in airfare prices bad news for core PCE On the surface, the weaker than expected 0.2% m/m increase in final demand PPI and unchanged level of core final demand PPI in December seems encouraging, but they mask some price jumps in a few of the key …
14th January 2025
Raising the federal debt ceiling this year will likely come as part of a budget reconciliation package alongside concessionary spending cuts given the razor-thin Republican majority in the House. As ever, a deal likely won’t be reached until the eleventh …
13th January 2025
Still waiting for clarity on the Trump agenda More than two months after Donald Trump and the Republicans completed a narrow clean sweep in last November’s election, and with only 10 days until the inauguration, there is still massive uncertainty about …
10th January 2025
Even Republicans growing concerned about Trump’s policy plans The drop in the expectations index of the University of Michigan Consumer Sentiment Survey in January and the accompanying jump in inflation expectations suggest that consumers are becoming …
Strong across the board The larger-than-expected 256,000 gain in non-farm payrolls in December and drop back in the unemployment rate to 4.1% supports the Fed’s decision to slow the pace of rate cuts and has heightened speculation that the loosening cycle …
Whilst Donald Trump is threatening to slam the brakes on the green transition in the US, state-level officials have the tools to continue making progress on the climate front. This Update uses our Regional Climate Databank to highlight the extreme …
9th January 2025
Fed worried by potential impact of Trump policy agenda After Chair Jerome Powell made a big fuss about claiming in last November’s press conference that the Fed wouldn’t speculate about what policies the incoming Trump administration will adopt, the …
8th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
The rise in corporate bankruptcies last year is not a huge concern, but it does add to the sense that firms are struggling more than the headline GDP and labour market data suggest. That in turn supports our view that GDP growth was set to slow even …
Donald Trump’s second term could redraw the global geopolitical map. A sustainable “Grand Bargain” with China, warmer relations with Russia, or a breakdown in the relationship between the US and its traditional allies could each reshape supply chains and …
The November JOLTS data, when paired with recent employment reports, show a labour market returning to pre-pandemic norms. Meanwhile, the fall in the private quits rate to its lowest since the height of the pandemic will reassure the Fed that core …
ISM services index rebounds, but surge in prices paid a worry The rebound in the ISM services index in December will soothe concerns that the services sector is starting to run out of steam. Less positively, the surge in the prices paid index to a nearly …
Exports and imports rebound after port strike disruption The US trade deficit widened again to $78.2bn in November, from $73.6bn, as imports rebounded by 3.4%, outpacing a 2.7% recovery in exports, with shipments in both directions recovering after the …
Manufacturing outlook looking less gloomy Building on the November rebound, the further small rise in the ISM manufacturing index in December suggests the sector is starting the year in better shape after a tough 2024. The 0.9-point rise in the headline …
3rd January 2025
We forecast a 140,000 gain in non-farm payrolls in December. Meanwhile, we expect the unemployment rate and average hourly earnings growth to be unchanged, at 4.2% and 4.0% respectively. Payroll growth to normalise It has been a volatile couple of months, …
2nd January 2025
The latest FOMC meeting suggests the Fed already has its eye on President-elect Donald Trump’s inflationary policy changes. We have therefore revised up our forecast for the terminal fed funds target range, to between 3.75% and 4.00%, with one 25bp cut in …
23rd December 2024
Earlier this week we published our US Outlook . We expect the incoming Trump administration’s policies to have a mildly stagflationary impact on the economy. Assuming that Trump introduces tariffs and immigration curbs via executive action by the middle …
20th December 2024
Real economy still strong; as price pressures ease again The 0.11% m/m increase in core PCE prices in November was the smallest gain in six months, although it follows on the heels of two above-target ~0.25% gains in the preceding two months. That …
Overview – We expect the incoming Trump administration’s policies to have a mildly stagflationary impact on the economy. Assuming that Trump introduces tariffs and immigration curbs via executive action by the middle of next year, we would expect GDP …
19th December 2024
The Fed did cut interest rates by an additional 25bp today, as was largely expected, taking the fed funds rate down to between 4.25% and 4.50%. But the vote was not unanimous and, in a hawkish shift, the new median projection now shows only 50bp of …
18th December 2024
Fed delivers a hawkish rate cut The Fed did cut interest rates by an additional 25bp today, as was largely expected, taking the fed funds rate down to between 4.25% and 4.50%. But the vote was not unanimous and, in a hawkish shift, the new median …
Is the current account deficit the biggest risk to US outperformance? The precarious nature of the outlook for the Federal budget deficit is well appreciated at this stage, but what if the bigger crisis risk is the mounting current account deficit? The …
Output falls further, as post-strike aerospace manufacturing recovery delayed The fall in industrial production in November, despite the partial reversal of the earlier temporary disruptions caused by the hurricanes and strike at Boeing, highlights that …
17th December 2024
This page has been updated with additional analysis since first publication. Broad-based strength shows consumer resilience The solid rise in retail sales in November was led by vehicle sales but still showed signs of broad-based strength, with control …
Fed presented with early Christmas gift Going into this week, it already looked likely that the Fed would cut its policy rate by 25bp at its December meeting (as opposed to leaving it unchanged), and the muted November price data cemented it. Based on the …
13th December 2024
PPI gives Fed green light to keep cutting rates Ignore the fact that PPI final demand prices increased by a slightly bigger than expected 0.4% m/m in November. The components that feed into the Fed’s preferred PCE index were universally weak and, together …
12th December 2024
Fed to continue with gradual policy normalisation Another 25bp rate cut incoming next week Fed’s projections will ignore potential impact of tariffs and immigration curbs Fed’s independence probably safe Fed to continue steady policy easing We expect …
11th December 2024
Core price pressures remain slightly elevated, as housing eases The 0.31% m/m increase in core CPI in November, which left the annual core inflation rate unchanged at 3.3% for a fourth month in a row and pushed the three-month annualised rate up to an …
Cut or skip? This week, Governor Christopher Waller signaled support for continuing the loosening cycle, but noted he could favour a pause this month if “our forecasts of slowing inflation and a moderating but still-solid economy are wrong”. While that …
6th December 2024
Upward trend in consumer confidence continues While the headline University of Michigan Consumer Sentiment Index remains below its average over the first half of the year, the jump in December suggests that household spending growth is likely to remain …
Reversal of disruptions lifts payrolls The solid 227,000 gain in non-farm payrolls in November was driven partly by the reversal of the disruptions that weighed on hiring in October, but still implies that underlying employment growth was a touch stronger …
The incoming Trump administration’s proposed crackdown on immigration means labour force growth is likely to slow toward zero. That would pull down potential GDP growth to less than 2% and labour shortages would contribute to increased inflationary …
4th December 2024
ISM services index drops back to three-month low The fall in the ISM services index to 52.1 in November is not too concerning, given it was driven partly by a slump in the supplier deliveries index, but it does lend some support to our view that GDP …
The rebound in job openings in October suggests that labour market conditions are stabilising at a healthy level. Meanwhile, despite a small rebound in the private quits rate, it still points to wage growth slowing sharply. The rebound in job openings to …
3rd December 2024
Although the Republicans completed a clean sweep in the recent election, we are sceptical that this opens the door to additional fiscal stimulus. We do expect the original Trump tax cuts, which are due to expire at the end of next year, to be extended. …
This page has been updated with additional analysis since first publication. Post-disruption rebound can’t hide weakness The rebound in the ISM manufacturing index in November was as expected following recent hurricanes and the end of the Boeing strike, …
2nd December 2024
We held an online session on US import tariffs on 26th November. (See a recording here ). In this Update we answer the questions we were most asked. What are Trump’s motives for threatening tariffs and will he follow through? Trump has spoken about using …
29th November 2024
