Filtered by Subscriptions: US Economics Use setting US Economics
Resurgence in productivity and fading ULC growth add to disinflationary pressures Non-farm labour productivity rebounded by 3.0% annualised in the fourth quarter, which means that, despite Fed Jerome Powell’s insistence at yesterday’s press conference, …
2nd February 2023
As expected following a blitz of speeches by officials ahead of the blackout window, the Fed raised its policy rate by a smaller 25bp, to between 4.50% and 4.75%, but tempered any hopes of a major dovish shift by maintaining the language in the statement …
1st February 2023
Fed sticks to its guns, but shifting data suggest hiking cycle almost done As expected following a blitz of speeches by officials ahead of the blackout window, the Fed raised its policy rate by a smaller 25bp, to between 4.50% and 4.75%, but tempered any …
Despite the rebound in JOLTS job openings in December, voluntary quits fell slightly and point to a further moderation in both wage growth and PCE core services (ex housing) inflation. Job openings rebounded to 11.0 million in December, from 10.4 …
Another recession signal flashing red The further fall in the ISM manufacturing index to 47.4 in January, from 48.4, suggests that the factory sector has yet to benefit from the improvements in manufacturing prospects in Europe and China. In particular, …
Another recession signal flashing red The further fall in the ISM manufacturing index to 47.4 in January, from 48.4, suggests that the factory sector has received little benefit from the recent improvements in manufacturing prospects in Europe and China, …
Weak ADP suggests malaise spreading to labour market The muted 106,000 increase in the ADP measure of private payroll employment will add to fears that the malaise in activity has spread to the labour market. Nevertheless, while this supports our estimate …
On the precipice of a recession Our tracking models now suggest the economy is more likely than not to be in recession in three months’ time, supporting the message from the latest surveys and hard activity data that GDP is likely to contract in the first …
31st January 2023
Easing labour market conditions pushing wage growth lower The 1.0% rise in private wages and salaries in the fourth quarter, down from a 1.2% gain in the third quarter, adds to the evidence that wage growth is slowing gradually. The Fed is still likely to …
It’s well known that, with the yield curve inverting the Fed is now racking up losses, but what is less appreciated is that the higher interest payments it is making are going mostly to foreign banks and money market funds. The Fed earns interest on …
30th January 2023
Recession denial in full effect The commentary this week dismissing the validity of the Conference Board’s leading indicator (see here ), which is currently giving an unambiguous recession warning, reminds us of the old quote from JK Galbraith that “faced …
27th January 2023
Slump in spending suggests recession could have already started The monthly income and spending figures reveal that, despite the apparent resilience of fourth-quarter GDP growth, the economy was on the precipice of a recession, and may already have fallen …
We expect a more modest 150,000 gain in non-farm payrolls in January. The annual benchmark revisions may also show a sharper slowdown in employment growth over the second half of last year than previously reported. Payrolls on borrowed time The labour …
26th January 2023
Underlying pace of growth weakens The 2.9% annualised rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter went on. We …
Underlying pace of growth already much weaker The 2.9% annualised rise in fourth-quarter GDP was a little stronger than we had expected, but the mix of growth was discouraging, and the monthly data suggest the economy lost momentum as the fourth quarter …
Many officials support downshift to 25bp hike at upcoming policy meeting. But officials still see multiple hikes beyond next week. We expect rates to peak just below 5%, with cuts starting later this year. We expect the Fed to downshift to a 25bp rate …
25th January 2023
The weakness of retail sales and manufacturing output over the final two months of 2022 has reignited market fears of a hard landing this week, with the Fed’s latest Beige Book acknowledging that activity appears to have ground to a halt. Admittedly, …
20th January 2023
The Fed’s hawkish transformation has been so marked that, if its forecasts are to be believed, over the next couple of years it would effectively be adopting the same reaction function last followed during the Greenspan and Bernanke eras between 1987 and …
19th January 2023
First came the inversion of the yield curve. Next the index of leading indicators began to fall. Then the survey-based activity indicators plunged well below the 50 mark. Finally, this week we learned that the weakness had spread to the hard data on …
Manufacturing output slumps to 14-month low The manufacturing sector appears to be in recession and, even if China’s emergence from its Covid restrictions provide some boost later this year, the deterioration in the survey evidence suggests the …
18th January 2023
Consumers buckle under higher rates The 1.1% m/m fall in retail sales in December, which followed a downwardly-revised 1.0% fall in November, adds to the evidence from the surveys that the economy was losing momentum towards the end of last year. …
Manufacturing falls into recession, with output at a 15-month low Echoing the recent slump in the survey-based indicators, industrial production declined by a worse-than-expected 0.7% in December, with November’s decline revised up to 0.6% m/m, from 0.2%. …
Consumers starting to buckle under higher rates The 1.1% m/m fall in retail sales in December, which follows a downwardly-revised 1.0% fall in November, adds to the evidence from the surveys that the economy was rapidly losing momentum towards the end of …
Raising the federal debt ceiling later this year will require bipartisan compromise, most likely involving measures to reduce the budget deficit modestly. But a deal probably won’t be reached until the last minute, raising the risk that the deadline to …
17th January 2023
Sentiment rebounding from historically weak level The further rise in the University of Michigan consumer sentiment index to 64.6 in January, from 59.7, illustrates that consumers have taken some encouragement from the fall in energy prices. Nevertheless, …
13th January 2023
Core CPI continues to moderate The 0.1% m/m decline in headline CPI in December was principally due to a 9.4% m/m drop in gasoline prices, but core consumer prices also increased by a more modest 0.3% m/m, extending the run of weaker monthly gains to …
Another more muted gain in core CPI Core CPI inflation was still an elevated 5.7% in December but, with another more muted 0.3% m/m gain, the three-month annualised rate fell to a 20-month low of 3.1%. Admittedly, the latter is still slightly above the …
12th January 2023
Slump in gasoline prices drives decline in headline CPI Consumer prices declined by 0.1% m/m in December, helped by a 9.4% m/m drop back in gasoline prices and a more modest 0.3% m/m increase in food prices. The pace of monthly gains in food away from …
The apparent resilience of employment in December has boosted hopes that the US can avoid a recession, but we still think that is unlikely. Employment is a coincident indicator whereas the only genuine leading indicators in the employment report – …
9th January 2023
The data this week suggested that the weak global backdrop is being compounded by a deterioration in domestic activity, although the labour market still appears to be in good health. Domestic weakness adding to external headwinds The November trade data …
6th January 2023
Sharp decline illustrates that recession still more likely than soft landing The slump in the ISM services index to a 19-month low of 49.6 in December, from 56.5, is another signal from the surveys that despite the resilience of employment growth, …
Labour market data boost odds of a soft landing The solid 223,000 gain in non-farm payrolls and drop-back in unemployment to a 50-year low in December will, at face value, do little to ease the Fed’s concerns about resilient core services inflation. …
Wage growth slowing despite employment resilience The solid 223,000 gain in non-farm payrolls and drop-back in unemployment to a 50-year low in December will, at face value, do little to ease the Fed’s concerns about resilient core services inflation. …
Models point to recession soon Our composite models continue to suggest that a recession this year is a near-certainty, with the implied odds of the economy being in recession in six months’ time and in one year’s time both above 90% as of December. …
5th January 2023
Trade hit by domestic and external weakness The sharp narrowing of the trade deficit to $61.5bn in November, from $77.8bn, came as a big fall in exports was offset by an even sharper drop in imports. Net trade still looks to have been a small drag on …
Fed doubling down on hawkish views The minutes of the Fed’s December policy meeting reveal officials in hawkish mood, with participants arguing that “a restrictive policy stance would need to be maintained until the incoming data provided confidence that …
4th January 2023
The latest JOLTS data suggest that labour market conditions remain quite tight and a lot more adjustment is needed to ensure that the drop back in price inflation to 2% will be sustained. While the job openings rate was unchanged at 6.4% in November, …
Index drops into recessionary territory The decline in the ISM manufacturing index to a two-and-a-half year low of 48.4 in December, from 49.0, is another sign that the economy lost more momentum at the tail-end of last year. Nearly all the survey-based …
Weaker ISM shows activity stalling, but labour market conditions remain tight The decline in the ISM manufacturing index to a two-and-a-half year low of 48.4, from 49.0, is another sign that the economy was losing momentum at the tail-end of last year. …
We estimate that employment growth slowed more sharply in December, with non-farm payrolls rising by 160,000. The unemployment rate probably edged up to an 11-month high of 3.8%. Although employment growth has been solid in recent months according to the …
3rd January 2023
This week brought further signs of slowing activity growth and falling inflation, trends we expect to intensify next year. Meanwhile, Congress has averted a government shutdown, but there appears to be a growing risk of another damaging stand-off over the …
23rd December 2022
Q4 growth looking ok, but economy losing momentum Real consumption is on course for solid growth of 3.5% annualised in the fourth quarter, but the income and spending data show that it stalled in November. The soft durable goods orders data for last month …
Q4 growth looking ok, but economy losing momentum Real consumption is on course for solid growth of around 3.5% annualised in the fourth quarter, but the income and spending data show that it stalled in November. The sharp fall in durable goods orders …
The November CPI report marked the second successive undershoot in inflation and there is mounting evidence that it will continue to fall sharply in 2023. (See Chart 1.) Core goods prices are coming under broad-based downward pressure, as easing supply …
21st December 2022
Despite the Fed’s continued hawkishness, the further softening in core inflation and weakness of the early activity data in November leave us more convinced that the FOMC will be cutting interest rates again by the end of next year. Fed’s new …
16th December 2022
Consumer resilience starting to fade The 0.6% m/m falls in retail sales and manufacturing output in November suggest that the economy has lost some serious momentum, with the resilience of consumers to much higher interest rates starting to crumble. …
15th December 2022
Further signs that economy is losing momentum The 0.6% drop in manufacturing output last month matches the already-reported decline in retail sales and provides further evidence that the economy has lost some serious momentum. With weak global growth and …
Consumer resilience starting to fade The 0.6% m/m fall in retail sales in November suggests that the resilience of consumers to much higher interest rates is starting to crumble. Solid gains in previous months mean real consumption growth should still be …
