Filtered by Subscriptions: US Economics Use setting US Economics
The surge in job openings and voluntary quits in April add to the survey and anecdotal evidence that labour shortages are becoming increasingly acute. (See Chart 1.) Those shortages look set to persist for some time and point to both wage growth and price …
8th June 2021
Net trade switching from a drag to a small boost The sharp drop in the trade deficit, to $68.9bn in April from $75.0bn a month earlier, largely reflects cooling demand for consumer goods now the boost from fiscal stimulus is fading and demand is switching …
Democrats get bad news on spending plans The Senate Parliamentarian delivered some bad news to the Democrats this week – ruling that they could introduce another reconciliation to the current budget, which would allow them to pass more of President Joe …
4th June 2021
Supply shortages holding back employment recovery The 559,000 gain in non-farm payrolls in May was at least an improvement on the 278,000 gain in April but, with the level of employment still 7.6 million below its pre-pandemic peak, it would take more …
Labour shortages emerging as key restraint While the headline ISM manufacturing index edged up to 61.2 in May, from 60.7, the main takeaway from the release was that shortages of workers, and not just raw materials, now appear to be playing a key role in …
1st June 2021
Infrastructure negotiations going nowhere Negotiations over a bipartisan compromise on infrastructure spending continued this week, but the Republicans and Democrats are still so far apart in their offers that it is only a matter of time before these …
28th May 2021
With labour shortages weighing on hiring there is even more uncertainty than usual over May’s employment report, but we estimate that non-farm payrolls rose by a relatively subdued 500,000. The disappointing 266,000 rise in payrolls in April might prove …
27th May 2021
Orders held back by shortages in motor vehicle sector The 1.3% m/m decline in durable goods orders in April partly reflected the impact of semiconductor shortages in the automobile sector, with motor vehicle orders falling by 6.2% m/m last month. …
Growth in the key monetary aggregates and bank lending has turned up over recent months (see Chart 1), driven in part by the Fed’s continued asset purchases . The Fed’s $120bn monthly purchases will push its balance sheet above $8trn soon. (See Chart 2.) …
26th May 2021
In a relatively quiet week, the few data releases we did get added to signs that shortages are pushing up prices further and restraining the pace of economic recovery. The mid-month Manheim used vehicle auction price data showed used auto prices rose by a …
21st May 2021
The strength of demand coupled with supply constraints have made shortages of many goods even worse, with the inventory to sales ratio falling to a record low in March. (See Chart 1.) The surge in job openings and share of employers saying they are …
18th May 2021
The extent of the surge in CPI inflation in April specifically caught us a little off guard, although we had been expecting a pick-up in response to the reopening and the shortages of raw materials, intermediate inputs, and labour too. (See here , here …
14th May 2021
Supply constraints beginning to weigh on production Manufacturing output increased by a modest 0.4% m/m in April but was held back by a 4.3% m/m drop back in motor vehicle production, as the global shortage of semiconductors really began to bite. Imports …
Sales remain elevated, but recovery in services losing momentum The unchanged reading for retail sales in April is slightly stronger than it looks given that it follows an upwardly revised 10.7% m/m surge in March, and it suggests that the boost from the …
Reopening & supply shortages trigger price surge, but Fed won’t react The 0.9% surge in core prices last month, the biggest monthly gain since April 1982, was concentrated in sectors that are reopening and/or facing intense supply shortages, which should …
12th May 2021
The NFIB and JOLT surveys published today add to evidence from the April employment report that labour shortages are widespread, pushing up prices and potentially acting as a brake on the recovery . The further increase in the NFIB jobs hard to fill index …
11th May 2021
Treasury Secretary Janet Yellen set the cat among the pigeons this week when she remarked in an interview “it may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat.” That faux pas threatened to undo the …
7th May 2021
Payroll gains to reaccelerate in coming months The more muted 266,000 increase in non-farm payrolls last month is a clear disappointment but, with much of the high-frequency data – including jobless claims – still improving rapidly, we doubt it signals …
Fed Chair Jerome Powell is resolute in his belief that the burst of stronger inflation we are about to see will prove temporary, with underlying inflation dropping back to the 2% target next year. We are not convinced. Given the breadth of the upward …
6th May 2021
The sharp drop in demand for vaccines in recent weeks is a risk to our assumption that the rollout reaches critical mass over the coming months. That could mean infections and hospitalisations remain elevated, but we doubt that would be a big drag on the …
4th May 2021
Exports and imports to continue rising strongly Although both exports and imports rebounded strongly in March, the former are still 5% below pre-pandemic levels whereas the latter are about 8% higher. As virus restrictions in other advanced economies are …
The Fed’s latest Senior Loan Officer Survey shows that lending standards are being eased across the board, which will help keep consumption and investment growth solid even as support from fiscal policy fades . The survey showed that a majority of banks …
Shortages putting massive upward pressure on prices The drop back in the ISM manufacturing index, to 60.7 in April from 64.7, appears to reflect intense and widespread supply constraints rather than a moderation in demand, a view which is underlined by …
3rd May 2021
President Joe Biden’s Families Plan wouldn’t provide much of an additional boost, but the stimulus already in place should ensure that the economic recovery goes from strength to strength, with the Fed clearly in no mood to stand in the way. Major fiscal …
30th April 2021
The easing of restrictions and the boost from stimulus cheques are why we estimate that non-farm payrolls increased by a massive 1,200,000 in April, up from 916,000 the month before. As coronavirus cases plummeted and some restrictions were lifted, the …
29th April 2021
Boosted by stimulus and reopening, GDP almost back to pre-pandemic peak Buoyed by the two rounds of stimulus cheques sent out in the first three months of the year, first-quarter GDP growth accelerated to 6.4% annualised, driven by a massive 10.7% surge …
Although it took a more upbeat tone on the economic outlook and acknowledged that inflation has risen in its statement released after today’s FOMC meeting, the Fed offered no hints that it was considering slowing the pace of its asset purchases, let alone …
28th April 2021
The $1.8trn in spending and tax credits in the American Families Plan would provide a relatively small boost to GDP growth as, like the earlier infrastructure proposals, it would be mostly paid for with higher taxes. With the Republicans even less likely …
Surveys point to continued strength The strong rebound in underlying durable goods orders in March, which partly reflects the unwinding of earlier weather-related disruption, indicates that business equipment investment has continued to expand at a rapid …
26th April 2021
This week brought further signs that the surge in demand is triggering much stronger price pressures. That is showing up most clearly in the auto sector, where inventories were already exceptionally lean even before the supply of new vehicles was …
23rd April 2021
FOMC statement likely to strike more optimistic tone… …but Powell to emphasise that policy changes are still some way off Asset purchase taper unlikely until next year with rates on hold until late-2023 We expect the statement following next week’s FOMC …
21st April 2021
The latest round of stimulus cheques and the easing of restrictions are driving a renewed resurgence in demand, with retail sales jumping by nearly 10% in March and the regional manufacturing surveys rising to their highest level since the 1970s. (See …
19th April 2021
The economic data released this week reinforce our view that the recent fiscal stimulus and continued lifting of virus restrictions will drive a marked acceleration in GDP growth this year, while also putting sustained upward pressure on inflation. The …
16th April 2021
Supply constraints still weighing on production The relatively modest 1.4% m/m rebound in industrial production in March, which was driven by a 2.7% rise in manufacturing output, was weaker than we had expected and illustrates that global supply shortages …
15th April 2021
Return to normalcy and stimulus deliver big boost to sales The near-10% surge in retail sales in March reflects a small fraction of the windfall from the $1,400 stimulus cheques, which were largely saved. At the same time, loosening restrictions are …
Overview – The combined strength of fiscal and monetary stimulus and the early success of the vaccination program means that we expect GDP growth to be 6.5% this year and 4.0% in 2022. We would be surprised if economic growth turns out to be markedly …
14th April 2021
Inflationary pressures to remain strong The outsized 0.6% rise in consumer prices in March, driven in part by a 0.3% rise in core CPI, is the clearest indication so far that the signs of mounting inflation evident in business surveys and producer prices …
13th April 2021
The news that a new interpretation of Senate rules would allow Democrats to pass a second reconciliation bill this fiscal year has the potential to be a gamechanger, but we expect moderate Senate Democrats to shoot down any attempt to effectively …
9th April 2021
Weather disruption will unwind in March The widening in the trade deficit to $71.1bn in February, from $67.8bn, came as trade in both directions was hit by the severe winter weather. Import growth is on course to outpace exports again in the first quarter …
7th April 2021
Big jobs rebound as restrictions lifted and weather distortion unwinds The better than expected 916,000 rebound in non-farm payrolls in March still leaves employment 8.4 million below its pre-pandemic peak from just over a year ago but, with the …
2nd April 2021
With the next phase of President Joe Biden’s Recovery plan spending likely to take a considerable time to pass Congress and be largely financed by higher taxes, it looks set to have a far smaller bearing on the near-term economic outlook than the $1.9trn …
1st April 2021
Demand continuing to outstrip supply The rise in the ISM manufacturing index to 64.7 in March, the highest level since 1983, echoes the message from the other surveys that demand is surging. But the details suggest that supply is struggling to keep up, …
In a world where the Phillips curve is flat, inflation expectations become the key driver of actual inflation over the medium term. But getting a true handle on inflation expectations is difficult because of the large number of diverse measures that are …
31st March 2021
We suspect that President Joe Biden will struggle to garner bipartisan support for his $2trn in infrastructure spending, even if he was willing to placate centrist Senate Republicans by dropping his proposal to fully fund that investment by raising …
The Fed’s asset purchases are fuelling a continued surge in the narrow money aggregates, but growth in both our M3 measure of broad money and bank lending remain on a downward trend. (See Chart 1.) The Fed’s balance sheet has continued to expand in step …
30th March 2021
News reports suggest President Joe Biden will unveil plans for a large infrastructure package on Wednesday. We expect the package will take much longer and be harder to pass than the $1.9trn American Rescue Plan, and the economic effects will be more …
26th March 2021
We expect the labour market recovery to have kicked into a higher gear in March, with non-farm payrolls increasing by 700,000. The 379,000 increase in payrolls last month was driven by a 355,000 rebound in the leisure and hospitality sector, as the rapid …
25th March 2021
The unusual rise in the Fed’s preferred PCE measure of inflation above CPI inflation in January partly reflects the impact of the differing methodology which, as spending patterns return to pre-pandemic norms, should be reversed this year. But it is also …
24th March 2021
Weather disruption will be reversed in March The fall in durable goods orders in February was mainly due to the disruption caused by the severe winter storms, which we already know weighed heavily on manufacturing output last month. The latest surveys …
The Fed made clear this week that it still has no plans to raise interest rates within the next three years. But that apparently rests on the belief that the strongest economic growth in nearly 40 years will generate almost no lasting inflationary …
19th March 2021
