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Recovery continues despite apparent slowdown in consumption The further rise in the ISM manufacturing index to 54.2 in July, from 52.6, suggests that output continued to rebound last month. Given that the recovery in production has lagged behind the …
3rd August 2020
Even though Congress failed to prevent the $600 additional UI payments from expiring last Friday, we still expect a deal in the coming weeks which will offset the continued hit to incomes from the pandemic. With the saving rate so elevated, the bigger …
The second-quarter GDP data released this week, which showed output plunging by a record 32.9% annualised, highlighted the unprecedented hit to the economy from the pandemic. We know that activity started to rebound from May onwards but, with the recovery …
31st July 2020
We estimate that non-farm payroll employment rose by “only” 1.0 million in July, as the renewed spread of the virus started to weigh on the economy. With employment currently still 15 million below its February level, that would underline that there is a …
30th July 2020
Economic damage will take years to unwind The 32.9% annualised decline in GDP in the second quarter, more than three times larger than the previous record quarterly contraction, underscores the unprecedented hit to the economy from the pandemic. We expect …
While the Fed left its policy settings unchanged and opted not to strengthen its forward guidance at the conclusion of its meeting today, its downbeat assessment of the economic outlook still suggests they will provide more accommodation in the months …
29th July 2020
Investment continuing to rebound Another solid rise in durable goods orders in June left core orders just 3.7% below February levels, underlining how the hit to business investment during the pandemic has been relatively mild . Surveys suggest that …
27th July 2020
The first increase in initial jobless claims since late-March last week has heightened fears that the economic recovery has started to go into reverse. Most other high-frequency indicators point to the recovery levelling off, but do not show a consistent …
24th July 2020
The rapid recovery in activity in May and June means that, after contracting by close to 30% annualised in the second quarter, GDP is already on course for a big rebound in the third quarter. But there are signs that the resurgence in coronavirus …
23rd July 2020
Officials prefer strengthening forward guidance over yield caps New language in statement might introduce a soft form of average inflation target Fed may eventually need to expand Treasury purchases again The upcoming FOMC meeting, which concludes on 29 …
22nd July 2020
With the pace of infections rising across most of the country, and the economic recovery in danger of going into reverse, we suspect that Congress will, at least partially, extend the enhanced $600 per week pandemic unemployment benefit. That temporary …
17th July 2020
Spending almost back to pre-pandemic level The better-than-expected 7.5% m/m increase in retail sales in June suggests that the resurgence in coronavirus infections in the South and the West hadn’t yet had an impact on consumers. Admittedly, the high …
16th July 2020
Even though unemployment is likely to continue declining faster than in previous recoveries, we still expect the unemployment rate to remain elevated for years, falling to 8.7% by the end of 2020 and 5.8% by end-2021 . But the lesson from the post-2008 …
Production catching up with stronger demand The 5.4% rise in industrial production last month was driven by an even stronger 7.2% gain in manufacturing output as producers, particularly in the auto sector, reopened factories to catch up with the …
15th July 2020
Initial disinflationary hit starting to reverse The rebound in consumer prices last month confirms that the disinflationary impact of the lockdowns in March and April is now going into reverse, but inflation is likely to remain muted over the coming …
14th July 2020
A growing range of indicators suggest the economic recovery stalled in late-June and early July, in part because of a resurgence in virus infections. There’s clearly a risk that the virus continues spreading unchecked over the coming weeks, pushing the …
10th July 2020
The high-frequency data suggest renewed fears about the coronavirus are starting to weigh on consumption even in states that haven’t moved to reimpose restrictions, reinforcing our view that the pace of the economic recovery will slow over the next few …
8th July 2020
Overview – The easing of the lockdowns has generated a bigger rebound in spending in May and June than we were originally anticipating but, given the resurgence in coronavirus infections, the pace of recovery is likely to be slower in the second half of …
6th July 2020
The renewed wave of coronavirus infections prompted the worst affected states in the South and West to re-introduce measures to restrict activity at bars and restaurants this week. But we are unlikely to see the return of the types of draconian lockdowns …
2nd July 2020
Job gains to slow significantly from here The 4.8 million increase in non-farm payrolls in June provides further confirmation that the initial economic rebound has been far faster than we and most others anticipated. But that still leaves employment 14.7 …
Factories quick to ramp up production as lockdowns ease The jump in the ISM manufacturing index to 52.6 in June, from 43.1, adds to the evidence that factory sector activity has recovered fairly quickly as the initial wave of lockdown measures has been …
1st July 2020
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th June 2020
The latest polling and betting odds data suggest that Joe Biden is pulling ahead of Donald Trump in the race to win November’s Presidential election. (See Chart 1.) Trump’s approval ratings have taken a hit from his mishandling of the coronavirus pandemic …
26th June 2020
We estimate that non-farm payroll employment increased by five million in June, as more furloughed employees returned to work. That would be another encouraging sign of the strength of the initial recovery, but would still leave employment 10% below …
25th June 2020
Investment rebounds, but exports and inventories continue to fall Consumption and investment rebounded strongly in May, as the lockdowns were eased, but the recovery in production has lagged behind, as manufacturing plants gradually reopened through the …
The Fed’s balance sheet has started to shrink again, as the emergency liquidity measures deployed at the height of the crisis have started to wind down, the pace of Treasury purchases has slowed dramatically and the rollout of the new 13( 3 ) lending …
23rd June 2020
There was a large disconnect between the extent of the sizeable rebound in retail sales in May and the much more lacklustre recovery in manufacturing output last month. We expect the gap to close over the coming months, however, as more manufacturing …
19th June 2020
The 17.7% m/m jump in retail sales in May showed that consumer spending is recovering far quicker than most had expected as lockdowns have eased, with headline retail sales reversing their April drop and underlying control group sales back at pre-pandemic …
18th June 2020
The unexpected strength of the bounce-back in retail sales in May could mean that we are under-estimating the potential for economic activity to return to pre-pandemic levels soon. Nevertheless, capacity in some sectors, like eat-in dining, will remain …
A lot could still change over the next five months but, as things stand, Joe Biden appears to be the favourite to win November’s presidential election. Biden’s policies are more moderate than some of his earlier Democratic rivals’ and we would expect his …
17th June 2020
The rise in new infections in a handful of states across the South and West is nothing like the national surge we saw in late-March and early April that triggered widespread lockdowns . (See Chart 1.) It does illustrate that the background risk of …
Spending recovering quickly post-lockdown; production will follow The 17.7% m/m rebound in retail sales in May indicates that, as the lockdowns were eased in many states, activity started to recover more quickly than we – and others – had been …
16th June 2020
The dramatic pandemic-related rise in government debt has attracted most of the attention, but it is the surge in corporate debt that could exert a bigger drag on the economic recovery in coming years. The current recession is unique in many ways, not …
15th June 2020
The potential expiry of the expanded $600 weekly unemployment insurance payments at the end of July could weigh on consumption. But those payments look more likely to see at least a partial extension and, in any case, Congress appears to be united on the …
There is still huge uncertainty over how quickly activity will recover from the pandemic, but it’s clear that the economy is set for an unprecedented period of near-zero interest rates. The Fed sprang no real surprises on the policy front this week, but …
12th June 2020
The Fed left its policy stance broadly unchanged at the conclusion of today’s FOMC meeting, but it did strengthen its forward guidance a little – by publishing interest rate projections that show nearly all officials believe the fed funds rate will still …
10th June 2020
Falling inflation still driven by only a handful of categories The further fall in core consumer prices in May was mainly driven by continued declines in travel-sensitive categories including airline fares and motor vehicle insurance. There is still …
The unexpected 2.5 million rebound in nonfarm payroll employment in May, against a consensus expectation of a 7.5 million decline , has generated a lot of speculation that the figures were either manipulated for political reasons or juiced by firms …
9th June 2020
The 2.5 million rebound in employment last month reverses only a small fraction of the jobs lost since February. But considering we and the consensus had been braced for another large decline, it builds on the signs from some of the other macro data this …
5th June 2020
Rise in payrolls suggests economy bouncing back quicker than anticipated The surprise 2.5 million rise in payroll employment last month indicates that the process of rehiring began sooner than the jobless claims figures suggested . With more states moving …
Auto plant closures hit trade; claims still edging lower The international trade deficit widened to $49.4bn in April, from $42.3bn, as exports slumped by a massive 20.5% m/m, outpacing a 13.7% m/m decline in imports. The closure of motor vehicle …
4th June 2020
Low yields mean there is no rush to adopt yield curve control FOMC could make an impact just by publishing interest rate projections again Fed slow to roll out its 13( 3 ) emergency lending facilities The Fed has several different policy options for …
3rd June 2020
Surveys point to slow recovery post-lockdowns The modest rise in the ISM manufacturing index to 43.1 in May, from 41.5, echoes the message from the other surveys that factory-sector activity is recovering only gradually as lockdowns have started to ease. …
1st June 2020
A month after the first states began to re-open their economies there is both good and bad news. The good news is that, up to now at least, there is no evidence that re-opening has led to a much-feared second wave of infections. The bad news is that, …
29th May 2020
We estimate that non-farm payroll employment fell by 9 million in May, taking the cumulative decline since February close to 30 million and pushing the unemployment rate above 20%. The loss of 20.5m jobs in April was as expected based on the tsunami of …
28th May 2020
Investment holding up much better than consumption The big drop in durable goods orders last month was once again driven mainly by plunging transport orders with underlying capital goods orders falling more modestly. Together with the drop in continuing …
Most of the 50 states have now begun to ease their lockdown restrictions, with many states in the interior now maintaining only minor restrictions on normal activity, although states on both coasts still have major restrictions in place. Nevertheless, the …
22nd May 2020
The relative resilience of consumer confidence in spite of the huge rise in unemployment is testament to the government’s fiscal rescue efforts and suggests the recovery will accelerate as fear of the virus eases . Headline measures of consumer confidence …
21st May 2020
Congress will probably agree to another round of fiscal support over the coming weeks, but we doubt that will make a huge difference to the economy, given that it appears set to be an order of magnitude smaller than the actions already taken . Congress …
The latest hard data suggest economic activity was running 20% below February levels in April, a far sharper downturn than the 2008/09 financial crisis and one compressed into just two months. (See Chart 1.) With lockdowns easing the economy is now …
19th May 2020
