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Growth in narrow measures of the money supply has continued to edge higher as demand and saving deposits continue to accumulate but, with growth in broader measures of money and bank lending dropping back, there is little threat of that pushing inflation …
17th November 2020
Production catching up with consumption The acceleration in manufacturing output in October suggests that, after lagging the broader recovery over the past six months, the factory sector is now making up some lost ground. With inventory levels still lean, …
New virus wave starting to weigh on spending The weaker than expected 0.3% m/m rise in retail sales in October is still broadly consistent with our forecast that consumption growth will slow to 7.5% annualised in the fourth quarter. But the details …
The pandemic has increased the odds that the US will eventually experience a period of high inflation, principally because we expect the Fed to be less committed to ensuring price stability in the future. The higher public debt burden, slower global …
16th November 2020
President Donald Trump’s failure to concede defeat more than a week after the election is unlikely to trigger a constitutional crisis. What matters more over the final months of his administration is the policy actions Trump might take. That could include …
13th November 2020
Price pressures moderating again The unexpected drop back in core inflation to 1.6% last month, from 1.7%, reflects continued subdued demand in the services sector. With the explosion in virus numbers likely to put further downward pressure on demand in …
12th November 2020
The introduction of one or more highly effective vaccines early next year would prompt us to revise up our 2021 GDP forecast, possibly quite significantly. The prospects of a vaccine might convince Congress to scale back the size of any fiscal stimulus …
10th November 2020
The high-frequency data suggest there is a growing risk that the recovery stalls over the next month or two, even as the growing potential for effective vaccines together with a bipartisan fiscal stimulus mean the balance of risks to our forecasts further …
Much of President-elect Joe Biden’s agenda will be dead on arrival with the Republicans maintaining control of the Senate, but there is still a chance of more fiscal stimulus being passed, albeit probably not until after Biden takes office on 20 th …
7th November 2020
With Joe Biden taking the lead in both Georgia and Pennsylvania, it seems all but certain he will be the next President, while the Senate is likely to remain under Republican control. That means we are set for continued gridlock in Congress over the next …
6th November 2020
Labour market recovery still carrying plenty of momentum The 638,000 rise in non-farm payrolls in October is stronger than it looks as it included a 147,000 drop in temporary Census employment and, alongside the big fall in the unemployment rate, it …
With the markets still relatively calm amid the ongoing election uncertainty, the Fed took the predictable decision to stand pat today. However, if the election results in a divided government – as now looks likely – that will reduce the odds of any …
5th November 2020
Employment growth still slowing; exports rebounding Although the markets remain firmly focused on the fallout from the election, the 365,000 rise in the ADP measure of private employment in October indicates that the labour market recovery is starting to …
4th November 2020
We still don’t know the winner of the presidential election or which party will control the Senate, and, with President Donald Trump threatening to challenge the outcome, the legal wrangling and uncertainty could drag on for some time. It is still …
Manufacturing recovery to regain some momentum The rise in the ISM manufacturing index to a two-year high of 59.3 in October, from 55.4, suggests that the rebound in production, which has so far lagged spending, should begin to catch up over the coming …
2nd November 2020
With the race for control of Congress close and unprecedented numbers voting early this year, the results on election night are likely to be unusually volatile . If the polls are accurate and Democrats win back the White House and Senate, hopes would …
Joe Biden and the Democrats still look on course to come out on top in Tuesday’s elections. But the surge in early voting means that election night could prove even more of a nail-biter than usual and, even once the results are known, there will still be …
30th October 2020
We expect employment growth to have slowed further in October, with non-farm payrolls rising by 600,000 – albeit partly because of another drop-back in temporary employment as operations for the 2020 Census wound down. The softer 661,000 rise in non-farm …
29th October 2020
GDP rebounds, but remains well below pre-pandemic level The 33.1% annualised rebound in GDP in the third quarter was unprecedented in size, but still left the economy 3.5% smaller than it was in the final quarter of last year. (See Chart 1.) The recovery …
Solid incoming data mean Fed officials in no rush to provide more accommodation More serious wave of coronavirus infections could prompt more easing Expectations of a big post-election stimulus would pose a dilemma Having rolled out major changes over the …
28th October 2020
Business equipment investment recovers, but aircraft still weak The 1.9% m/m rise in durable goods orders in September demonstrates that the economic recovery isn’t entirely dependent on consumers, with business equipment investment recording a swift …
27th October 2020
With the final debate now done and dusted, America enters the final two weeks of the presidential election campaign with Joe Biden still leading in the polls and betting markets suggesting the Democrats will win control of the Senate as well as the White …
23rd October 2020
After rebounding by 30% annualised in the third quarter, we expect a more modest 4.5% gain in GDP in the fourth. But recent data suggest the risks to that forecast could lie to the upside, with investment rebounding rapidly and the September retail sales …
22nd October 2020
While the chances of a pre-election fiscal deal remain slim, markets appear to believe that a Democratic clean sweep of next month’s elections would result in a major post-election stimulus package. But with the Democrats unlikely to win a …
21st October 2020
The renewed upturn in coronavirus infections poses a downside risk to the economy and could also have a late bearing on the Presidential election in a little over two weeks’ time. The rise in new cases in recent weeks – to the highest level since …
16th October 2020
Manufacturing output stuck well below February level The 0.6% m/m decline in industrial production in September isn’t necessarily a sign that the broader economic recovery is in jeopardy when we know that retail sales rose strongly last month. But it is …
Consumer rebound still solid The unexpectedly strong 1.9% rise in retail sales last month suggests the economy was carrying more momentum into the fourth quarter than anticipated, defying fears that the expiry of enhanced unemployment benefits in the …
The upturn in coronavirus infections in the Midwest isn’t in itself a major concern, but a more widespread resurgence in cases over the winter would raise the risks of the economic recovery going into reverse. While Europe grapples with a second wave of …
14th October 2020
Core inflation held down by services weakness The more modest rise in core consumer prices in September, which came despite a further surge in used vehicle prices, suggests that the previous upward pressure on prices resulting from supply constraints may …
13th October 2020
Despite high unemployment, the latest NFIB survey shows small businesses are struggling to hire qualified workers, while inventory levels are exceedingly lean. In contrast to September’s softer CPI figures, the NFIB survey points to some further upward …
The rise in longer-term Treasury yields this week appears to reflect growing expectations of a Democrat clean sweep in November that could result in a larger fiscal stimulus down the road. Stock markets are benefiting from the speculation, even though any …
9th October 2020
The annual growth rate of M1 rose to a new record high in August but, with growth in the broader monetary aggregates now easing and bank loans continuing to decline, there is still little chance of that triggering a surge in price inflation. (See Chart …
7th October 2020
Exports should begin to catch up soon The trade deficit widened further in August, as imports continued to rebound at a faster pace than exports but, with domestic production continuing to ramp up and overseas demand also recovering, we doubt this marks …
6th October 2020
The news that President Donald Trump has tested positive for coronavirus has raised the odds of not only Joe Biden winning in November, but of the Democrats sweeping Congress too. Those braced for an October surprise did not have to wait long this …
2nd October 2020
Pace of recovery slowing The weaker than expected 661,000 rise in non-farm payrolls last month was in part due to a drop in government education employment but, with the pace of private payroll gains continuing to slow gradually, it is clear that the …
Manufacturing recovery has much further to run The modest decline in the ISM manufacturing index to 55.4 in September, from 56.0, suggests that manufacturing output will continue to grow at a relatively faster pace, as producers catch up with the …
1st October 2020
Overview – Following a 3.7% decline this year, we expect GDP growth to be a solid 4.5% in 2021, but the risks to that forecast on both sides are, frankly, enormous. The key downside risk is that recurring waves of coronavirus infections during the winter …
Concerns about the spread of the pandemic in Europe have continued to weigh on the stock market, but the battle over the Supreme Court could end up having a bigger bearing on the near-term outlook by further reducing the chances of a fiscal stimulus deal …
25th September 2020
Details much stronger than headline figures suggest The 0.4% m/m rise in headline durable goods orders in August was weaker than we had been expecting, but the underlying details nevertheless show that business equipment investment staged a V-shaped …
We estimate that non-farm payrolls rose by a more modest 800,000 in September, as the pace of private sector rehiring slows further and the recent burst of Census hiring goes into reverse . The near-1.4 million rise in non-farm payroll employment last …
24th September 2020
Fed underwhelms with new forward guidance After seeming to take a bold new step when it recently announced it would be adopting a flexible average inflation target, the Fed risked disappointing markets this week when it failed to back that up with much …
18th September 2020
The pace of economic recovery has slowed in the last month, but that is arguably still an impressive result given the surge in coronavirus cases over the summer, and the more recent expiry of the enhanced unemployment benefits. The retail sales figures, …
17th September 2020
The FOMC’s updated economic and rate projections show that officials expect to leave the fed funds rate at the current near-zero rate until at least 2023 and probably well beyond that. With the five-year Treasury yield already at less than 0.2%, however, …
16th September 2020
Sales growth inevitably slowing after rapid recovery The 0.6% m/m rise in retail sales in August was a bit weaker than we had expected, but isn’t a huge concern given that sales are now nearly 2% above their pre-pandemic level. (See Chart 1.) The expiry …
Recovery in manufacturing begins to wane The muted 0.4% m/m increase in industrial production in August wasn’t quite as bad as it looks, with Hurricane Laura causing a temporary 2.5% m/m drop off in mining production and the return to seasonal …
15th September 2020
With initial jobless claims still running at close to one million per week, it could be argued that, at 8.4% in August, the unemployment rate is not capturing the full extent of the slack in the labour market. But the survey evidence and the job turnover …
14th September 2020
The July Job Opening and Labour Turnover Survey (JOLTS) released this week suggests the labour market is in much better health than the downbeat jobless claims figures imply. The JOLTS report did confirm the sharp slowdown in the pace of payroll growth in …
11th September 2020
Dwindling inventory pushes vehicle prices sharply higher The outsized 0.4% m/m increase in core CPI in August was principally due to a 5.4% m/m surge in used motor vehicle prices which, unusually for this very early stage of the recovery, reflects …
New average inflation framework points to more policy support But Fed officials apparently in no rush to provide more accommodation Modest tweaks risk disappointing markets The Fed’s new average inflation framework implies that more stimulus measures are …
9th September 2020
In the wake of the Fed’s new policy strategy, a range of officials have used speeches in recent days to play down expectations that a major loosening in policy is imminent. While we still expect the Fed to strengthen its forward guidance and step up the …
4th September 2020
