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The 1.6% m/m decline in February’s durable goods orders was principally due to a 31.1% m/m drop back in the notoriously volatile commercial aircraft orders component. Nevertheless, even putting that decline aside, orders were muted, reflecting the recent …
2nd April 2019
The modest rebound in the ISM manufacturing index to 55.3 in March, from 54.2, offers some reassurance that the US factory sector isn’t following its European counterpart off a cliff, although the details of the survey are still consistent with …
1st April 2019
The decline in underlying retail sales in February was offset by upward revisions to previous months, but real consumption growth still appears to have slowed sharply in the first quarter. … Retail Sales …
The partial inversion of the Treasury yield curve has attracted a lot of attention over the past week, but we have been more surprised by the speed at which markets have started to price in rate cuts. Market expectations have almost caught up to our …
29th March 2019
For all the focus on the Treasury yield curve, other leading indicators of activity are not yet signalling that a recession is imminent. But their recent deterioration does suggest that the risks are rising and, even if a recession is avoided, they …
28th March 2019
We expect payroll growth to rebound to 150,000 in March, from 20,000 the month before, but that would still imply employment gains are now beginning to trend lower. … Payroll growth shifting down the …
The pick-up in broad money growth to a six-year high in February is not necessarily a positive for the economy because it is a lagging indicator. But it does at least suggest the Fed’s balance sheet run-down, which officials announced will end in …
27th March 2019
The sharp fall in the trade deficit in January was mainly due to a larger than expected drop in imports, which is hardly a positive sign for the economy. Nonetheless, with imports likely to have been flat or fallen slightly in the first quarter, net trade …
By making it clear that interest rates will not be raised this year and that quantitative tightening will start to wind down earlier than previously suggested, the Fed was even more dovish this week than most had anticipated. It wasn’t all positive news, …
22nd March 2019
The Fed’s revised economic projections, which now imply no rate hikes this year, together with the announcement that it will halt its balance sheet run-down in September, came as a positive surprise for the markets. But we think the Fed’s forecasts are …
20th March 2019
The incoming monthly activity data suggest that GDP growth has slowed from 2.6% annualised in the fourth quarter to only around 1.5% in the first. At the same time, however, the business surveys have remained relatively upbeat, with a weighted average of …
The deluge of data this week provided some mixed signs on economic activity, but one clear theme from the producer and consumer price releases was that what little inflationary pressure there is in the economy already appears to be fading. … Muted …
15th March 2019
The further decline in manufacturing output in February confirms that the global industrial slowdown is now weighing more heavily on US producers. With tighter fiscal and monetary policy constraining domestic demand, the weaker external environment is …
With interest rates on hold, the focus at next week’s FOMC meeting will be on officials’ updated economic projections, which are likely to show a lower expected path for GDP growth and the fed funds rate. The Fed may also use the meeting to announce an …
13th March 2019
The rebound in underlying capital goods orders in January stands out as a positive amid the recent flood of downbeat activity data, but it is still consistent with a gradual slowdown in business equipment investment growth in the first quarter. And with …
With headline CPI inflation edging down to a two-and-a-half-year low of 1.5% in February, from 1.6%, and core inflation dropping to a four-month low of 2.1%, from 2.2%, the Fed would appear to be justified in supporting the real economy by being patient …
12th March 2019
The 1.1% m/m rebound in control group retail sales in January provides some reassurance that consumer spending isn’t falling off a cliff. But with sales now estimated to have plunged by an even sharper 2.3% in December, the data confirm that real …
11th March 2019
Attention on Friday was inevitably captured by the terrible February payrolls number but, looking back at developments this week, there was also a surprising number of positives. … Some positives beneath the gloomy …
8th March 2019
The slump in payroll employment growth in February reinforces the message from the incoming activity data that economic growth is slowing below its 2% potential pace in the first quarter. That makes us more confident in our view that the Fed will remain …
The widening in the trade deficit to a 10-year high in December confirms that net trade was a drag on GDP growth in fourth quarter, and the weakening global backdrop suggests that drag will intensify in the first quarter. … International Trade …
6th March 2019
The rumoured trade deal with China won’t in itself provide much boost to the economy even if it includes the removal of the punitive tariffs levied by both sides in the past year. We continue to expect economic growth to slow this year, as more …
4th March 2019
The drop in the ISM manufacturing index to a near-three-year low is a clear sign that US manufacturers are getting hit by the broader global industrial downturn. While higher interest rates and the fading stimulus from fiscal policy are the main reasons …
1st March 2019
The 2.6% annualised gain in fourth-quarter GDP was a little better than the markets were braced for, but the bottom line is that growth has now been slowing for the past few quarters. We expect that downward trend to pick up pace over the first three …
We anticipate a robust 190,000 gain in non-farm payrolls in February, while a post-shutdown rebound in household employment will cause the unemployment rate to drop back to 3.9%. … Robust payrolls remain a bright …
28th February 2019
GDP increased by 2.9% last year, up from 2.2% in 2017, but that acceleration is no surprise given the size of the fiscal stimulus introduced early last year. As the stimulus fades and the lagged impact of past monetary tightening continues to feed …
Fed Chair Jerome Powell reiterated the FOMC’s “patient” mantra in his testimony to Congress today, but we think the Fed is already done hiking interest rates. With GDP growth slowing below potential, we expect the Fed to end its balance sheet run-down …
26th February 2019
The weak incoming data mean that economic growth is on track to slow below its 2% potential pace this quarter. That kills off any remaining prospect of further Fed rate hikes and, with economic growth set to slow further later this year, we think the …
Next week is shaping up to be a busy one, when congressional testimony by the Fed’s Chair, the delayed publication of fourth-quarter GDP and the second Trump-Kim summit could all be eclipsed by the long-awaited delivery of the Mueller report into links …
22nd February 2019
The weakness of underlying durable goods orders in December suggests that equipment investment growth slowed further in the fourth quarter, and we expect it to remain weak for most of this year. … Durable Goods …
21st February 2019
With the global outlook continuing to darken, the US had until recently remained a relative bright spot. But the latest data suggest that outperformance may have been short-lived. January’s drop in manufacturing output, led by weaker auto production, …
20th February 2019
The Fed’s “patient” stance was originally a response to the deteriorating global economic and financial market backdrop, but the dreadful activity data and subdued inflation figures out this week provided further domestic evidence to justify that dovish …
15th February 2019
The 0.6% m/m decline in industrial production in January was driven by a 0.9% drop in manufacturing output, suggesting that the US is now succumbing to the industrial downturn already evident across the global economy. With the latest retail sales data …
The unexpected plunge in control group retail sales in December means that fourth-quarter GDP growth was probably nearer 2.5% annualised than the 3.1% we had pencilled in and, more worryingly, it also suggests the economy entered 2019 with less momentum …
14th February 2019
The decline in headline CPI inflation to a 19-month low of 1.6% in January, from 1.9%, was due principally to a sharp decline in energy prices. Excluding food and energy, core CPI inflation remained unchanged at 2.2% where it has been broadly stuck for …
13th February 2019
Even if there are no further delays to the IRS processing tax refunds, we think households are on track to receive perhaps $30bn less in the first quarter than last year, equivalent to 0.7% of annualised disposable income. That may hit spending on …
12th February 2019
The latest NFIB survey suggests that a combination of rising interest rates and weaker business optimism is beginning to weigh more heavily on investment growth. … Fading optimism dragging investment growth …
The news that China’s share of US Treasury holdings has fallen to a 12-year low, alongside the surging Federal budget deficit, has prompted the usual warnings that the US will struggle to find buyers for its debt and that interest rates are set to surge. …
11th February 2019
The US economy still appears to be sailing on serenely while the rest of the world economy sinks like a stone. The latest survey data for January show an apparent capitulation in both China and the euro-zone, with the manufacturing PMIs rapidly falling …
8th February 2019
The unexpected narrowing in the trade deficit to $49.3bn in November, from $55.7bn, suggests that trade made a small positive contribution to GDP growth in the fourth quarter, but only because imports stalled. … International Trade …
6th February 2019
The acceleration in broad money growth to a six-year high in December should put to rest any lingering concerns about the impact of the Fed’s balance sheet run-down on the economy. … Monetary Indicators Monitor …
5th February 2019
Even if the Fed has stopped hiking interest rates sooner than we originally envisaged, we doubt that will prevent a marked economic slowdown this year. After all, that dovishness was partly prompted by the more severe than expected downturn in global …
The Fed’s latest Senior Loan Officer Survey suggests the slowdown in business equipment investment and rate-sensitive consumer spending growth will worsen in the coming months. Loan demand has continued to decline and now banks are tightening lending …
4th February 2019
In a remarkable U-turn, the Fed appears to have abandoned plans to continue gradually raising interest rates it set out only six weeks ago. The markets unsurprisingly welcomed this dovish shift, but we don’t think it will prevent economic growth slowing …
1st February 2019
The rebound in the ISM manufacturing index in January provides further reassurance that economic growth has remained solid at the beginning of 2019. We still expect a combination of weaker global demand and the stronger dollar to weigh on the …
The 304,000 surge in non-farm payrolls in January was partly offset by a downward revision to the December gain, but still illustrates that economic growth remains solid and that the government shutdown had little impact. The Fed made it pretty clear this …
The dovish tone of the policy statement and press conference following today’s FOMC decision will reinforce expectations that the Fed is almost done raising interest rates. We think a sharp economic slowdown over the course of this year means the Fed will …
30th January 2019
With the “patient” Fed set to leave interest rates unchanged, attention has shifted to its plans for balance sheet normalisation. But focusing on the terminal size of the balance sheet misses an important point. Its composition matters too, and if the Fed …
29th January 2019
The increase in participation of those aged 25-54 is partly due to a structural decline in disability rates, but the more recent drop in fertility rates also appears to be playing a key role. That will help boost labour force growth over the next few …
28th January 2019
At next week’s policy meeting, the Fed is likely to reiterate its current mantra that it can be “patient” in waiting to hike interest rates. Admittedly, stock markets have recovered most of the losses from December and credit spreads have narrowed again, …
25th January 2019
We expect a solid 190,000 gain in non-farm payrolls in January which, because a bill has already been passed guaranteeing workers back pay when the government reopens, will be largely unaffected by the shutdown. … Payrolls will be unaffected by …
24th January 2019
