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The recent slump in crude oil and gasoline prices means that headline CPI inflation could fall well below 2% for most of next year. But, given that lower prices would also provide a small boost to real GDP growth, the temporary inflation undershoot won’t …
12th November 2018
The housing market is unlikely to cause another crisis as it did in 2007. But the slowdown in housing activity is a clear sign that the Fed’s interest rate hikes are starting to take their toll on the real economy. … Will housing drag the economy under …
The results of this week’s midterm elections were in line with expectations, but President Donald Trump’s unexpected decision to fire his Attorney General Jeff Sessions would seem to reduce the odds of a bipartisan fiscal stimulus with the House …
9th November 2018
As universally anticipated, the Fed left rates on hold today and there was nothing in the policy statement to suggest that officials are wavering from their plans to hike interest rates again in December. … December rate hike …
8th November 2018
The Democrats were widely expected to win control of the House in yesterday’s midterm elections and the results set the stage for two years of legislative gridlock. President Donald Trump and the Democrats could work together to boost infrastructure …
7th November 2018
There are few signs that the recent tax cuts have boosted the economy’s supply side and, with business investment growth moderating, the prospect of a marked pick-up in productivity growth is fading. Without a productivity miracle to fall back on, the Fed …
6th November 2018
The betting odds suggest that there are few uncertainties surrounding the broad outcomes of Tuesday’s midterm elections, with the Democrats likely to win control of the House while the Republicans maintain a majority in the Senate. That is most likely to …
2nd November 2018
The 250,000 gain in non-farm payrolls in October, following a more modest 118,000 gain in September, confirms that Hurricane Florence temporarily depressed employment in September. The BLS suggests that Hurricane Michael, which struck Florida during the …
The decline in the ISM manufacturing index to a six-month low of 57.7 in October, from 59.8, leaves it still at a relatively high level by past standards. Nevertheless, it does suggest that the factory sector is starting to succumb to the headwinds of a …
1st November 2018
Although the Fed is unlikely to make any policy changes at next week’s meeting, we expect the statement to reiterate the FOMC’s plan to continue gradually raising interest rates, with the next move coming in December. With the latest data showing that …
31st October 2018
With the Democrats likely to win control of the House, while the Republicans maintain a slim majority in the Senate, the chances of another fiscal stimulus being agreed after the midterm elections appear low. The more likely outcome is legislative …
29th October 2018
With the effective fed funds rate getting close to the top of its target range again, there’s a good chance that the Fed will combine a 25bp hike in the fed funds target range in December with another smaller 20bp hike in the interest on excess reserves …
The recent slump in stock markets is hard to square with the 3.5% annualised gain in third-quarter GDP that follows an even more impressive 4.2% rise in the second. Looking at the details of that economic growth, however, there are signs that higher …
26th October 2018
At 3.5% annualised, GDP growth remained unusually strong in the third quarter, thanks partly to this year’s fiscal stimulus, but there are signs that higher interest rates are beginning to have a bigger restraining effect. Once the boost from fiscal …
We estimate that non-farm payroll gains rebounded to 185,000 in October, but this may be skewed by the uncertain impacts of Hurricane Florence and Hurricane Michael. The bigger picture is that underlying jobs growth remains strong, which will push up wage …
25th October 2018
The September durable goods data confirm that equipment investment growth rebounded in the third quarter, although the recent slowdown in new orders growth suggests that strength won’t be sustained. … Durable Goods & Advance Economic Indicators …
Although narrow money growth rebounded in September, the Fed’s quantitative tightening will continue to exert downward pressure over the months ahead. Furthermore, signs are emerging that the Fed’s interest rate hikes are starting to weigh on demand for …
24th October 2018
Data next week are likely to show GDP growth slowing to 3.3% annualised in the third quarter. That would still be well above the economy’s potential growth rate but, looking under the hood, there are reasons to suspect that a sharper slowdown lies ahead. …
19th October 2018
The fall in equity prices over the past couple of weeks is hard to square with the recent economic data, which suggest that GDP growth was 3.0% annualised in the third quarter. The sell-off appears instead to be a delayed response to the renewed surge in …
18th October 2018
The modest 0.3% m/m rise in industrial production last month was driven by continued gains in manufacturing output, suggesting that the sector is holding up better than we had anticipated. But the appreciation of the dollar and slowdown in global growth …
16th October 2018
Despite the disappointing 0.1% m/m rise in headline retail sales in September, the strength of underlying sales suggests that third-quarter real consumption growth slowed only gradually to 3.5% annualised. … Retail Sales …
15th October 2018
It is hard to explain this week’s sharp drop in equity prices in terms of the incoming economic data. True, following the surge in the 10-year Treasury yield that began last week, the sell-off in equities could be due to fears that higher interest rates …
12th October 2018
Although the Fed’s rate hikes have so far been modest compared to previous tightening cycles, actual borrowing costs faced by households and firms have risen more markedly. That is a key reason why we expect economic growth to fall below its potential …
11th October 2018
A widespread US debt crisis is unlikely but, over the next few years, over-leverage in the non-financial corporate sector, particularly the oil & gas, utilities and telecoms industries, could trigger a rise in defaults and a rebound in corporate bond …
The second consecutive modest rise in core consumer prices in September, together with the sell-off in the stock market, won’t be enough to prevent the “crazy’ Fed from raising rates again in December. We expect core inflation to rebound in the coming …
The recent strength of the economy appears to be pushing Fed officials in an increasingly hawkish direction. But the corresponding surge in market interest rates this week only reinforces our own view that economic growth will slow sharply next year. … …
5th October 2018
The weaker 134,000 gain in non-farm payrolls in September may well be a one-off, reflecting some hit from Hurricane Florence. With large upward revisions to previous months’ payroll gains, a fall in the unemployment rate to its lowest level since 1969, …
The new trade deal agreed with Canada and Mexico won’t in itself have much impact on the US economy. Along with the deal recently agreed with South Korea, however, it provides another example of President Donald Trump backing down from his hard-line …
1st October 2018
The small decline in the headline ISM manufacturing index last month from a 14-year high in August still leaves it at an unusually high level, but it is difficult to square with the slowdown in global activity, the stronger dollar, and the uncertainty …
President Donald Trump’s renewed criticism of Canada this week means that the end-September deadline for a new trilateral NAFTA agreement is set to pass without a deal, increasing the threat that Canada is included in the list of countries subject to new …
28th September 2018
Boosted by the fiscal stimulus, GDP growth is still on track to be a solid 2.8% this year but, as that stimulus fades and the Fed continues to tighten monetary policy, we expect growth to slow to 2.2% in 2019 and only 1.5% in 2020. Our baseline forecast …
27th September 2018
We estimate that non-farm payrolls rose by 220,000 in September, with the unemployment rate dropping to 3.8% and average hourly earnings posting another decent monthly gain. That would be enough to keep the Fed hiking interest rates over the coming …
The weakness of underlying capital goods shipments and goods exports in August means that, even though inventories will still make a big positive contribution, we now forecast that third-quarter GDP growth will be 3.0%, a little weaker than we previously …
The Fed stuck to the script today, pushing ahead with another rate hike and signalling through the accompanying statement and economic projections that it will raise interest rates four times between now and the end of next year. We expect the Fed to …
26th September 2018
A combination of the Fed’s balance sheet rundown and rising interest rates have pushed narrow money growth down to an eight-year low, but growth in the broader money and credit aggregates have held up much better, suggesting that slowdown is not affecting …
The surge in market interest rates, which continued this week, is already feeding through to higher borrowing costs for households and businesses and leaves us increasingly confident in our view that consumption and investment growth will slow sharply …
21st September 2018
The continued strength of economic growth in the third quarter together with signs that wage growth and underlying inflation are accelerating will maintain pressure on the Fed to keep raising interest rates once a quarter, including at next week’s …
19th September 2018
The economy remains strong, with the fiscal stimulus still providing a big boost but, looking beyond headline GDP growth, there are signs that rising interest rates and the resurgent dollar are beginning to weigh on activity. Higher long-term rates have …
17th September 2018
The further rise this week in market interest rate expectations for the next 12 months brought them almost in line with our own long-held and once-hawkish projections. But investors are increasingly underestimating the scope for rate cuts further ahead. … …
14th September 2018
The more modest 0.2% m/m gain in manufacturing output in August provides further evidence that the appreciation of the dollar over the past six months is now beginning to weigh more heavily on output in the factory sector. With the consumer sector still …
Although retail sales were weaker than we had been expecting in August specifically, upward revisions to sales in previous months mean that real consumption growth still appears to have remained strong in the third quarter. … Retail Sales …
Recent developments suggest that the trade dispute with China will continue to escalate over the coming months, with a rising possibility that by early next year all bilateral trade could be subject to tariffs. Nevertheless, the impact on US output and …
13th September 2018
The more modest 0.1% m/m increase in core consumer prices in August is unlikely to derail the Fed’s plans to continue hiking interest rates once a quarter, with another increase coming later this month. … Consumer Prices …
The latest NFIB and JOLT surveys suggest that the recent acceleration in wage growth has further to run. … Surveys suggest wage growth has further to …
11th September 2018
The ISM surveys released this week suggest that the economy is set for another quarter of growth above 4% annualised. We suspect that will prove a little too optimistic, but the bottom line is that the economy remains unusually strong. That will give the …
7th September 2018
The 201,000 rise in non-farm payrolls in August all-but guarantees that the Fed will raise interest rates later this month, particularly as wage growth reached a nine-year high. … Employment Report …
The sharp widening in the nominal trade deficit to a five-month high of $50.1bn in July, from $45.7bn, suggests that the big boost to GDP growth from net exports in the second quarter will be reversed in the third. But with domestic demand growth still …
5th September 2018
The surge in the ISM manufacturing index in August to a 14-year high is hard to square with other evidence, which indicates that growth in the factory sector is slowing. The details suggest that domestic demand remained strong last month, but with export …
4th September 2018
President Donald Trump may have reached an agreement to overhaul NAFTA this week but, as his interview with Bloomberg on Thursday highlighted, his protectionist instincts haven’t gone anywhere. They will be on full show next week when Trump will …
31st August 2018
We estimate that growth in non-farm payroll employment rebounded to 180,000 in August. Along with signs that diminishing slack is starting to push wage growth gradually higher, that would seal the deal for another Fed rate hike next month. … Strong …
30th August 2018
