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The budget deal will raise federal spending this year by as much as 0.7% of GDP, providing an extra fiscal stimulus to an economy already boosted by the recent tax cuts. While that will mean 2018 is a very strong year for economic growth, it will add to …
9th February 2018
The reported acceleration in wage growth last month, which triggered the recent market sell-off, was nothing more than a weather-related distortion. The unseasonably cold January explains both the surge in average hourly earnings and the drop in average …
6th February 2018
Despite the widening in the trade deficit to a nine-year high of $53.1bn in December, from $50.4bn, a continued acceleration in real export growth should ensure that net trade is, at worst, neutral for GDP growth this year. … International Trade …
The Fed’s latest Senior Loan Officer Survey points to a reacceleration in the growth rate of business loans, although auto loans look set to weaken further. … Senior Loan Officer Survey …
5th February 2018
Despite long-term Treasury yields rising sharply this week to their highest level in four years, broader measures suggest that overall financial conditions have actually continued to loosen. Corporate bond spreads have fallen to levels not seen since …
2nd February 2018
The 200,000 gain in non-farm payrolls in January, which was above the consensus estimate but in line with our own forecast, leaves the Fed firmly on track to raise rates in March. And with signs that wage pressures are starting to build, we expect that …
The small decline in the ISM manufacturing index in January left it well above historical averages and consistent with GDP growth of over 4% annualised. With domestic demand receiving a boost from tax cuts and external demand buoyed by strong growth …
1st February 2018
Janet Yellen’s final meeting as Fed Chair pretty much summed up her entire tenure; policy was left accommodative but there were hints it will be tightened gradually in the future. The more hawkish statement confirms expectations of a March hike and we …
31st January 2018
The reduction in the Fed’s balance sheet has so far been exceptionally gradual, which helps to explain why there’s been next to no impact on the monetary aggregates. Meanwhile, bank lending growth has started to edge higher, driven by a pick-up in …
The rebound in the Conference Board measure of consumer confidence in January, which beat consensus expectations but was roughly in line with our own estimate, suggests that real consumption growth will start the year on a strong note. … Conference Board …
30th January 2018
The household saving rate fell to a 12-year low of 2.4% of disposable income in December and, based on the recent surge in the values of equities and real estate, it could fall all the way to zero. … Saving rate going to zero…and that’s okay …
Although stronger infrastructure investment could provide a significant boost to the economy, President Donald Trump’s plan to make private investors do most of the heavy lifting is unlikely to succeed. In any case, the chances of getting a bill through …
The surge in the stock market and wave of firms announcing wage increases and bonuses since the Tax Cut and Jobs Act passed have fuelled optimism that tax cuts are reviving “animal spirits” and providing a big boost to economic growth. But many of these …
26th January 2018
The slight slowdown in GDP growth in the fourth quarter means the economy fell just short of the 3% growth targeted by the White House, but it was entirely due to a huge drag from inventories and net trade, which will not be repeated. … GDP (Q4 1st …
We estimate that payroll employment growth rebounded to an above-trend 200,000 in January. That may have been enough to push the unemployment rate down to a new cycle-low of 4.0%, which would provide further reason to expect wage growth to trend higher …
25th January 2018
Janet Yellen’s final FOMC meeting will pass with little fanfare, but the language of the accompanying policy statement looks set to strike a more hawkish tone. That would leave the Fed on course to raise rates at Jerome Powell’s first meeting as Chair in …
24th January 2018
Despite the small decline in the University of Michigan consumer sentiment index in January, the index still points to consumption growth remaining close to 4% annualised. … Uni. of Michigan Consumer Confidence …
19th January 2018
Congress may still avoid a partial government shutdown this weekend if another short-term continuing resolution squeaks through a Senate vote. That will keep the lights on for another month, but a longer-term deal, to fund the Federal government and raise …
It is still possible that Congress will reach a late deal to avoid a partial government shutdown beginning this weekend, but the chances of agreement seem to be slipping away. … A primer on Federal government …
18th January 2018
The stronger 0.3% m/m gain in core consumer prices in December provided clearer evidence that the forces weighing on core inflation last year are now firmly in reverse. Admittedly, core CPI inflation only edged up to 1.8% in December and will remain …
In the long run we suspect the Fed will move away from rules-based inflation targeting and shift to a more discretionary regime that focuses on financial stability as well as price stability and full employment. In the short run, however, the Fed’s …
As a net oil importer, the recent rise in oil prices should eventually be a negative for the US economy, but the near-term impact may actually be positive. Mining investment is set to rebound in the first half of this year, while the hit to real incomes …
17th January 2018
The 0.9% m/m surge in industrial production in December was mostly due to a spike in utilities and stronger mining activity. Even so, underlying growth in manufacturing output remains strong and there are good reasons to think that it will continue to …
The tightening of financial conditions this week provided a timely reminder of the downside risks to the economy this year and next. 2018 won’t necessarily be the slam dunk that many are assuming. The sharp sell-off in the Treasury market highlights the …
12th January 2018
The 0.4% m/m rise in headline retail sales in December was in line with expectations, but the continued strength of underlying sales suggests that real consumption growth accelerated sharply in the fourth quarter of last year. … Retail Sales …
The 0.3% m/m gain in core consumer prices in December will reinforce expectations of a Fed rate hike in March and supports our view that the Fed will ultimately increase interest rates by a more aggressive 100bp cumulatively this year. … Consumer Prices …
The Fed’s quantitative tightening has so far had little impact on the monetary aggregates, but the effects of rising short-term interest rates are becoming more visible. Meanwhile, after slowing sharply in early 2017, bank lending growth is now …
10th January 2018
Small firms remain optimistic about the outlook, but tighter labour market conditions are becoming an increasing constraint on expansion. That points to a pick-up in wage pressures and continued strong investment growth in 2018, though there are signs …
9th January 2018
Business investment enjoyed a strong resurgence last year, particularly in the second half. Our estimates imply that business investment increased by 7.5% annualised in the fourth quarter, the biggest gain in more than three years. Furthermore, with …
5th January 2018
The slightly disappointing 148,000 gain in non-farm payrolls in December will not prevent the Fed from continuing to normalise interest rates, with the next hike probably coming in March. … Employment Report (Dec.) & Internat’l Trade …
The rebound in the ISM manufacturing index to 59.7 in December, from 58.2, leaves it close to a 13-year high and at a level that historically has been consistent with GDP growth accelerating to more than 4% in annual terms. … ISM Manufacturing Index …
3rd January 2018
Our econometric model points to a 210,000 gain in non-farm payrolls in December, which would be well above the average monthly gain of 174,000 over the first 11 months of last year. Manufacturing employment growth has been particularly strong over the …
It is hard to see how the US economy could have a bad year in 2018. GDP growth has been gaining momentum in 2017, the global economy is experiencing a strong synchronised upswing, borrowing costs remain low, the dollar has been trending lower and, despite …
22nd December 2017
The strong gains in real consumption and durable goods in November suggest that the economic expansion maintained its recent impressive vigour into the end of 2017. GDP growth looks to have been close to 3% annualised in the fourth quarter. … Durable …
Our forecast that GDP growth will accelerate to 2.5% next year is boringly in line with the consensus. Given the constellation of positive factors boosting economic growth, however, it’s hard to be contrarian for next year, at least on the downside. The …
After back to back quarters of 3% plus growth, the economy is on track to expand by close to 3% annualised in the final quarter of the year as well. Consumption growth is rebounding, with control group retail sales on a clear upward trend in recent …
20th December 2017
The Republicans' long-awaited tax reform bill, which looks set to be signed into law this week, represents the first major legislative victory for President Donald Trump and should provide a modest boost to the economy next year. The stimulus may end up …
19th December 2017
The subdued November CPI figures and the news that the Fed left its inflation and interest rate projections unchanged triggered a mini-rally in the bond markets, but arguably investors should be paying closer attention to the surge in producer price …
15th December 2017
The softer 0.2% m/m gain in industrial production in November was little surprise following the upwardly-revised 1.2% m/m surge the previous month. In any case, with the disruption from the hurricanes now well behind us, activity remains on course for a …
The 0.8% m/m rise in headline retail sales in November was a lot better than consensus expectations and, together with the upward revision to October’s gain, suggests that real consumption growth has accelerated in the fourth quarter. … Retail Sales …
14th December 2017
As widely expected, the Fed hiked interest rates by 25bp today, taking the fed funds target range to between 1.25% and 1.50%. Despite factoring in the imminent fiscal stimulus into their GDP growth projections for 2018, however, officials still anticipate …
13th December 2017
Headline consumer prices increased by a robust 0.4% m/m in November, albeit mainly due to a 7.3% m/m surge in gasoline prices, with core consumer prices increasing by a more modest 0.1% m/m. Nevertheless, the latter will not prevent the Fed from hiking …
Although small firms are increasingly optimistic about the economic outlook, the latest surveys suggest that business investment growth may soon start to slow. But with demand for labour as strong as ever, diminishing slack looks set to push wage growth …
12th December 2017
Inflation has been unusually stable over the past decade at a relatively low level, but there is no guarantee that the status quo will be maintained in the long term. A slide into deflation or a return to high inflation are both possible, with the former …
11th December 2017
Although the University of Michigan consumer confidence index declined in December, against consensus expectations of a small rise, the index remains at a high level by past standards and consistent with stronger real consumption growth. … Uni. of …
8th December 2017
The Fed is almost certain to raise interest rates at the conclusion of its policy meeting next week and, against a backdrop of tightening labour market conditions and gradually rising wage inflation, we expect it to raise rates another four times in 2018. …
The slightly bigger than expected 228,000 gain in non-farm payrolls in November all but guarantees another 25bp interest rate hike by the Fed next week, particularly with the unemployment rate unchanged at an unusually low 4.1%. … Employment Report …
At this stage, a 25bp rate hike at next week’s FOMC meeting is all-but guaranteed. Of more interest will be whether the increased prospect of a near-term fiscal stimulus prompts officials to revise up their projections for GDP growth, inflation and …
6th December 2017
The soon-to-be-finalised fiscal stimulus could prompt the Fed to tighten monetary policy slightly more aggressively next year, although the potential interactions between fiscal and monetary policies over the next few years go well beyond that. … How will …
With both the House and Senate having passed their respective versions of the Tax Cuts and Jobs Act, it now seems reasonably certain that we will get a package of tax cuts in place by early next year, which will provide a modest boost to economic growth …
5th December 2017
