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The widening in the trade deficit in October was driven by a large fall in soybean exports, which appears unlikely to be reversed over the next month or two. Together with the continued strength of import growth, this suggests that net trade will be a …
5th December 2017
The small decline in the ISM manufacturing index in November, which mirrors the drop back in the regional Fed surveys and the alternative Markit PMI, still leaves it at an elevated level consistent with solid GDP growth. The depreciation in the dollar …
1st December 2017
Our forecast that the S&P 500 will do no better than trend sideways for the next year is based on our belief that, with the unemployment rate at a 17-year low, most of the gains in nominal GDP next year will accumulate to workers in the form of higher …
We forecast a 200,000 gain in non-farm payrolls in November, with the unemployment rate holding steady at a 17-year low of 4.1%. The latter will concern those Fed officials worried that diminishing labour market slack is laying the foundations for a more …
30th November 2017
The monetary aggregates reveal a divergence, with M2 growth slowing to a six-year low of 5.0% in October, while growth in our M3 measure accelerated to a two-and-a-half-year high of 6.1%. As short-term interest rates continue to rise, that divergence will …
29th November 2017
The rise in the Conference Board consumer confidence index to a new 17-year high provides further reason to think that real consumption growth is set to accelerate. … Conference Board Consumer Confidence …
28th November 2017
The flattening of the yield curve over the past couple of months is not a signal that a recession is on the way. Instead, it is mainly due to a drop back in the term premium on longer-dated bonds, which could reflect a number of factors, including the …
22nd November 2017
The fall in durable goods orders in October was entirely driven by a drop back in the volatile transport category. The underlying details suggest that business equipment investment continues to expand at a solid pace, although there are also some signs …
Core CPI inflation was subdued at 1.8% in October, but there were signs that the transitory factors weighing on core inflation earlier this year are now starting to fade. Medical care price inflation has bottomed out, while the surge in replacement demand …
20th November 2017
Households’ balance sheets are in good shape; debt as a share of income has remained stable, net wealth is at a record high, and debt service costs are below their long-run average. However, the recent increase in new credit card delinquencies is a sign …
17th November 2017
The 1.3% m/m surge in manufacturing output in October, the biggest monthly gain in six months, mainly reflects the return to normalcy after the disruption caused by the hurricanes in late August and early September. Nevertheless, the pick-up in global …
16th November 2017
The Republicans appear to be making reasonable progress on tax reform but, with several key challenges yet to be resolved, there is still a long way to go before a final bill is ready for President Donald Trump to sign. The administration’s goal of …
15th November 2017
Despite the subdued 0.2% m/m gain in headline retail sales in October, which was still above the consensus forecast of no change, the underlying details suggest that real consumption growth has picked up in the fourth quarter. … Retail Sales …
A drop back in energy prices last month pushed headline down to 2.0% from 2.2%, but there are clear signs that underlying price pressures are on the rise again. Core inflation increased for the first time since January, to 1.8% from 1.7%, and we suspect …
The nomination of the relatively inexperienced Jerome Powell as Fed Chair comes at arguably a bad time as the FOMC has fewer professional economists and less experience than it has had in decades. The large number of vacancies and high turnover on the …
14th November 2017
Despite the fall in the University of Michigan consumer confidence index to 97.8 in November, from 100.7, it remains close to its highest level in many years, suggesting that real consumption is set for stronger growth in the fourth quarter. … Uni. of …
10th November 2017
The rapid pace of business investment growth so far this year may be unsustainable, but there is little reason to fear anything worse than a modest slowdown any time soon. The near-term prospects for equipment investment still look bright and, although …
In the year since Donald Trump won the Presidential election, events outside of the US have had a bigger impact on the economy, but we doubt that will remain the case. We expect a deficit-financed fiscal stimulus to boost GDP growth in 2018, while the …
9th November 2017
The Fed’s latest Senior Loan Office Survey (SLOS) paints a mixed picture, with banks loosening lending standards on business loans and residential mortgages, but tightening standards on some types of consumer loans, including auto loans and credit cards. …
6th November 2017
The contrarian wisdom is that even if the aggregate debt-to-income ratio has fallen sharply in recent years, it masks financial stresses for those on low incomes, since most of the gains in income have gone to the already wealthy. The data, however, tell …
3rd November 2017
The smaller than expected 261,000 gain in non-farm payroll employment in October, which was below the 310,000 consensus forecast, isn’t as disappointing as it looks when the cumulative 90,000 upward revision to employment in the preceding two months is …
The sharp rebound in productivity this year, after falling outright in 2016, is positive news for the economy and suggests that real wages will pick up more rapidly soon. But with employment growth slowing, productivity growth will need to rise further to …
The House GOP tax bill released earlier today suggests that Republicans are edging towards their goal of passing tax reform this year. The proposals would add $1.5trn to the deficit over ten years, as already agreed to in the Budget resolution. The bill …
2nd November 2017
Some are born great, some achieve greatness and some have greatness thrust upon them. Jerome Powell belongs in the third category. President Donald Trump’s nomination of Powell to be the next Fed Chair is an underwhelming choice. The Fed will face many …
The Fed issued a very similar statement at the conclusion of the latest FOMC meeting today, which included an upgrade to its assessment of economic growth. On balance, this is a marginally more hawkish statement that leaves the Fed firmly on course to …
1st November 2017
The small drop back in the ISM Manufacturing Index in October from a 13-year high is little to worry about, and it still suggests that manufacturing output will rebound in the fourth quarter. … ISM Manufacturing Index …
The rise in the Conference Board consumer confidence index to a near 17-year high in October suggests that, following the slightly softer 2.4% annualised gain in real consumption in the third quarter, spending growth is likely to pick up over the rest of …
31st October 2017
The decline in the household saving rate, to a near-decade low of 3.1% in September, is largely explained by the accompanying surge in household net wealth to a record high. Capital gains mean that households can get away with saving less from current …
Regardless of who is nominated to be the next Fed Chair, we expect a rebound in core inflation will prompt the Fed to raise interest rates four times in 2018. The components that have dragged core CPI inflation lower this year look set to reverse course, …
27th October 2017
The 3.0% annualised gain in third-quarter GDP, which was almost unchanged from the 3.1% increase in the second, will be welcomed by the White House and demonstrates that the hurricanes ended up having little lasting impact on the economy. … GDP (Q3 1st …
We are forecasting a huge 350,000 rebound in payroll employment in October, as the impact of Hurricanes Harvey and Irma are reversed. But the bigger picture remains that payroll employment growth will trend lower over the next few years. … Payrolls set to …
26th October 2017
If President Donald Trump is serious about being a “low-interest rate guy”, markets are probably right to brush off John Taylor’s chances of being nominated for Fed Chair. That said, we don’t agree with recent claims that Taylor could prove to be dovish …
25th October 2017
The Fed’s policy meeting next week could provide some insight into whether the majority of officials still support a December interest rate hike. But it will otherwise be overshadowed by the imminent announcement from the White House on who President …
The 2.2% m/m rise in durable goods orders in September confirms that business equipment investment posted another big gain in the third quarter, while the survey evidence suggests that things could get even better in the fourth quarter. … Durable Goods …
Our measure of M3 shows broad money growth rising in September to its fastest pace in more than two years, although growth in narrow money continues to slow gradually. … Monetary Indicators Monitor …
24th October 2017
The markets are right to remain relatively sanguine over the upcoming decision on who will be the next Fed Chair, since the Fed’s low rate regime will probably continue with President Donald Trump picking Jerome Powell. But there is still uncertainty over …
20th October 2017
Although GDP growth looks to have slowed slightly in the third quarter, at least partly due to the disruption caused by Hurricanes Harvey and Irma, the surge in the ISM surveys suggests that underlying activity growth continues to strengthen. A weighted …
18th October 2017
The demise of the NAFTA agreement would have a modest negative impact on the US economy. But if a unilateral withdrawal by the Trump administration signalled the beginning of a broader lurch toward protectionism, then the damage to the US economy could …
17th October 2017
The 0.3% m/m rebound in industrial production in September confirms that the disruption caused by Hurricane Harvey in late August, which largely explains the 0.7% m/m fall in that month, is now being reversed. That said, there were still signs of …
The Republicans’ tax plans could result in a sizable chunk of the $2.6tn of earnings held overseas by US firms being repatriated. However, although the tax revenues from such a move could help to offset some of the giveaways elsewhere in the proposals, we …
Even putting aside the hurricane-related fall in payroll employment in September specifically, trend employment growth has been gradually slowing for more than two years now. The surge in job openings to a record high, however, suggests that slowdown has …
13th October 2017
The rebound in retail sales in September provides further evidence that the economy is bouncing back from the disruption caused by the hurricanes. Real consumption growth still looks to have slowed in the third quarter, but it should pick up again over …
The 0.5% m/m rise in headline consumer prices in September was driven by a spike in gasoline prices due to Hurricane Harvey, while there was a more muted 0.1% rise in core consumer prices. But the latter partly reflects a drop back in vehicle and drug …
The latest JOLT and NFIB surveys underline that labour market conditions are exceptionally tight, and suggest that the recent pick-up in wage and investment growth has further to run. … Stage set for a pick-up in wage and investment …
11th October 2017
The shift to full expensing of firms’ capital investments included in Republicans’ tax plans would provide a temporary boost to the economy by encouraging businesses to bring forward investment projects. But it will not lift investment permanently, nor …
9th October 2017
The surge in the ISM manufacturing and non-manufacturing indices in September leaves them consistent with annual GDP growth of nearly 4%, but there are some doubts over whether activity really is that strong. In particular, the Markit PMIs have remained …
6th October 2017
The 33,000 decline in non-farm payrolls in September was worse than the consensus forecast at 90,000 or our own 100,000 estimate but, frankly, all of us were waving a finger in the air and guessing when it came to what impact Hurricanes Harvey and Irma …
The narrowing of the trade deficit to $42.4bn in August, from $43.6bn, provides further evidence that net trade was on course to make a small positive contribution to third-quarter GDP growth. … International Trade …
5th October 2017
The surge in the ISM non-manufacturing index is a clear sign that the economy is recovering quickly from any hurricane-related disruption and that the underlying pace of GDP growth remains strong. A weighted average of the ISM manufacturing and …
4th October 2017
The share of people aged 25 to 54 who are in the labour force is likely to rise further over the coming years, as labour market conditions continue to tighten and disability rates drop back. Nevertheless, there are not hordes of people waiting on the …
