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Our recreated M3 measure shows broad money growth accelerating to a 12-month high of 4.6% in August, from 4.3%, although the Fed’s quantitative tightening will put modest downward pressure on the monetary aggregates for the next few years. … Monetary …
3rd October 2017
The debate surrounding the four candidates who were interviewed to become the next Fed Chair has focused almost exclusively on how they might affect the monetary policy outlook, but we suspect it will be the winning candidate’s views on regulatory policy …
2nd October 2017
The rise in the ISM manufacturing index to a 13-year high of 60.8 in September, from 58.8, is the latest illustration of the benefit to the manufacturing sector from the weaker dollar and strong global demand. The index is now, at face value, consistent …
After another soft start to the year, US economic growth is now benefitting from an upturn in global activity and a loosening of financial conditions. The weaker dollar should boost export growth, while domestic demand should benefit from low long-term …
In her speech earlier this week, Chair Janet Yellen stressed that, despite the weakness of core inflation this year, the Fed still intends to push ahead with further interest rate hikes, with most officials expecting to raise rates before the end of this …
29th September 2017
The September employment report is likely to be affected heavily by the disruption caused by Hurricanes Harvey and Irma. Our best guess is that payrolls rose by around 100,000, about half of the gain we would have expected in the absence of the …
28th September 2017
The unified tax proposals released by Republicans today offer more detail than before, but there are still a number of missing pieces that make it hard to estimate the overall cost of the plan accurately. Our long-held working assumption is that, by early …
27th September 2017
Headline durable goods orders rebounded partially in August, but the bigger news was the strong increases in non-defence capital goods orders and shipments. The latter suggests that business equipment investment is set for another big gain in the third …
The small drop in the Conference Board measure of consumer confidence in September appears to be entirely due to the impact from Hurricanes Harvey and Irma, and is likely to be reversed in the coming months. The fact that confidence is near a sixteen year …
26th September 2017
As the statement and updated projections from this week’s FOMC meeting made clear, a majority of Fed officials remain convinced that the recent weakness of core inflation is mostly due to transitory factors and still expect to hike rates again in …
22nd September 2017
The Fed’s decision today to keep interest rates unchanged at 1.0-1.25%, as well as its long-anticipated move to formally announce the start of the balance sheet normalisation process next month, came as little surprise. The bigger news was that, despite …
20th September 2017
The V-shaped rebound in the three-month annualised rate confirms the slump in core CPI inflation that began in the spring was mostly due to transitory factors, which are now fading. The annual core inflation rate will remain muted for the rest of this …
18th September 2017
The rapid rebound in real median household income over the past few years, from a 16-year low in 2011 to a record high in 2016, illustrates that it is not just the top five percent who are benefitting from the current economic expansion any more. Over the …
15th September 2017
Retail sales and industrial production both came in well below consensus expectations in August, although a lot of that weakness resulted from the disruption caused by Hurricane Harvey toward the end of the month, which will eventually be reversed. … …
August’s report confirms that the earlier decline in core CPI inflation was largely due to idiosyncratic factors that are now fading or going into reverse. We still don’t expect the Fed to hike interest rates again this year, but it will return to …
14th September 2017
A plethora of recent developments mean that the Fed is unlikely to raise interest rates again until next year now, although we do expect it to announce the start of its balance sheet normalisation at next week’s FOMC meeting, which concludes on Wednesday …
13th September 2017
While the recovery in business investment looks set to continue, the latest surveys suggest that firms will soon have to increase the pay they are offering if they want to hire additional workers. … NFIB & JOLT surveys suggest weak wage growth won’t …
12th September 2017
A number of developments this week – including Vice Chair Stanley Fischer’s resignation from the Fed, the stopgap deal to keep the government funded for only three months and the arrival of Hurricane Irma on the heels of Harvey – make it less likely that …
8th September 2017
Estimates of the damage caused by Hurricane Harvey have been rising in recent days, but we still expect the short-term negative impact on activity and employment to be modest. Unfortunately, it now appears that disruption will be compounded by Hurricane …
6th September 2017
The trade deficit widened trivially to $43.7bn in July, from $43.5bn, but net external trade is still on course to provide a modest positive contribution of around 0.3% points to third-quarter GDP growth. … Int. Trade (Jul.) & ISM Non-Manufacturing …
The announcement by the White House that it will phase out the Obama-era Deferred Action for Childhood Arrivals (DACA) programme, which provides temporary work permits for 800,000 children of illegal immigrants, the so-called ‘dreamers”, will have only a …
5th September 2017
The upward revisions to second-quarter GDP growth, which is now estimated to have been 3.0% annualised, suggest that the ambitious growth targets set by the White House may already have been achieved. However, while the economy looks set to continue …
1st September 2017
The rebound in the ISM manufacturing index to a six-year high in August illustrates that, despite the softer pace of payroll employment growth, activity continued to expand at a healthy pace last month. On past form, the index is consistent with …
August’s employment report was disappointing across the board but given the potential seasonal problems – with weak initial readings in August subsequently revised higher in previous years – it isn’t going to have any meaningful impact on the Fed. … …
The annual growth rates of the monetary aggregates remained strong in August, but bank loan growth is still muted. … Monetary Indicators Monitor …
30th August 2017
Hurricane Harvey is a national tragedy, but the impact on the national economy will be minimal. We might see a small uptick in initial jobless claims in early September and a very modest adverse impact on employment, industrial production and retail sales …
29th August 2017
The increase in consumer confidence in August is remarkable given the nuclear threat from North Korea and violent protests in Charlottesville. With labour market conditions still exceptionally tight, confidence and consumption growth look set to remain …
Congress should act to raise the debt ceiling by mid-October, but a short shutdown looks inevitable. Moreover, the tensions between the White House and the various Republican factions in Congress make the outcome of the negotiations harder to predict than …
28th August 2017
Fed Chair Janet Yellen’s passionate defence of the post-crisis tightening of financial regulation in her Jackson Hole speech today isn’t going to go down particularly well at the White House. Donald Trump has made rolling back regulation the centrepiece …
25th August 2017
Household debt levels may now exceed their pre-crisis peaks in dollar terms but, more importantly, debt remains at an easily manageable level relative to disposable incomes and, after factoring in low interest rates, the cost of servicing that debt is …
The big drop in headline durable goods orders in July is nothing to worry about, since it was entirely due to a drop back in orders in the volatile aircraft category. The more important news was that non-defence capital goods orders and shipments rose …
Whoever is leading the Fed next February, policy will be driven mostly by economic developments, which we think will prompt the FOMC to raise rates four times in 2018. But a new Chair, along with other board appointees, could shift the Fed’s stance in …
24th August 2017
We forecast a 200,000 rise in non-farm payrolls in August, and suspect that the unemployment rate fell to 4.2%, below the current end-year projection of Fed officials. The surveys suggest it could fall even further over the months ahead. … Unemployment …
Just as the dollar’s earlier surge weighed on economic growth last year, the drop back in the exchange rate this year will provide a boost to growth over the next 12 months. The pick-up in global economic growth will also help. Real export growth has …
22nd August 2017
The shift to online sales is having a transformative effect on the retail industry, but does not explain the weakness in core inflation, either this year specifically or the Fed’s more general failure to hit the 2% target in recent years. … Is it Amazon’s …
21st August 2017
The sharp increase in the University of Michigan consumer confidence index in August takes it back to the highs seen earlier in the year, and is a sign that consumption growth will remain strong over the rest of this year. … UoM Consumer Confidence …
18th August 2017
Even if the dollar doesn’t weaken any further, the 7% depreciation in trade weighted terms already seen this year will help support GDP growth via the resulting boost to exports. But the recent moves are also putting renewed upward pressure on import …
The 0.2% m/m rise in industrial production in July, which included a 0.1% m/m decline in manufacturing output, was a little weaker than we had expected. That said, with industrial production rising at its strongest pace in three years in the second …
17th August 2017
We expect the current economic expansion to continue for the next year or two, by which time it will be the longest on record. But all expansions come to an end, and the rise in interest rates we expect over the next few years will push the economy into a …
16th August 2017
The strong gain in retail sales in July, together with the upward revisions to May and June data support our forecast that third-quarter GDP growth will be between 2.5% and 3.0% annualised. With jobs growth showing few signs of slowing, we expect …
15th August 2017
The recent pick-up in productivity growth is at least partly due to tighter conditions in the labour market, with the dwindling pool of the unemployed forcing firms to invest in additional productivity-enhancing capital equipment instead. Given the high …
11th August 2017
The weakness in core CPI inflation persisted in July, although transitory factors continued to play a sizeable role. … Consumer Prices …
The latest JOLT and NFIB surveys show that labour market conditions remain unusually tight and, while this is still not translating into significantly faster wage growth, it might finally be prompting firms to boost their capital expenditures. … NFIB & …
8th August 2017
Annual revisions to the income and spending data released this week mean that the household saving rate is now estimated to have fallen sharply over the past year, calling into question the sustainability of recent economic growth. While those revisions …
4th August 2017
The 209,000 rise in non-farm payrolls in July, together with the drop back in the unemployment rate to a joint 16-year low, suggests the Fed will still need to raise rates again this year, even if inflation remains subdued. … Employment Report (Jul.) & …
Despite the small decline in the ISM manufacturing index in July, the index is still above its average level in the second quarter and is consistent, on past form, with GDP growth of over 3% annualised. … ISM Manufacturing (Jul.), Income & Spending …
1st August 2017
The Fed’s latest policy statement suggests that, barring any disruptive debt-ceiling stand-off, the FOMC is ready to announce it will begin reducing the size of its balance sheet at its September meeting. But policymakers are keeping their options open on …
28th July 2017
The 2.6% annualised gain in real GDP in the second quarter was driven by a rebound in real consumption growth, and suggests that the economy is still on track to grow by around 2.2% in 2017 as a whole. This should convince the Fed that, despite the recent …
We expect a 200,000 increase in non-farm payrolls in July, which should have been enough to push the unemployment rate back down to 4.3%. As labour market conditions tighten further, we expect wage growth to come under some renewed upward pressure before …
27th July 2017
The 6.5% m/m rise in headline durable goods orders in June was flattered by a 131% surge in the ever-volatile commercial aircraft category. But the underlying details were also fairly encouraging and suggest that, after surging in the first quarter, …
