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At face value, there are substantial differences between the fiscal plans of the two presidential candidates. While Hillary Clinton’s policies would essentially maintain the status quo, Donald Trump’s plan could entail a massive fiscal expansion. Attempts …
7th October 2016
The more modest 156,000 gain in non-farm payrolls in September, combined with the tick up in the unemployment rate to a five-month high of 5.0%, won’t stop the Fed from hiking interest rates at the December FOMC meeting, but it should quell any …
There is little evidence that the upcoming presidential election played any role in the weakness of economic growth in the first half of this year or, despite the early optimism, what is shaping up to be no more than a moderate acceleration in growth in …
5th October 2016
Although the trade deficit widened slightly to $40.7bn in August, from $39.5bn, net external trade is now on track to make a big contribution to third-quarter GDP growth. Elsewhere, the big rebound in the ISM non-manufacturing index in September is …
After a sharp fall in August, the rebound in the ISM manufacturing index in September should soothe fears that the US economy is headed for a serious downturn. Nevertheless, the index remains at a muted level and the other news today that construction …
3rd October 2016
While the decline in the neutral real fed funds rate in recent years can be explained in part by the decline in potential GDP growth, there are other factors, including increased risk aversion, higher costs of financial intermediation and higher savings. …
30th September 2016
We estimate that non-farm payroll employment increased by a slightly stronger 190,000 in September, but this would probably leave the unemployment rate unchanged at 4.9%. … Stronger payrolls may not be enough to cut …
29th September 2016
Although durable goods orders were unchanged in August, the details of the report were weak. It now appears that equipment investment contracted in the third quarter, which means the risks to our estimate that third-quarter GDP growth was 2.5% are now …
28th September 2016
If Donald Trump wins November’s presidential election, there is now a clear possibility that Fed Chair Janet Yellen would resign almost immediately, perhaps even before the mid-December FOMC meeting. It is hard to see how she could continue in her …
27th September 2016
A marked gap has opened up between the incoming expenditure-based data, which point to a healthy rebound in third-quarter GDP growth and the production-based business survey evidence, which has weakened over the past few months. We still think there are …
26th September 2016
The Fed left its policy rate unchanged at between 0.25% and 0.50% at last week's FOMC meeting, but it appears to be firmly on track for a December hike. However, the fed funds rate is likely to increase more gradually over the next few years than we had …
23rd September 2016
The Fed left its policy rate unchanged at between 0.25% and 0.50% at the conclusion of this week's FOMC meeting, but it appears to be firmly on track for a December hike. However, the fed funds rate is likely to increase more gradually over the next few …
21st September 2016
The annual growth rates of all the monetary aggregates accelerated in August, with a particularly pronounced pick-up in narrow M1 money growth, but bank loan growth has slowed slightly. The latter is principally due to a moderation in loans to businesses. …
20th September 2016
The big gap that has opened up between the CPI and PCE measures of core price inflation is now largely due to just one category, medical care. The Fed's preferred PCE measure of core inflation is still being depressed by declines in the administered …
19th September 2016
The cash held overseas by US firms has continued to grow at a rapid pace, rising to almost $2.5tn in 2015. The substantial tax bill most firms would face if they attempted to bring this cash home, however, means that it is still very unlikely to ever be …
Hillary Clinton’s recent stumble, both figuratively and literally, appears to have thrown the US presidential election race wide open again. The conventional wisdom is that the markets could react badly to a Trump win, particularly if next January he …
16th September 2016
The University of Michigan measure of consumer confidence was unchanged at a five-month low of 89.8 in September, although it is still at a level that, historically, has been consistent with real consumption growth of around 4% annualised. … UoM Consumer …
Although core CPI inflation edged higher in August, it has been broadly unchanged this year, suggesting that the Fed doesn’t need to rush to raise interest rates next week. … Consumer Prices (Aug. …
The weakness in retail sales and industrial production in August underline that the rebound in third-quarter GDP growth could be weaker than previously hoped, which is another reason for the Fed to pass on raising interest rates next week. … Retail Sales …
15th September 2016
It is always possible that the Fed could surprise us with an unexpected rate hike next week, but we very much doubt that will happen, it just doesn’t fit Chair Janet Yellen’s more cautious style. At this stage it would also be a big shock too, with the …
14th September 2016
Since the start of this year the rate of improvement in labour market conditions has slowed to a crawl. While a welcome rebound in the participation rate helps to explain why the unemployment rate has remained stuck at just below 5%, the progress in other …
There is now a marked gap opening up between the incoming expenditure-based data, which point to a healthy rebound in third-quarter GDP growth and the production-based business survey evidence, which is not far above recessionary levels. On balance, we …
9th September 2016
The rise in the job openings rate to a record high of 3.9% in July, from 3.8%, suggests that, despite the slowdown in payroll gains in August, labour market conditions continue to tighten, which should eventually generate a pick-up in wage growth later …
7th September 2016
The unexpected slump in the ISM non-manufacturing index to a six-year low of 51.4 in August, from 55.5, should all but rule out any possibility of a September rate hike, particularly as the manufacturing index fell back below the 50 mark last month. … …
6th September 2016
The gradual decline in the unemployment rate over the past couple of years has generated a cyclical rebound in labour’s share of income, which we suspect has further to run. At first glance, this appears to be good for the economy (assuming that …
2nd September 2016
The August employment report is not going to convince Fed officials to vote for a rate hike later this month, although an increase in December is still likely. … Employment Report (Aug.) & Int. Trade …
The decline in the ISM manufacturing index to 49.4 in August, from 52.6, is another reason to believe that the Fed will take a cautious approach and delay the next rate hike until December. With that decline, the index is now at a level that has …
1st September 2016
The rise in the Conference Board measure of consumer confidence to an 11-month high of 101.1 in August, from 96.7 leaves the index at a healthy level and suggests that real consumption growth will remain robust in the third quarter. It also implies that …
30th August 2016
After providing a small but valuable contribution to growth over the past couple of years, residential investment unexpectedly became a drag in the second quarter, contracting at a 7.7% annualised pace. However, we don’t expect this weakness to last. …
26th August 2016
Our econometric model suggests that non-farm payrolls increased by a more sustainable 180,000 in August. Otherwise, we suspect that after remaining unchanged in recent months, the unemployment rate edged down to 4.8%, from 4.9%. … Gradual slowdown in pace …
25th August 2016
Although the strong rise in durable goods orders in July was partly due to a massive rebound in the ever-volatile commercial aircraft category, the details of the report provide tentative evidence that business equipment investment may be set for a …
The stagnation in retail sales in July was not entirely surprising. Following the 4.2% annualised surge in real consumption in the second quarter, it was inevitable that spending growth would ease to a more sustainable pace. The fundamentals have also …
23rd August 2016
With the growth rate of our M3 broad money aggregate at a solid 4.4% y/y in July and bank loan growth at an even stronger 7.7% y/y, the economy appears to be in good health. … Monetary Indicators Monitor …
19th August 2016
The latest data show that household debt is now close to its 2008 peak in dollar terms. However, the gains in income over the past eight years and the decline in interest rates mean that households are now in a far stronger position to pay down that debt …
After a muted performance over the past 12 months, we expect GDP growth to accelerate in the second half of this year, albeit mainly because the drags from falling investment and inventories will fade. GDP growth should pick up from 1.5% this year to 2.2% …
17th August 2016
Headline CPI inflation remained unusually low in July and the latest drop in energy prices will keep it below 2% for longer than we first thought. Core consumer prices rose by 0.1% m/m, which was below consensus expectations for a 0.2% m/m rise and will …
16th August 2016
The latest data suggest that while firms are reluctant to increase capital expenditure, they are nonetheless continuing to expand their workforces. With the unemployment rate below 5%, however, the current pace of hiring is unlikely to be sustained for …
12th August 2016
The small rise in the University of Michigan measure of consumer confidence in August suggests that the weaker-than-expected July retail sales figures were a blip rather than the start of a more serious downturn. … UoM Consumer Confidence (Aug. …
Retail sales were unchanged in July, as a rebound in motor vehicle sales was largely offset by a price-related drop back in the value of gasoline station sales. After a clearly unsustainable 4.2% surge in real consumption in the second quarter, which is …
The latest JOLT survey suggests that labour market conditions continue to tighten, which should generate an acceleration in wage growth later this year. … JOLT survey points to tightening labour …
10th August 2016
The recent surge in short-term market interest rates in the US is linked to the upcoming change in money market fund rules rather than any underlying financial problems … Rise in short-term interest rates is little to …
The second-quarter productivity figures, which incorporate the recent downward revisions to historical GDP, reveal that the stagnation in productivity growth was even worse than we previously believed. … Productivity slump even worse than previously …
9th August 2016
The news that real personal spending increased by 0.3% m/m in June, along with the reported surge in auto manufacturers’ unit sales in July, implies that real consumption growth began the third quarter on a strong note. Digging deeper, however, the …
5th August 2016
The better than expected 255,000 increase in non-farm payrolls in July will renew speculation that the Fed might hike interest rates as soon as this September, but we still think Fed officials will want to see more evidence of a pick-up in GDP growth, …
After last week’s disappointing second-quarter GDP data, the very minor fall in the ISM manufacturing index in July should soothe fears that the US economy is heading into a more serious downturn. Indeed, at its current level, the index remains consistent …
1st August 2016
The disappointing 1.2% annualised gain in second-quarter GDP growth, combined with the downward revisions to gains in the preceding two quarters, make a September interest rate hike much less likely. Over the past 12 months, the economy has expanded by …
29th July 2016
Despite the more hawkish language in last week’s FOMC statement, the GDP data have significantly reduced the chances of a near-term rate hike. The economy has been growing at around 1% annualised for almost a year now and we suspect that Fed officials …
Our econometric model points to a healthy 190,000 gain in non-farm payrolls in July. As a result, the unemployment rate probably edged back down to 4.8%, from 4.9%. … Labour market remains in good …
28th July 2016
The Fed was never going to provide a definitive steer on future rate decisions at this week's FOMC meeting, particularly not when Chair Janet Yellen is due to speak at the Jackson Hole symposium in late August. Nevertheless, the language added to today's …
27th July 2016
The 4.0% m/m decline in durable goods orders in June, was principally due to a sharp decline in the notoriously volatile commercial aircraft category. Otherwise, the details of the report confirm that equipment investment was a minor drag on …
