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The Fed’s latest Senior Loan Officer Survey (SLOS) underscores that business investment is likely to remain muted for some time yet. In contrast, the consumer outlook is encouraging. … SLOS shows contrast between business and consumer …
2nd May 2016
The modest drop back in the ISM manufacturing index to 50.8 in April, from 51.8, is a bit disappointing, but that April figure is still the second highest reading in the past eight months. At its current level, the index is consistent with GDP growth of …
Some of the headwinds that restricted first-quarter GDP growth to a paltry 0.5% annualised will fade in the second half of this year. But barring a miracle second-quarter rebound, it appears that GDP growth is on course for another underwhelming gain of …
29th April 2016
Our econometric model points to a more modest 170,000 gain in non-farm payrolls in April, with the unemployment rate remaining unchanged at 5.0%. Otherwise, we’ve pencilled in a 0.3% m/m gain in average hourly wages, which would lift the annual rate up to …
28th April 2016
The very modest 0.5% annualised gain in first-quarter GDP, which represents a significant slowdown on the already moderate 1.4% gain in the final quarter of last year, was due to a number of headwinds hitting in the economy. Some of those will fade but, …
As universally expected, the FOMC kept the fed funds target range unchanged at between 0.25% and 0.50% today, but left the door open to a second 25 basis point rate hike in June. With core inflation picking up and global risks diminishing, we still …
27th April 2016
Although the current account deficit remains well below the peak reached in 2006, net external debt has soared to more than 40% of GDP, up from only 10% a decade ago. The external debt burden is still a long way below the levels that triggered currency …
The weakness in non-defence durable goods orders and the dip in consumer confidence do not chang eour view that, after a disappointing first quarter, GDP growth will rebound in the second, helped by a pick-up in consumption growth. … Durable Goods (Mar.) …
26th April 2016
The recent activity data indicate that first-quarter GDP growth slowed to just 0.8% annualised. However, we expect this to prove only a temporary setback rather than the start of a more serious downturn. Employment and incomes have continued to grow at a …
25th April 2016
According to our calculations, economic growth slowed to only 0.8% annualised in the first quarter. (Data due on Thursday). That slowdown doesn’t worry us, however, even though economic growth has been getting progressively weaker since the middle of last …
22nd April 2016
Although we expect the Fed to raise interest rates faster than most anticipate over the next two years, the resulting appreciation of the dollar should be much more modest than last year. Following a massive 10.9% increase in 2015, our forecasts imply a …
20th April 2016
Despite the marked improvement in financial conditions and fading fears over China’s economic outlook, the Fed is very unlikely to raise interest rates at the upcoming FOMC meeting, which concludes on Wednesday 27th April. Nevertheless, we expect the Fed …
Inflation is going to overshoot the Fed’s 2% target, let’s be clear. While we expect Fed officials to be fairly relaxed about that, however, we don’t think it means interest rates won’t rise at all, only that they will remain well below the neutral rate …
19th April 2016
The slowdown in first-quarter real consumption growth is primarily a reflection of the big drop back in motor vehicle sales over the past couple of months. In contrast, domestic motor vehicle production is on track for a sharp increase in the first …
15th April 2016
At first glance, the reported declines in industrial production and consumer confidence suggest the recovery is losing momentum. But the remarkable turnaround in the activity surveys points to a mini manufacturing renaissance soon, while consumer …
The more modest 0.1% m/m increase in March consumer prices, which was below the consensus estimate of a 0.2% m/m gain, was principally because of a 1.1% m/m drop back in clothing prices. … Consumer Prices …
14th April 2016
The most likely outcome of the elections on November 8 th is that Hillary Clinton will be the next President with the Republicans maintaining control of both the House and Senate. But we wouldn’t completely rule out the Democrats gaining control of one or …
13th April 2016
The 0.3% m/m decline in retail sales was slightly weaker than consensus expectations and was mainly due to a 2.1% m/m decline in auto sales. More importantly, while the 0.1% m/m increase in control group sales was on the weak side in March, upward …
If sustained (admittedly a big if), the recent surge in labour force growth would mean that the US economy’s potential growth rate is arguably higher than most economists currently believe. Unfortunately, unless we see a corresponding rebound in labour …
8th April 2016
Thanks to a markedly weaker gain in consumption than we were previously expecting, it now appears that first-quarter GDP growth was no more than 1% annualised. Following on from the 1.4% gain in the final quarter of last year, that suggests the US economy …
7th April 2016
The recent weakness of wage growth over the past few months is partly explained by a deterioration in the quality of jobs being created, which is also reflected in a surge in low-skilled labour force participation. … Strength of low-paid hiring may be …
The widening in the trade deficit to a six-month high of $47.1bn in February, from $45.9bn, means that net exports will be a drag on first-quarter GDP growth, which we now think was around 1.5% annualised. … Internat’l Trade (Feb.) & ISM Non-Manu. …
5th April 2016
The revelation last week that spending in January was much weaker than initially thought, coupled with the modest increase in February, means that real consumption growth probably slowed to around 2.0% annualised in the first quarter, from 2.4% in the …
1st April 2016
The 215,000 gain in non-farm payroll employment in March highlights once again that, even though GDP growth has been underwhelming over the past six months, the labour market remains unusually strong. … Employment Report …
The recent surge in labour force participation has been concentrated among low-skilled workers, which may be artificially depressing average hourly earnings. But with this trend unlikely to last and the unemployment rate close to its natural level, we …
31st March 2016
We are not overly concerned by the slowdown in the annual growth rate of our broad M3 money measure to a five-year low of 3.5% in February, particularly not when bank loans are still expanding at more than 8% per year. … Monetary Indicators Monitor …
30th March 2016
The 11.5% decline in corporate profits last year, which included a 7.8% decline in the fourth quarter alone, doesn’t necessarily mean that a recession is imminent. Admittedly, profits usually begin to decline in the latter stages of the economic cycle, …
29th March 2016
The rebound in the Conference Board measure of consumer confidence to 96.2 in March, from 94.0, suggests that the rebound in stock markets more than offset the impact of higher gasoline prices in recent weeks. It also supports our view that the apparent …
It is becoming increasingly apparent that many Fed officials are underestimating the degree to which inflation will rise in the second half of the year. Fed officials expect core PCE inflation will fall back to 1.6% by the fourth quarter, but it remained …
28th March 2016
The downward revision to the Fed’s interest rate projections at the March FOMC meeting, despite little change in the economic projections, has prompted plenty of speculation that its “reaction function” has shifted. We’re sceptical that the Fed is now …
24th March 2016
The 2.8% m/m decline in headline durable goods orders in February was partly due to a slump in the volatile commercial aircraft category. But even allowing for that, the details of the report suggest that equipment investment remained muted in the first …
Our econometric model points to a 180,000 gain in non-farm payrolls in March. We estimate that the unemployment rate was unchanged at 4.9%. Otherwise, we’ve pencilled in a 0.4% m/m gain in average hourly wages, but base effects mean that the annual rate …
Last week’s weaker than expected data on retail sales and the drop in utilities production in February suggest that real consumption growth has started the year on a softer footing than initially believed. Nevertheless, the apparent weakness in …
18th March 2016
The decline in the University of Michigan’s measure of consumer confidence to 90.0 in March, from 91.7, illustrates that higher gasoline prices more than offset the positive impact to sentiment from the rebound in stock markets. … UoM Consumer …
The Fed opted to leave its key policy rate unchanged at 0.25% to 0.50% today, while also lowering its projections for the pace of future rate hikes. Nevertheless, as inflation continues to rise and global risks diminish further, we expect the Fed will …
16th March 2016
Despite lower gasoline prices weighing on headline CPI inflation, the much bigger story is the surge in core inflation to a four-year high of 2.3% in February, which illustrates that the Fed can’t stay on the sidelines for much longer. … Consumer Prices …
The February retail sales report was disappointing (taking account also of downward revisions to January data) and means that the risks to our forecast for first quarter-GDP growth of 2.5% annualised now lie on the downside. Nonetheless, while real …
15th March 2016
It is questionable whether the surge in commercial property prices can be sustained. The rise in multi-family apartment prices, which explains a large part of the overall increase in commercial property values, is partly explained by the low vacancy rate, …
11th March 2016
We are often characterised as being “bullish” on the US economy, but our economic growth forecasts are hardly upbeat. Instead, where we really differ from the consensus is in believing that even moderate economic growth will be enough to generate a marked …
10th March 2016
Despite the clear improvement in the incoming economic data over the past month, which has triggered a reversal of the earlier tightening in financial conditions, the chance of the Fed raising interest rates at next week’s FOMC meeting, which concludes on …
9th March 2016
The rapid growth of auto loans in recent years has prompted claims that the next unsustainable debt bubble is emerging. For now, however, there appears to be little cause for concern. Although the nominal dollar value of auto loans outstanding is above …
4th March 2016
With employment rising at a rapid pace and labour market slack still shrinking, we think the Fed will resume raising interest rates in June. A marked pick-up in wage growth is still notably absent, but that won’t matter to the Fed when there are clear …
Despite the rebound in the ISM manufacturing index to a five-month high of 49.5 in February, from 48.2, the factory sector continues to be battered by the strong dollar and weak global demand. The good news is that manufacturing is not getting weaker. At …
1st March 2016
The slowdown in real consumption growth to a more modest 2.0% annualised in the final quarter of last year was a disappointment, particularly as households were benefitting from a further decline in gasoline prices, leaving them with more money to spend …
26th February 2016
Our econometric model points to a more muted 180,000 gain in non-farm payrolls in February. We estimate that the unemployment rate was unchanged at 4.9%, with the growth rate of average hourly earnings edging back up to 2.6%. … Pace of employment gains …
25th February 2016
The 4.9% m/m increase in durable goods orders in January was flattered by a strong rebound in the notoriously volatile aircraft component, but details of the report bode well for equipment investment in the first quarter and should quell fears that the US …
The pick-up in core CPI inflation to a three-and-a-half-year high of 2.2% in January illustrates that rising domestic price pressures won’t allow the Fed to leave interest rates at near-zero levels for that much longer. The 0.3% m/m increase in core …
23rd February 2016
The decline in the Conference Board measure of confidence to an eight-month low of 92.2 in February, from 97.8 suggests that the financial market turmoil earlier in the month is beginning to weigh more heavily on consumer confidence. Nevertheless, healthy …
The dollar’s near 20% rise since mid-2014 has slowed the growth rates of both manufacturing output and employment, but there is no sign of any collapse that could drag down the wider economy. The manufacturing surveys remain particularly downbeat, but …
19th February 2016
The pick-up in core CPI inflation to a three-and-a-half-year high of 2.2% in January, from 2.1%, illustrates that rising domestic price pressures won’t allow the Fed to leave interest rates at near-zero levels for that much longer. … Consumer Prices …
