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The 271,000 surge in non-farm payrolls last month puts to rest fears that the earlier slowdown could be the start of a worrying downturn. The decline in the unemployment to 5.0% in October leaves it at the lower bound of the Fed's estimated range for the …
23rd November 2015
The rise in credit spreads this year has been interpreted by some as a signal that the corporate sector is dangerously over-leveraged. At an aggregate level we can find very little evidence of this, however, with any potential problems restricted to a few …
20th November 2015
The 0.2% m/m decline in industrial production in October was mainly due to a weather-related drop in utilities output. Nevertheless, while the 0.4% m/m gain in manufacturing output was encouraging, the broader picture is still that manufacturing is …
17th November 2015
There is now clear evidence of an acceleration in core services price inflation, which hit a six-year high in October. That acceleration has been partly offset by the deflationary impact of the stronger dollar on goods prices. As the impact of the …
Although the Fed expects to raise interest rates only very gradually next year, we suspect that an acceleration in core inflation, thanks in part to a rebound in medical care inflation, will force the Fed into a more aggressive tightening than the markets …
13th November 2015
The rebound in the University of Michigan’s consumer confidence measure to a four-month high of 93.1 in November, from 90.0, presumably reflects the rebound in stock markets and the resilience of labour market conditions. … UoM Consumer Confidence …
The October retail sales report was a little bit weaker than expected, but doesn't change our view that fourth-quarter GDP growth will be a respectable 2.5%. … Retail Sales & Producer Prices …
The rebound in the job openings rate to 3.7% in September, from 3.6%, illustrates that labour market conditions remain robust. September was also only the second month on record that the job openings rate exceeded the job hires rate. … JOLT survey …
12th November 2015
The current level of business investment is not unusually low, with firms opting to use funds to pay dividends or buy back equity instead. Nevertheless, that doesn’t mean the outlook for business investment is encouraging. With the stronger dollar hitting …
6th November 2015
The much bigger than expected 271,000 surge in non-farm payrolls in October confirms that the weakness in August and September was just a temporary blip and, given the circumstances, a December interest rate hike is now the most likely outcome. … …
The big narrowing in the trade deficit in September is encouraging, but that improvement won't last. The dollar’s surge over the next 12 months means that the deficit is likely to widen again and net trade will be modest drag on GDP growth. … Internat'l …
4th November 2015
The Fed’s latest Senior Loan Officer Survey suggests that growth in business investment in equipment will remain muted over the remainder of this year. … Boom in business lending may be …
2nd November 2015
The very modest decline in the ISM manufacturing index, to 50.1 in October from 50.2 in September, illustrates that the strong dollar and weak global demand are still weighing very heavily on the factory sector. Moreover, there is nothing that points to a …
The Fed clearly wanted to signal last week that a rate hike in December was a realistic possibility but, on balance, we still anticipate that it will be delayed until early next year. It’s recently become clear that a couple of Fed Governors, as well as a …
30th October 2015
Our econometric model indicates that non-farm payrolls rose by a stronger 200,000 in October, up from an average monthly gain of 167,000 over the prior three months. Whether that would be sufficient to seal a December rate hike from the Fed is open to …
29th October 2015
The slowdown in GDP growth to 1.5% annualised in the third quarter, from a very strong 3.9% in the second, was mainly due to a big drag from inventories, which subtracted 1.4% points after making a neutral contribution in the previous quarter. The …
The post-FOMC meeting statement released today certainly leaves open the possibility that the Fed will hike interest rates at the next meeting in December. Nevertheless, we still think that the Fed is more likely to wait until early next year. … Fed …
28th October 2015
The 1.2% m/m decline in durable goods orders in September was actually better than we expected, but only because the drag from the notoriously volatile commercial aircraft category wasn't as bad as we feared. The details of the report suggest that …
27th October 2015
The growth rate of our M3 broad money aggregate slowed to 5.0% in September butbank loans are still expanding at a healthy 7.7% clip. … Monetary Indicators Monitor …
26th October 2015
The Treasury’s November 3rd deadline for raising the debt ceiling is getting closer without any sign that Congress is close to a deal to raise the limit. Yields on Treasury bills scheduled to mature in early November have begun to edge higher, but the …
23rd October 2015
It is highly unlikely that the Fed will spring a surprise rate hike at next week's FOMC meeting, which concludes on Wednesday 28th October, and even the odds of a hike at the December meeting have fallen precipitously in recent weeks. We think that the …
22nd October 2015
Our calculations now suggest that GDP growth slowed to only 1.5% annualised in the third quarter. Even after the disappointment of September’s retail sales figures, third-quarter consumption growth was probably still as high as 3.0%. Unfortunately, the …
The decline in the participation rate is almost entirely due to structural factors and there is little prospect of a rebound in the next few years. The downward trend in the participation rate actually began as far back as 2000, driven by the aging of the …
20th October 2015
The likelihood of the Fed hiking interest rates before the end of this year tumbled again last week, as the incoming data triggered some sizeable downgrades to estimates of third-quarter GDP growth. In addition, in a remarkable rebuke to the Chair Janet …
16th October 2015
The 0.2% m/m decline in industrial production in September was a much smaller fall than we were expecting, but it nonetheless illustrates the impact that the stronger dollar is having on manufacturing and the impact that the slump in energy prices is …
The September CPI report suggests that although domestic inflationary pressures are slowly building, the stronger dollar and lower commodity prices will give the Fed an excuse to delay hiking interest rates until early next year. … Consumer Prices …
15th October 2015
The softness of September’s retail sales figures supports our view that the Fed probably isn’t going to hike interest rates until early next year. Our calculations now suggest that third-quarter GDP growth was only 1.7% annualised. … Retail Sales & …
14th October 2015
The big news last week was the announcement of the Trans Pacific Partnership (TPP) trade agreement between the US and 11 other countries, which aims to lower trade barriers and set common commercial standards. Even if the deal is approved by Congress we …
9th October 2015
The huge widening in the trade deficit in August to $48.3bn, from $41.8 bn in July, demonstrates the extent to which deteriorating global growth and the sharp appreciation in the dollar have impacted US external trade. Net external trade will subtract …
6th October 2015
The slowdown in employment growth in August and September will probably delay the first interest rate hike until early 2016, but it doesn’t appear to be the start of a sustained deterioration in labour market conditions. Employment growth should rebound …
5th October 2015
The incoming economic data have been a lot more mixed recently, with the awful performance of exports and manufacturing, both dragged down by the dollar’s strength, now being compounded by a slowdown in employment growth. Although consumption growth could …
2nd October 2015
While it’s always important not to over-react to one single data release, we’ll make an exception in this case. The chances of a rate hike by the Fed this year just went way down. Payroll employment increased by a much weaker than expected 142,000 in …
The decline in the ISM manufacturing index to 50.2 in September from 51.1 in August is yet another illustration of the devastating impact that the strong dollar and weak foreign demand is having on the battered factory sector. Things might well get even …
1st October 2015
Although America’s current account deficit is still a modest 2.4% of GDP, well below the 6.3% peak reached in late 2005, net external debt has more than quadrupled since mid-2007. Liabilities to foreigners now exceed the value of US assets held abroad by …
30th September 2015
The annual growth rate of our M3 money measure accelerated to a five-month high of 5.6% in August, from 5.2%. The growth rates of the narrower M1 and M2 monetary aggregates are even higher. … Monetary Indicators Monitor …
29th September 2015
The increase in the Conference Board measure of consumer confidence to 103.0 in September, from 101.3 suggests that lower gasoline prices trumped the fading impact from the financial market turmoil a month ago. … Conference Board Consumer Confidence …
External deflationary pressure from the strong dollar and lower commodity prices will continue to keep both headline and core inflation unusually low in the shortterm . The strong dollar's downward pressure on non-energy import prices has pushed core …
This week it will be uncertainty over fiscal policy and a possible Federal government shutdown that dominates the headlines. Congress needs to pass a continuing spending resolution by the end of September to keep the Federal government open beyond this …
25th September 2015
GDP growth is now on track for a solid 2.5% gain in 2015. We had previously anticipated that growth would accelerate to nearer 3.0% in 2016 but, given the weakness of global demand and the dollar’s surge, we now forecast another 2.5% increase. In 2017, …
24th September 2015
Our econometric model points to a 200,000 increase in non-farm payrolls in September. We expect the unemployment rate to be unchanged at 5.1%. With the job openings rate comfortably at a record high and the net proportion of households saying that jobs …
The 2.0% m/m decline in durable goods orders in August was a lot better than we were expecting, but principally because the drop back in the volatile transportation category was smaller than anticipated. More generally, although equipment investment …
The latest US financial accounts show that the Fed’s reluctance to raise interest rates from near-zero is not because the central bank fears that it could trigger a debt crisis, either in the US or in other countries. … Dollar debt not the reason for the …
18th September 2015
The more the Fed procrastinates, the more we get the feeling that officials are fooling themselves into thinking that, if they only just wait a little longer, all the uncertainty will clear up and they can raise interest rates with no danger of making a …
Despite raising its GDP growth and core inflation forecasts for this year and lowering its unemployment rate forecast for this year, the Fed opted to leave its key policy rate unchanged at 0.0% to 0.25% today. As far as our own forecasts are concerned, we …
17th September 2015
The 0.1% m/m decline in headline CPI inflation in August was partly due to the renewed decline in gasoline prices, but even core prices increased by only 0.1% m/m, suggesting that underlying inflation remains muted. Nevertheless, once the impact of the …
16th September 2015
The August retail sales and industrial production reports highlight the continued divergence between a strong domestic economy led by healthy consumer spending and weakness in the export-orientated factory sector, which is being weighed down by the strong …
15th September 2015
Although the slump in the University of Michigan consumer confidence index to a 12-month low of 85.7 in September, from 91.9, left it well below the consensus forecast at 91.1 it was almost exactly in line with our own 85.0 projection. As we explained in …
11th September 2015
The decline in the unemployment rate to only 5.1% in August means that the Fed has arguably already achieved the full employment part of its dual mandate. If there is still any slack left in thel abour market, July’s Job Opening and Labour Turnover (JOLT) …
The odds of the Fed hiking interest rates at next week’s FOMC meeting, which concludes on Thursday, are close to 50-50. The cumulative improvement in the economy over the past few years means that it is almost impossible to justify interest rates still …
9th September 2015
