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With less than two weeks to go until the next FOMC meeting, the odds that the Fed will raise interest rates this month are still close to 50-50. The US economic data remain strong, with the notable exception of the manufacturing sector, which should …
4th September 2015
August’s employment report is fairly mixed and can be used to make a case for or against a rate hike at the upcoming FOMC meeting. As far as we’re concerned, the September meeting is a 50-50 toss up . Nevertheless, even if the Fed doesn’t hike rates …
The struggles of the export-orientated manufacturing sector, which has been hit by the dollar’s surge and the weakness of global demand, have been getting most of the attention this week, but today's data releases revealed that the trade deficit actually …
3rd September 2015
The decline in the ISM manufacturing index to a two-year low of 51.1 in August, from 52.7 in July, reflects the ongoing impact of the dollar’s rapid appreciation and softening global demand. Nevertheless, the much bigger non-manufacturing sector continues …
1st September 2015
This report is only available as a PDF. Click to download. … Employment Report (Jul.) …
We are now assuming that, even if the rally in global stock markets continues, some Fed officials will still want to hold off on raising interest rates until October or even December. A September rate hike isn’t out of the question. But New York Fed …
28th August 2015
Our econometric model points to a more modest 220,000 increase in non-farm payrolls in August, which would probably push the unemployment rate down to 5.2%, from 5.3%. That would seem to meet the Fed’s desire to see “some” further improvement before …
After nearly nine months of weakness, presumably triggered by the dollar's surge and the slump in the mining sector, equipment investment appears to be finally recovering. Headline durable goods orders rose by 2.0% m/m in July, following an upwardly …
26th August 2015
The growth rate of our broad M3 monetary aggregate rebounded to a robust 5.2% y/y in July, suggesting that there is little risk of a sustained deflation or a marked slowdown in real economic growth. The narrower monetary aggregates are still expanding at …
25th August 2015
The rebound in the Conference Board measure of consumer confidence in August more than offset last month’s sharp fall and is consistent with consumption growth remaining healthy in the third quarter. This adds to the evidence that the economy is strong …
Central European bonds and currencies have been remarkably resilient during the recent turmoil in the global financial markets. In contrast, Turkish markets have been hit by fresh concerns about the political situation and a general spike in investor risk …
There are no signs of any major downturn in the US economy, economic growth in China still appears to slowing rather than collapsing and emerging markets are not about to endure a repeat of the 1997/98 Asian crisis. The current bout of market turmoil, if …
24th August 2015
The projections made by Fed officials back in June indicated that they were setting a pretty low bar for hiking interest rates later this year. Nevertheless, despite those low expectations, officials were almost evenly split on whether rates would need to …
21st August 2015
The very muted 0.1% m/m gains in both headline and core CPI in July will certainly give the Fed pause for thought in whether to raise interest rates or not at the next FOMC meeting in mid September. On balance, we still think the Fed will go ahead and …
19th August 2015
After an unexpected surge at the end of the second quarter, inventories are shaping up to be the big wildcard in third-quarter GDP growth. We expect inventories to subtract 0.5% points, with third-quarter GDP growth coming in close to 2.5% annualised. … …
17th August 2015
Last week the markets were very much focused on the potential for a stalling Chinese economy to “export” deflationary pressure to the US, either via the direct impact of a weaker renminbi or through the indirect impact of weaker global commodity prices. …
14th August 2015
The University of Michigan measure of consumer confidence was virtually unchanged in August, and remains consistent with annualised consumption growth remaining close to 3%, or even better, in the third quarter. … UoM Consumer Confidence …
The 0.6% m/m increase in industrial production in July was much higher than the consensus forecast of a 0.3% m/m gain, but it was primarily due to a massive surge in motor vehicle output. The latter looks very much like a distortion that will be reversed …
The 0.6% m/m increase in July's retail sales, which matched the consensus forecast, was solid rather than spectacular. But upward revisions to sales in May and June mean that real consumption growth started the third quarter on a stronger footing than we …
13th August 2015
The risk of a further market-driven slide in the Chinese renminbi and the renewed slump in global commodity prices, triggered by heightened concerns about the state of China’s economy, probably won’t prevent the Fed from beginning to raise interest …
12th August 2015
Ignore the 1.3% annualised rebound in non-farm productivity in the second quarter, which barely reversed the 1.1% decline in the first quarter. The bigger story is the almost unprecedented weakness of productivity, not just since the recession but going …
11th August 2015
A September rate hike is looking more and more like a done deal, even though the incoming economic data have been decidedly mixed of late. … Fed edging closer to first rate …
7th August 2015
The widening in the trade deficit to $43.8bn in June, from an upwardly revised $40.9bn in May, is more or less as the BEA assumed in its GDP estimate and therefore doesn’t point to a revision to the 2.3% annualised increase in second-quarter GDP. … …
5th August 2015
The modest fall in the ISM manufacturing index suggests that the factory sector is continuing to suffer the effects of the dollar’s appreciation. Nonetheless, the survey is still consistent with annualised GDP growth of over 2%. … ISM Manufacturing Index …
3rd August 2015
The Fed's more upbeat tone on economic conditions in the latest FOMC policy statement was a long way from it ringing the alarm bells on a September lift-off. Nevertheless, it still suggests that the Fed could be sufficiently confident about tightening …
Our econometric model points to a 250,000 gain in non-farm payrolls in July, although we suspect that the unemployment rate remained at 5.3%, as the labour force rebounds. … Labour market slack continues to …
30th July 2015
The second-quarter GDP data support the Fed’s more upbeat tone on economic conditions and suggests that the economy could cope with higher interest rates. … GDP (Q2, 1st …
The sharp fall in the Conference Board measure of consumer confidence in July, to 90.9 from 99.8 in June (revised down from 101.4), points to an easing in consumption growth in the second half of the year. Nonetheless, with the labour market strengthening …
28th July 2015
June's durable goods data suggest that the rebound in investment in business and equipment in the second quarter was probably smaller than we expected. Nevertheless, this isn’t enough to prompt us to change our call of a 2.8% annualised rise in …
27th July 2015
This week's FOMC meeting will be uneventful. With the Fed keen to stress that every meeting is "live" and that decisions are based entirely on the incoming data, we wouldn't expect any heavy hints in Wednesday's statement that a September rate hike is …
24th July 2015
We don't anticipate any major changes from the Fed at next week's FOMC meeting, which concludes on Wednesday 29th July. With the Fed keen to stress that every meeting is "live" and that decisions are based entirely on the incoming data, we wouldn't expect …
21st July 2015
After a strong May, economic activity was more mixed in June. Nevertheless, it was still solid enough to re-affirm our view that the economy rebounded robustly in the second quarter. Even after the slight decline in June retail sales, our calculations …
20th July 2015
The unexpected decline in June's retail sales was a disappointment and, more generally, the rebound in underlying sales in the second quarter has been weaker than the turnaround last year, when unseasonably severe winter weather also dampened …
17th July 2015
The 0.3 m/m increase in June's consumer price index, which was partly due to a 3.4%m/m increase in gasoline prices, brought the brief period of "deflation" to an end. The annual inflation rate edged up to +0.1% last month. By early next year it will be …
The 0.3% increase industrial production in June reflects in large part a rebound in the mining sector, which has struggled so far this year. … Industrial Production & Producer Prices …
15th July 2015
Fed Chair Janet Yellen's latest comments don't change our view that the Fed is still on track for a September lift-off. Furthermore, we expect rising wage growth and core inflation to trigger a much more rapid rise in interest rates next year, with the …
The growth rate of our broad M3 monetary aggregate slowed slightly to 5.0% y/y in June, reflecting the ongoing impact from the Fed's decision to taper its asset purchases last year. … Monetary Indicators Monitor (Jun …
14th July 2015
The 0.3% m/m decline in retail sales in June is disappointing but, given the strength of sales in earlier months, it still looks like real consumption increased by a relatively healthy 2.7% annualised over the second quarter as a whole. After the …
The decline in the labour participation rate to a near 40-year low of 62.6% in June largely reflects structural factors, such as the aging population, rather than cyclical weakness. … Decline in the participation rate is mostly …
13th July 2015
Fed Chair Janet Yellen's semi-annual testimony to Congress on Wednesday and Thursday this week couldn't have been better timed for those wondering whether Greece's potential exit from the euro would prompt the Fed to postpone its first rate hike until …
10th July 2015
Governor Alejandro Garcia Padilla's comment last week that "the debt is not payable" has raised fears that a Puerto Rico debt crisis could have a bigger impact on US financial markets than the crisis in Greece, but we very much doubt that. … Is Puerto …
7th July 2015
The modest rebound in the monthly trade deficit to $41.9bn in May, from $40.7bn, means that net exports are on track to be a very small drag on overall second-quarter GDP growth, which we still think was roughly 3% annualised. … International Trade …
As things stand now, GDP is on track for a 2.3% increase this year, which would be very similar to the growth rates achieved in 2012, 2013 and 2014. It appears that GDP growth is stuck in a rut. It is fast enough to reduce the output gap, albeit only …
2nd July 2015
The 223,000 increase in payroll employment in June was a bit weaker than we had been expecting, but is offset to some degree by the fall in the unemployment rate, to 5.3% from 5.5%. As such, we still think the Fed will hike interest rates in September. …
The further modest rise in the ISM manufacturing index to 53.5 in June, from 52.8 in May, was exactly in line with our above consensus forecast and confirms that the outlook for industry is improving. At this level the index is consistent with annualised …
1st July 2015
The Fed would, of course, be reluctant to hike rates for the first time since 2006 in the midst of another global financial crisis triggered by Greek exit from the euro. However, we do not expect contagion from developments in Europe to be severe enough …
The further rebound in the Conference Board measure of consumer confidence to within touching distance of the eight-year high seen earlier this year suggests that the surge in real consumption in May will be sustained in the coming months. … Conference …
30th June 2015
With the best will in the world towards the anti-austerians, the bigger fiscal squeeze in 2013 had amuch smaller impact on the economy's performance than many feared, while the more recentfading of the fiscal drag hasn't triggered the expected pick-up in …
29th June 2015
Our econometric model points to a 290,000 gainin non-farm payrolls in May and, as a result, wealso expect the unemployment rate to edge downto 5.4%. … Model points to another big gain in …
25th June 2015
The annual growth rates of broad money and bank loans slowed a little in May, but that is mainly due to base effects. Furthermore, our reconstructed measure of M3 still increased by a relatively robust 5.1% over the past year. … Monetary Indicators …
23rd June 2015
