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The apparent crumbling in the housing recovery has, at least temporarily, removed a valuable support to GDP growth. But the wider economic recovery will carry on regardless and it may not be long before residential investment once again starts adding to …
28th April 2014
Although durable goods orders rose by a decent 2.6% m/m in March, the details of the survey suggest that the growth rate of business investment in equipment slowed down to roughly 2.0% annualised in the first quarter. That supports our view that, in part …
24th April 2014
The monthly gains in payroll employment may soon rise above the 200,000 that have been the norm for most of the past year. This would be partly due to some catch-up after the recent extreme winter weather and partly due to a strengthening in economic …
The two-day FOMC meeting that concludes next Wednesday (30th April) is likely to be a quiet affair for two reasons: The Fed made key changes to its forward guidance at the last meeting in mid-March. The upcoming meeting is also likely to be one of the …
23rd April 2014
The slowdown in trend productivity growth, which began a decade ago, is principally due to two structural factors; the fading boost from the IT revolution and the aging of the population. The financial crisis may have triggered a temporary decline in …
22nd April 2014
The incoming data over the past few weeks suggest that activity and employment rebounded in March, as the weather-related distortion that affected the winter months began to unwind. Our latest calculations indicate that first-quarter GDP growth slowed to …
Looser credit conditions, lower loan rates and the stronger economic outlook have continued to boost bank lending to businesses. This supports our view that business investment growth will accelerate both this year and next. … Monetary Indicators Monitor …
21st April 2014
The more data we see on economic activity in March, the more we're reassured that the drop-off in the preceding few months was almost entirely due to the unseasonably severe winter weather. … Economy shrugging off winter …
With industrial production rising at a decent pace in March, the economy is now starting to show its true colours after the weakness triggered by the bleakest of winters. There is scope for production to rise rapidly in the coming months too. … …
16th April 2014
The rebound in CPI inflation to 1.5% in March, from 1.1%, is partly due to the reversal of the base effects that pushed it down in February. Nonetheless, more permanent trends will lift both headline and core inflation close to 2.0% before too long. … …
15th April 2014
The leap in retail sales in March is mainly due to the unwinding of the distortion caused by the unusually bad weather in previous months. This means first-quarter real consumption growth was probably a little stronger than we had been expecting. … …
14th April 2014
The markets have begun to heed the Fed’s bizarre warnings to ignore its own interest rate projections. But they shouldn’t be so trusting, especially when the minutes of the mid-March FOMC meeting revealed a growing split between those members that believe …
The rise in consumer confidence in April reflects a reversal of the earlier weather-related hit to confidence, as well as record high stock markets and improving labour market conditions. These numbers suggest that consumption growth got off to a decent …
11th April 2014
The latest round of jobs data released over the past few days would appear to refute Fed Chair Janet Yellen's recent claims that there is still considerable slack in the labour market. … Latest labour market data refute Yellen's slack …
8th April 2014
The rapid run-up in the price of farmland appears to be over. We suspect that the slowdown in the growth rate of farmland prices last year will develop into an outright decline in prices this year, at least in the corn belt that saw the most dramatic rise …
7th April 2014
The solid 192,000 increase in non-farm payrolls in March, along with the bounce back in average weekly hours worked to a four-month high of 34.5, from 34.3, confirms that the recent spate of weakness was nearly all due to the severe winter weather. … …
4th April 2014
There are finally reasons to expect a more sustained pick-up in business investment this year and next. Admittedly, economists have been forecasting that business investment would become a driving force of the recovery pretty much since that recovery got …
3rd April 2014
The unexpected widening in the monthly trade deficit to a five-month high of $42.3bn in February, from $39.3bn, suggests that first-quarter GDP growth was only 1.5% annualised, lower than our previous estimate of 2.0%. … International Trade …
The rebound in auto sales in March and the rush to sign up for health insurance in recent weeks means that the slowdown in real consumption growth in the first quarter may not be as marked as previously looked likely. Consumption growth will probably …
2nd April 2014
The trivial increase in the ISM manufacturing index to 53.7 in March, from 53.2, suggests that the sector is slowly recovering from the weather-related disruption at the start of the year. … ISM Manufacturing Index …
1st April 2014
The fall in PCE inflation to just 0.9% in February probably marks the low point in this cycle and we suspect that the Fed will be surprised by how fast inflation rebounds over the next 18 months. … PCE inflation won't be this low for …
31st March 2014
While a handful of banks “failed” the Fed’s latest stress tests, the sector as a whole has enough capital to continue lending to domestic businesses and households even if it had to absorb further legal settlements or any losses stemming from events in …
If there is little prospect of getting the long-term unemployed, who account for an unusually large share of the overall jobless rate, back into work then wage growth could accelerate faster than the Fed currently expects. That might eventually prompt a …
27th March 2014
The weather didn't quite return to seasonal norms in March, but it was nowhere near as bad as it was between December and February. We have pencilled in a gain of 200,000 in payroll employment in March, even though the Midwest and Northeast were hit by …
The 2.2% m/m rebound in durable goods orders in February, which was more than double the consensus estimate of a 0.8% m/m gain, was largely due to a big bounce back in the transportation component. Unfortunately, the details of the report suggest that the …
26th March 2014
The rebound in the Conference Board measure of consumer confidence to a six-year high of 82.3 in March, from 78.3, reflects mainly a reversal of the weather effects from a month ago. With equity prices close to record highs and labour market conditions …
25th March 2014
The current account and Federal budget deficits have narrowed markedly over the past few years, indicating that the US economy is the closest it has been to both internal and external balance in more than a decade. This adjustment is even more remarkable …
A rebound in medical inflation from recent 40-year lows will add to a wider strengthening in price pressures to push core PCE inflation above the Fed’s 2% target next year. This may prompt the Fed to increase interest rates a bit sooner and a bit faster …
24th March 2014
We didn't think new Fed Chair Janet Yellen's admission that "considerable period" meant six months or so warranted the subsequent equity sell-off. It simply confirmed what we already knew, that the first rate hike would be coming in mid-2015. What we …
As expected, the Fed continued to taper its asset purchases and dropped its explicit unemployment rate threshold, reverting to a more qualitative form of forward guidance in today's policy statement. What we hadn't anticipated is that FOMC participants …
19th March 2014
As a lot of the surge in food prices in February is due to the extreme weather, it is unlikely to be sustained. Nonetheless, the risks to our forecast that food price inflation will climb from 1.4% in February to around 2.0% by the end of next year now …
The surge in bank lending to businesses in February could be an early sign that small firms are becoming more optimistic. Either way, the growth rate of bank lending will rise further this year as the economy continues to strengthen. … Monetary …
18th March 2014
The fall in CPI inflation to only 1.1% in February, from 1.6%, won’t influence tomorrow’s policy decision by the Fed, as it is solely due to base effects that will be reversed in March. Core inflation remained at 1.6% and there are even some tentative …
The slump in average weekly hours worked over the past few months is undoubtedly weather-related and we expect to see a bounce back in the spring. … There is no hidden rot in the jobs …
17th March 2014
The rebound in industrial production in February suggests that the economy is waking up after hibernating during the past few months of unusually bad weather. This makes it even more likely that the Fed will decide to taper its monthly asset purchases …
We don’t place much weight on the idea that the Fed would be happy to leave interest rates at near-zero until wage growth returned to 4%. Instead, we believe that a pick-up in wage growth to between 2.5% and 3.0% would be enough to prompt the Fed to pull …
Most of the decline in the University of Michigan's measure of consumer confidence to 79.9 in March, from 81.6, can be attributed to the unseasonably bad weather. After all, the usual determinants of confidence have remained resilient; stock markets are …
14th March 2014
As the rise in retail sales in February didn’t get anywhere close to reversing all of the drop in the previous two months, the unusually bad weather is still hurting retailers. But since households are spending more on heating and healthcare, annualised …
13th March 2014
At the policy meeting due to end on Wednesday 19th March, the Fed will almost certainly reduce the size of its monthly asset purchases by a further $10bn, to $55bn, and will probably abandon the 6.5% unemployment rate threshold in favour of using a wider …
12th March 2014
It will be a few months yet before we know for sure whether or not the recent pick-up in wage growth is just a temporary distortion caused by the unusually severe weather, but it does chime with the strengthening in the survey evidence over the past six …
10th March 2014
The unusually severe winter has been playing havoc with the incoming economic data but, once the weather returns to seasonal norms, we expect the US economy to perform strongly this year and in 2015. Indeed, we now expect GDP growth of 2.8% in 2014, up …
The Affordable Care Act, or “Obamacare”, remains a contentious piece of legislation, but the fact of the matter is that it boosted real consumption growth in January and will probably support it in February and March too. It may well increase overall GDP …
The fact that payroll employment rebounded in February despite the unusually bad weather pretty much guarantees that the Fed will taper its asset purchases further at the mid-March policy meeting. … Employment Report (Feb.) & Int. Trade …
7th March 2014
We’re not very concerned by the recent decline in State and local government spending when States’ own spending plans are consistent with a decent rebound both this year and next. This will compliment the easing in the drag from Federal government …
5th March 2014
The biggest and longest-lasting impact from the recent rise in natural gas prices could be a boost to business investment in mining structures. That could add 0.3 percentage points to annual GDP growth, albeit not immediately and not all at once. … …
4th March 2014
While the ISM manufacturing index rebounded to 53.2 in February, from 51.3, the extent of the increase was limited because of the ongoing severe winter weather. We expect a further improvement in March. … ISM Manufacturing Index …
3rd March 2014
There is a strong possibility that February's labour market figures, due out this Friday, will only make the Fed's job even harder. There is a chance that the unemployment rate could have hit the 6.5% threshold in February. Even if it doesn't reach the …
Most of the recent weakness in housing activity is due to the unusually bad weather rather than the lagged effects of last year’s rise in mortgage rates. While higher mortgage rates have clearly taken some steam out of the housing recovery, they won’t …
28th February 2014
A third consecutive month of weak payroll growth in February would raise speculation that the Fed will pause the tapering of its asset purchases. But because any weakness this month was probably due to the unusually bad weather, we believe the Fed will …
27th February 2014
The 1.0% m/m decline in durable goods orders was mainly due to a drop back in the notoriously volatile commercial aircraft component. More generally, there is some evidence that the growth rate of equipment investment is strengthening but, as with much of …
