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Broad money growth continues to slow very gradually but, with the annual growth rate of our M3 measure still at a healthy 5.8% in November, there is no reason for concern, particularly not when overall credit growth is actually accelerating. … Monetary …
16th December 2013
The strong increase in November took the level of industrial production back above the pre-recession peak for the first time and provided more evidence that economic growth is gaining momentum. … Industrial Production …
Last week we learned that business inventories and sales both posted sizeable gains in October, while the retail sales figures showed another decent gain in November. As a result, we now expect fourth-quarter GDP growth to be 2.5% annualised. … Strong …
November’s retail sales figures suggest that the holiday shopping season began on a strong note. Real consumption growth in the fourth quarter is on course to be at least double the third quarter’s 1.4% annualised gain. … Retail Sales …
12th December 2013
We suspect that the renewed strength of employment growth in the past few months will be just enough to persuade the Fed to begin tapering its monthly asset purchases at next week's two-day FOMC meeting, which concludes on Wednesday 18 th December. … …
11th December 2013
The modest bipartisan budget deal announced late yesterday, which would boost Federal spending by roughly $63bn over the next two years while at the same time reducing deficits by a cumulative $23bn over the next decade, should pass Congress soon without …
The recent surge in equity prices and rapid rebound in house prices are boosting household wealth and will contribute to an acceleration in consumption growth over the next two years. … Rising wealth will boost consumption …
10th December 2013
As the fading fiscal drag more than offsets any impact from a modest further rise in long-term interest rates, we expect economic growth to accelerate from 1.8% this year to 2.5% in 2014 and further to 3.0% in 2015. The Fed will begin to wind down its …
9th December 2013
Last week's upward revision to third-quarter GDP growth to 3.6% annualised, from the initial 2.8% estimate, prompted a number of forecasters to lower their forecasts for fourth-quarter GDP growth, in some cases to below 1.0%. To some extent that is …
The sharp rise in the University of Michigan's measure of consumer confidence to a five-month high of 82.5 in December, from 75.1, presumably reflects the strength of the labour market and the upward trend in stock markets. … Uni. of Mich. Consumer …
6th December 2013
The 203,000 increase in November's non-farm payrolls, along with the drop in the unemployment rate to a five-year low of 7.0%, gives the Fed all the evidence it needs to begin tapering its asset purchases at the next FOMC meeting later this month. … …
The trade deficit narrowed to $40.6bn in October, from $43.0bn, but that decline only partly reversed the widening in September. Looking through the month-to-month volatility, the trade deficit continues to trend gradually lower, largely because surging …
4th December 2013
The unexpected increase in the ISM manufacturing index to a two-and-a-half year high of 57.3 in November, from 56.4, suggests that activity is receiving a boost from both stronger domestic and overseas demand. … ISM Manufacturing Index …
2nd December 2013
Cutting the interest on excess reserves (IOER) rate may seem like a simple way for the Fed to signal its intent to leave short rates at near-zero for several more years, at the same time as it begins to taper its asset purchases. However, even a small …
Our econometric model indicates that non-farm payroll employment rose by a solid 180,000 in November, which may be enough to prompt the Fed to taper its asset purchases at the policy meeting in December. At the same time, the unwinding of the distortions …
27th November 2013
The continuing slump in non-defence capital goods (ex. aircraft) orders and shipments suggests that business equipment investment might contract over the entire second half of this year. … Durable Goods …
Despite a strengthening labour market, record-high equity prices and lower gasoline prices, the Conference Board measure of consumer confidence actually fell to a seven-month low of 70.4 in November, from 72.4. … Conf. Board Consumer Confidence …
26th November 2013
The pick-up in GDP growth to 2.8% annualised in the third quarter, from 2.5% in the second, suggests that as the fiscal drag fades, the recovery is strengthening. On the whole, the latest monthly data also point to an acceleration. Manufacturing output …
25th November 2013
The Fed is clearly looking to offset the market impact from any decision to wind down its asset purchases by strengthening its commitment to leave its policy rate at near-zero for several more years. To some extent, this is because officials are less …
The key takeaway from the minutes of the late October FOMC meeting is that, despite the government shutdown, the Fed was still open to tapering its monthly asset purchases at the mid-December meeting. … Fed minutes suggest December taper not out of the …
20th November 2013
The acceleration in retail sales growth in October is one of a few reasons why the Fed is unlikely to be too concerned by the fall in CPI inflation to a four-year low of 1.0%, from 1.2% in September. … Retail Sales & Consumer Prices …
The annual growth rate of our M3* measure of broad money remained at just under 6% in October. In contrast, the growth rates of the narrower M1 and M2 aggregates continue to trend lower. … Monetary Indicators Monitor …
19th November 2013
The push by the Fed to delay tapering its asset purchases and possibly to lower its unemployment rate threshold suggests that officials expect the participation rate to rebound. We're not convinced, however, and suspect that the aging of the population …
18th November 2013
The recent decline in gasoline prices has prompted speculation that it could provide a very timely boost to real income and spending. Gasoline prices normally decline at this time of year, however, so the impact on the seasonally adjusted price and …
There is no evidence that the fall in industrial production in October is a temporary effect triggered by the government shutdown that will be reversed in November. But equally, the rise in manufacturing output suggests that the trend is still improving. …
15th November 2013
The trade deficit widened to a four-month high of $41.8bn in September, from $38.7bn, suggesting that third-quarter GDP growth will need to be revised down to around 2.5% annualised, from 2.8%. … Int. Trade (Sep.) and Productivity & ULC …
14th November 2013
At her Senate nomination hearing today, the current Fed Vice Chair Janet Yellen carefully defended the Fed's policy and regulatory actions over the past few years, suggesting that her approach will not differ much when she takes over as Chair from Ben …
The further rise in the long-term costs of QE means that a smaller improvement in the economic data than before may be needed to prompt the Fed to slow the pace of its asset purchases. At the margin, this is one reason why the Fed may decide to taper in …
13th November 2013
The rise in income inequality may not be morally defensible or socially desirable but, for now at least, it doesn't appear to be restraining economic growth. … Income inequality is not holding the economy …
11th November 2013
Lowering the unemployment rate threshold would appear to be a neat way for the Fed to commit to leaving interest rates at near-zero for longer and perhaps offset any tightening in financial conditions from a decision to taper QE3. But this could do more …
The much bigger than expected 204,000 gain in October's non-farm payrolls, combined with a cumulative 60,000 upward revision to the gains in the two preceding months will mostly definitely increase speculation that the Fed will begin to taper its asset …
8th November 2013
The further drop in the University of Michigan's index of consumer confidence to a two-year low of 72.0 in November, from 73.2, is hard to explain given that the government reopened, the labour market is strengthening, equity markets have rallied and …
The pick-up in third-quarter GDP growth to 2.8% annualised, from 2.0%, was largely due to a bigger than expected boost from inventory accumulation, which added 0.8% points to the headline figure. At the margin, this will increase speculation that the Fed …
7th November 2013
The Fed's latest Senior Loan Officer Survey shows that even though banks are still prepared to increase the supply of credit, the recent surge in long-term borrowing costs has undermined the demand for loans, particularly mortgages. … Rising borrowing …
4th November 2013
The incoming data suggest that labour market conditions remain soft, but the wider economic recovery does appear to be strengthening, as the severity of the fiscal drag begins to fade. Admittedly, our calculations suggest that GDP growth slowed marginally …
The unexpected rise in the ISM manufacturing index to a two-and-a-half-year high of 56.4 in October, from 56.2, suggests that manufacturers weren't notably affected by the government shutdown. The resilience of the ISM index hints at a modest pick-up in …
1st November 2013
The Federal government shutdown won't have had a major bearing on payroll employment, which we estimate rose by around 140,000 in October. But it will have put a dent in the alternative household measure of employment, which means the unemployment rate …
31st October 2013
The latest policy statement from the Fed today is remarkable for what it omits rather than includes. There is no explicit mention of the government shutdown or what impact it might have on the economy or the Fed's monetary policy. It is possible that Fed …
30th October 2013
Depending on which of the survey measures you believe, either the economic recovery is about to take off or fade away completely. The fundamentals, however, suggest that the truth probably lies somewhere in between and the most likely outcome is that the …
The decline in CPI inflation in September and signs of weaker jobs growth in October support the now widespread view that the Fed won’t begin to taper its monthly asset purchases until next year. … Consumer Prices (Sep.) & ADP Payrolls …
The sharp drop in the Conference Board's measure of consumer confidence to a six-month low of 71.2 in October, from 80.2, probably reflects the impact from the shutdown. (The survey period ended on the day the government reopened.) With Federal employees …
29th October 2013
September’s retail sales figures suggest that consumption growth gained momentum at the end of the third quarter. And the government shutdown is unlikely to have changed the picture too much at the start of the fourth quarter. … Retail Sales & Producer …
Industrial production gained some momentum in September and, once the hit from the government shutdown has passed, industry should be supported by the modest global recovery and the fall in the dollar. … Industrial Production …
28th October 2013
It's ironic that the recent government shutdown and debt ceiling crisis came at a time when America's debt situation is improving. Over the next decade, a combination of faster GDP growth and only a gradual rise in interest rates will contain the debt …
A satisfactory explanation for the easing in jobs growth is hard to find, but a fading of the fiscal drag and a further pick up in overseas demand means it probably won’t be sustained for long. We suspect that by early next year payroll employment will …
Despite the better than expected 3.7% m/m jump in durable goods orders in September, which was almost entirely due to a bounce back in the volatile aircraft category, it appears that third-quarter business investment in equipment stagnated, or even …
25th October 2013
The two-week government shutdown means that the Fed is almost certain to leave the pace of its monthly asset purchases unchanged at its two-day FOMC meeting, which concludes on 30th October. The conventional wisdom is that the Fed could now delay its …
24th October 2013
The monthly trade deficit was basically unchanged at $38.8bn in August, suggesting that net external trade had a neutral impact on overall third-quarter GDP growth, which we estimate was near 2.0% annualised. … International Trade …
Congress has thankfully agreed to reopen the Federal government and raise the debt ceiling, but the short-term fix means that fiscal uncertainty will continue to act as a drag on the economic recovery over the first few months of next year. There are …
23rd October 2013
Our M3* measure of broad money, which replicates the series discontinued by the Fed, continued to grow at a healthy annual rate of nearly 6% in September. But the longer the Fed delays the tapering of its monthly asset purchases, the greater the risk that …
22nd October 2013
