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The manufacturing sector has added half a million jobs over the past few years, prompting speculation that, after a decade of offshoring production to lower cost countries like China, firms are now beginning to relocate production back to America. The …
3rd April 2013
It is tempting to blame the decline in the ISM manufacturing index to a three-month low of 51.3 in March, from 54.2, on the faltering global economic recovery. However, that theory is hard to square with the details of the report and also the evidence …
1st April 2013
The Cypriot bank bailout, which imposed losses on bondholders and large depositors, is never likely to be repeated in the US. For a start, while the Cypriot banking system is equivalent to a massive 716% of domestic GDP, the US banking system is a much …
It’s going to be almost impossible to observe what impact the sequester government spending cuts is having on the labour market. But we expect it will be fairly small. In any case, it is too soon for any impact to show up in March’s data, which are likely …
27th March 2013
Despite endless claims that the US is hopelessly indebted to foreigners, which will eventually lead to a collapse in the dollar and/or rampant inflation, its net external liabilities are actually modest and well below the levels that have triggered …
26th March 2013
March's sharp decline in the Conference Board's measure of consumer confidence to 59.7, from 68.0 in February, is probably a delayed reaction to higher gasoline prices, which were prevalent during most of the survey period. As long as the underlying …
The 5.7% m/m rebound in February's durable goods orders, which was above the 3.9% consensus forecast and a bit below our 6.5% call, is not quite as good as it looks. Nevertheless, business investment still appears to be expanding at a healthy pace. … …
Renewed falls in vehicle prices probably won’t reduce CPI inflation by much. But, along with the latest drop in financing rates and loosening in loan criteria, they provide support to our view that over the next few years vehicle sales will rise rapidly …
25th March 2013
We are heartened by the recent signs that economic growth is being driven by more sustainable domestic forces rather than potentially temporary overseas influences. This leaves the economy well placed to weather any slowdown in global growth, which the …
The Fed acknowledged in its statement today that the economy was again growing at a "moderate" pace and FOMC participants revised their forecasts for the unemployment rate slightly lower for 2014 and 2015. Nevertheless, the majority of participants still …
20th March 2013
The US economic recovery appears to be strengthening. Despite the impact of the payroll tax hike and higher gasoline prices on real incomes, first-quarter real consumption growth is on course to increase by around 2% annualised. The key activity surveys …
The growth rates of broad money, including our own measure of M3, have slowed recently, even as the Fed has expanded its quantitative easing. We suspect this decline reflects a fall in the precautionary demand for money, however, and it should not …
19th March 2013
In addition to the direct boost to GDP from homebuilding, the housing recovery has started to provide an indirect boost by supporting both industrial activity and employment. The possibility that the housing recovery proves to be stronger than we expect …
18th March 2013
The current signs of inflationary pressure in the labour market will probably amount to nothing. Although we are mindful that accelerating earnings growth could be an early indication that unemployment is closer to the natural rate than we thought, at …
The combination of the payroll tax hike and rising gasoline prices was probably behind the unexpected drop in the University of Michigan measure of consumer confidence to a 15-month low of 71.8 in March, from 77.6 in February. … Ind. Production (Feb.) & …
15th March 2013
Aside from the rise in gasoline prices, which is now being reversed, it is hard to find any evidence of major consumer price pressures in the economy. This will allow the Fed to maintain its attack on the unemployment rate at next week’s policy meeting. …
We don’t expect that the recent improvement in labour market conditions and growing concerns over the costs of ultra-loose monetary policy will prompt the Fed to reduce the size of its monthly asset purchases soon. The most that can be expected from the …
13th March 2013
February’s retail sales figures suggest that, so far at least, households are coping well with the burden of more taxation and higher gasoline prices. It now looks as though consumption growth in the first quarter will be a bit stronger than we had …
The recent strengthening in the labour market is encouraging, but today’s news on the rates at which workers are being hired and are quitting is further evidence that it falls short of the “substantial” pick up that would prompt the Fed to trim the size …
12th March 2013
The willingness of investors to snap up the record amount of corporate bonds issued in the fourth quarter of last year may concern some Fed officials as it could be a sign that low interest rates are encouraging some institutions to “reach for yield”. … …
11th March 2013
The US recovery still appears to be on track and is possibly even strengthening a little, despite the lingering impact of the expiry of the payroll tax cut, the recent surge in gasoline prices and the sequestration cuts to government spending. … Recovery …
February's Employment Report isn't a game changer, but it adds to the evidence from the upbeat ISM surveys released earlier this week that, despite the expiry of the payroll tax cut, higher gasoline prices and government spending cuts, the recovery is …
8th March 2013
The economy-wide deleveraging process, which has constrained the economic recovery over the past four years, may now be over. Moreover, as any remaining deleveraging in the household sector can be achieved by debt rising at a slower pace than income, …
The rebound in the trade deficit to $44.4bn in January, from $38.1bn in December of last year, was a bit bigger than expected (consensus forecast was $42.6bn) and suggests that net external trade will make either a neutral or slightly negative …
7th March 2013
Rapidly rising delinquency rates have made us more concerned about the quadrupling in student loan debt over the past decade to £1trn. But we still don’t think this poses a major threat to the financial system or the government. High student debt may, …
6th March 2013
The sequestration spending cuts will probably only remain in place for a couple of months until Congress reaches a wider budget agreement, so the overall impact on the economy should be modest. More generally, it doesn’t look as though the continued …
4th March 2013
The rise in the ISM manufacturing index to a 20-month high of 54.2 in February, from 53.1, suggests that US producers are undeterred by the fragile recovery in overseas manufacturing activity, for now at least. If the latest softening in the PMIs of …
1st March 2013
Households absorbed the large drop in income in January by reducing their saving rather than their spending. But the effects of the payroll tax hike and the latest surge in gasoline prices will continue to constrain consumption in the first quarter. … …
Our econometric model suggests that payrolls rose by around 175,000 in February, which would leave employment growing at much the same pace as in recent months. Without a meaningful acceleration in job growth, however, the recent resurgence in earnings …
28th February 2013
January's durable goods report is a lot better than the 5.2% m/m drop in headline orders suggests, even after factoring in the downward revision to December's gain, which was trimmed to 3.7% m/m from 4.6%. Nevertheless, the survey evidence is still at a …
27th February 2013
The FDIC’s banking profile for the fourth quarter of last year shows that US banks are well placed to continue boosting lending to both firms and households. At the same time, there is not much evidence that banks are compensating for low net interest …
26th February 2013
Fed Chairman Ben Bernanke's semi-annual congressional testimony confirmed that the FOMC is paying a lot more attention to the potential costs of continuing with its quantitative easing this year. Bernanke still appears to believe that the benefits …
Despite lower household income and surging gasoline prices, consumers were relatively upbeat in February. The Conference Board's measure of consumer confidence rose for the first time in four months to 69.6 in February, from 58.4. Still, first-quarter …
The surge in retail gasoline prices to $3.80 per gallon, from $3.40 only a month ago, will put more pressure on households who are already struggling to cope with the expiry of the payroll tax cut. The only good news is that the most recent dip in …
25th February 2013
In light of last week's revelations in the minutes from January's FOMC meeting, Chairman Ben Bernanke's congressional testimony this week will be watched particularly closely for any signs that he is more concerned about the potential costs of further …
January’s consumer prices data provide a timely reminder that, even though it is now four years since the Fed first started expanding its balance sheet, there are few signs that inflation is becoming problem. … Consumer Prices …
21st February 2013
The minutes from the most recent FOMC meeting in late January suggest that rising fears over the potential costs from further quantitative easing could prompt Fed officials to reduce or even halt the central bank's monthly asset purchases sooner than most …
20th February 2013
The Fed’s QE3 policy has contributed to the acceleration in the growth rate of our M3* measure of broad money to a four-year high of 6.5% in January. But the continued expansion in the Fed’s balance sheet does not appear to be boosting inflation or …
19th February 2013
All the recent talk of currency wars is overdone and holds few implications for the US economy. The rise in the dollar against the yen has just been offset by a fall against the euro. The dollar trade-weighted index is broadly at the same level as when …
18th February 2013
The rise in the University of Michigan measure of consumer confidence to 76.3 in February, from 73.8, probably reflects a mixture of better news on the labour market and the continued rally in stock markets. Clearly, households have made peace with lower …
15th February 2013
There’s no need to be concerned by the fall in manufacturing output in January. The improvement in the survey evidence and the slightly better global backdrop actually mean that industrial conditions are strengthening. … Industrial Prod. (Jan.) & Empire …
The probability is rising that Congress won't act to prevent the sequestration spending cuts taking effect at the start of next month. On paper, that would reduce spending by $110bn per year, equivalent to 0.7% of GDP, for nearly a decade. Even if …
14th February 2013
The outlook for the US economy is improving and, although first-quarter GDP growth will be hit by the expiry of the payroll tax cut, growth should climb back to around 2.5% annualised in the second half of this year and continue at roughly the same pace …
13th February 2013
It is mildly encouraging that consumption in January did not capitulate completely after the recent tax hikes. And while higher taxes and the latest leap in gasoline prices could yet hit sales harder in the next few months, the outlook for consumption in …
State and local governments have sorted out their finances to such an extent that they will soon be in a position to raise spending and, consequently, boost both GDP and job growth. This will offset at least part of the drag on growth from the expected …
12th February 2013
As if households didn't already have enough to worry about with the expiry of the payroll tax cut at the start of this year, they suddenly find themselves having to cope with a sudden spike in gasoline prices and delays in receiving their tax rebates. …
11th February 2013
The unexpected narrowing of the trade deficit to $38.5bn in December, from $48.6bn the month before, pretty much guarantees that the dip in fourth-quarter GDP will be revised to a small gain in the second estimate. … International Trade …
8th February 2013
Further increases in both house and equity prices would take net household wealth back above prerecession levels later this year, perhaps helping to boost GDP by around 0.7%. This wealth effect should continue to boost the economy in future years too, …
7th February 2013
The latest projections from the non-partisan Congressional Budget Office show that, despite recent efforts to control spending and boost revenues, the Federal budget deficit will remain close to 4% of GDP through this decade, before starting to widen …
5th February 2013
The expiry of the payroll tax cut will contribute to what could be a 3.5% m/m slump in personal disposable income in January. We expect any decline in real consumption to be pretty modest, however, with households absorbing the loss of income by lowering …
