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The drop back in inflation below the 2% target in November will allow the Fed to continue focusing its efforts on boosting the real economy. This is just as well when, after stripping out the effect of superstorm Sandy, manufacturing output is stagnant. …
14th December 2012
November’s retail sales figures didn’t alter our view that consumption is struggling to find momentum. With consumer confidence now falling, hopes that retailers would enjoy a robust holiday shopping season are fading. … Retail Sales & Producer Prices …
13th December 2012
The Fed's adoption of numerical thresholds is, in practical terms, just a tweak in the framework used to signal how long it expects to leave short-term rates at near-zero. Based on the FOMC's new economic projections, the unemployment rate isn't expected …
12th December 2012
October’s trade release is the latest to look worse than it really is due to the effects of superstorm Sandy. Nonetheless, another year of tepid global growth will mean that the external sector remains a small drag on US GDP growth in 2013. … …
11th December 2012
The rise in consumer confidence to a five-year high in November can’t be explained by developments in equity prices, gasoline prices, the labour market or the housing market. As such, it’s no surprise that, on one measure at least, confidence has already …
10th December 2012
The household debt to disposable income ratio fell to a nine-year low of 113% in the third quarter, down from a peak of 134%. The deleveraging process will continue for a few more years, although with debt rising at a slower pace than income, rather than …
The sharp drop in December's University of Michigan's measure of consumer confidence to a four-month low of 74.5, from 82.7, suggests that the looming fiscal cliff has finally started to take a toll on consumer moods. As it stands now, confidence is at a …
7th December 2012
November's Employment Report is something of a mixed bag but, on balance, it's a positive. Non-farm payroll employment increased by a better than expected 146,000 last month, well above the consensus forecast at 85,000. The BLS said that Sandy had no …
2013 could be the year in which a number of factors that have been holding back the US economic recovery are removed. This doesn’t mean the economy will soon start firing on all cylinders. But it does mean that the foundations for faster growth in a …
6th December 2012
The rebound in domestic production of both crude oil and natural gas has led to increased speculation that America could become energy independent. The US will become progressively less reliant on oil imports, as domestic production rises and consumption …
5th December 2012
It looks like the Fed will replace its expiring Operation Twist with an expansion of the assets it is purchasing under the QE3 programme. We expect that the Fed will use next week's two-day FOMC meeting, which concludes on Wednesday 12th December, to …
4th December 2012
The drop in the ISM manufacturing index back below the supposed boom/bust level of 50 for the first time since July may not be due to superstorm Sandy. Instead, it may be a result of the uncertainty generated by the fiscal cliff. … ISM Manufacturing Index …
3rd December 2012
The rapid rise in the value of outstanding student loans and the spike in the default rate have fuelled fears that student loans are the next bubble. Aside from the risk that excessive borrowing early in life could delay or prevent borrowing later on, …
30th November 2012
The lingering effects of superstorm Sandy mean that non-farm payroll employment probably increased in net terms by just 75,000 in November, which would be less than half the gain in October. The looming fiscal cliff may have prompted some businesses to …
29th November 2012
November's slight uptick in the Conference Board's measure of consumer confidence to a near-five-year high of 73.7, from 73.1 in October, appears to have been driven by lower gasoline prices. Despite the recent drop back in equity prices and the looming …
27th November 2012
Unless the housing recovery proves to be much stronger than we expect, it won’t provide a worrying boost to core CPI inflation. Nonetheless, the housing market poses an upside risk to our view that core inflation will spend most of the next two years just …
October's durable goods data suggest that the slump in business investment eased slightly last month. But we don't anticipate any marked turnaround until Congress gets its act together and reaches an agreement to avert most, if not all, of the fiscal …
The housing recovery continues to go from strength-to-strength. House prices have risen by 5% over the past 12 months and there is an upside risk of a further acceleration. The faster prices rebound, the quicker the negative equity problem will be …
26th November 2012
Amid all the serious downside risks to the economic outlook, including the uncertainty surrounding the fiscal cliff negotiations and the possibility of a resurgence of the crisis in the euro-zone, the recovery in housing is proving to be a rare and …
20th November 2012
The annual growth rate of our measure of the broad M3 monetary aggregate edged up slightly to 5.5% in October and, with the Fed hinting at an expansion of its QE3 large-scale asset purchases in the new year, we anticipate a further gradual pick-up in 2013 …
19th November 2012
The encouraging noises emanating from Washington make it more likely, although it is still far from certain, that a deal to prevent the fiscal cliff will be reached and that any adverse impact on the economy will be fleeting. There will probably still be …
We would warn against reading too much into the performance of retail sales on Black Friday as there is little evidence that it will set the tone for sales during the whole holiday season. More generally, the threat of a sharp fall in after-tax incomes on …
15th November 2012
The annual rate of CPI inflation edged back up to 2.2% last month, from 2.0%, but will drop back before year-end thanks to the continued decline in gasoline prices. Core inflation remained unchanged at 2.0%, in line with the Fed's target, leaving the …
We still expect the newly re-elected President Obama and Congress to reach an agreement to avert most of the scheduled tax hikes and spending cuts that would otherwise kick in at the start of next year, albeit probably not until the last minute. The …
14th November 2012
October’s retail sales figures suggest that consumption has lost a bit of momentum ahead of the crucial holiday shopping season. If this was due to the effects of Hurricane Sandy, then sales will presumably bounce back this month. But if it is due to the …
Some have argued that the election result, which maintained the broad status quo of a divided Congress, was the worst possible outcome for the fiscal cliff negotiations. But as far as the fiscal cliff negotiations specifically are concerned, we think this …
12th November 2012
The rise in the University of Michigan's measure of consumer confidence to 84.9 in November, from 82.6, appears to have been driven by a combination of the recent drop back in gasoline prices and the improvement in both housing and labour market …
9th November 2012
The unexpected narrowing in the trade deficit in September opens the door to an modest upward revision to third-quarter real GDP growth. The bigger picture is that the weak global backdrop will continue to suppress exports. … International Trade (Sep. …
8th November 2012
The re-election of President Obama removes one uncertainty that has been weighing on the markets over the last few months. But they are none the wiser about if, how and when Congress will deal with the colossal tightening in fiscal policy scheduled to …
7th November 2012
Businesses are developing a split personality. The slump in capital goods orders suggests that businesses are increasingly concerned about the looming fiscal cliff and/or the global economic slowdown, whereas the pick-up in private sector employment …
6th November 2012
We doubt that the fall in the annual growth rate of average hourly earnings to a record low in October is the start of another downward leg that will eventually end in outright declines in earnings. For that to happen, we would need to see a sharp and …
The Fed’s latest Senior Loan Officer survey suggested that businesses are increasingly putting on hold investment decisions just in case Congress allows the fiscal cliff to hit. There is a growing incentive, then, for whoever wins Tuesday’s election to …
5th November 2012
We doubt that October's Employment Report is either strong enough or weak enough to have any marked impact on next week's presidential election. Non-farm payrolls increased by a better than expected 171,000 last month (the consensus forecast was 125,000) …
2nd November 2012
A mild improvement in the global economy appears to be supporting American industry while, at the same time, the housing recovery has continued to strengthen. … ISM Manufacturing Index …
1st November 2012
Despite the increase in the Conference Board's measure of consumer confidence to a near-five-year high of 72.2 in October, from 68.4 in September, annualised consumption growth is unlikely to post a significant pick-up in the fourth quarter, from the 2.0% …
The Fed's latest Senior Loan Officer Survey (SLOS) shows that banks are more willing to lend, but the problem is that, with global economic growth slowing and the fiscal cliff looming, US households and businesses are increasingly reluctant to borrow. … …
31st October 2012
Favourable pricing and financing conditions mean that the pent up demand for new vehicles created during the recession could soon be released. Such a surge in new vehicle sales has the capacity to boost GDP growth by at least 0.25 percentage points in …
The flooding and power outages across large parts of the East Coast mean that Hurricane Sandy will undoubtedly hit economic output in the short-term. Some of that output will be made up before the end of the current quarter, however, and when we factor in …
30th October 2012
Recent changes to the way the ADP calculates its measure of employment means it now has an even closer historical relationship with the official payroll data. But what really matters is whether it is a more accurate real-time predictor of the initial …
Regardless of who wins the Presidential election, the chances of the victor having a compliant Congress appear to be fading fast. So even if Romney won, the most likely scenario is still that a deal is struck to avert the fiscal cliff. And if the Senate …
29th October 2012
The US economy expanded by a solid 2.0% annualised in the third quarter, up from 1.3% in the second, as a pick-up in consumption growth more than offset a decline in business investment. We suspect that growth will slow a little in the fourth quarter and …
26th October 2012
As the last major piece of economic news to be released before the Presidential election, October’s Employment Report will attract even more attention than normal, with both parties attempting to spin the data in their favour. Our econometric model points …
25th October 2012
Bizarrely, even though September's durable goods report shows an above-consensus 9.9% m/m rebound in orders, the overall report is a disappointment that signals third-quarter GDP growth was weaker than previously thought. … Durable Goods Orders …
After the fireworks at the last FOMC meeting in mid-September, when the Fed launched an open-ended QE3 and strengthened its forward-looking guidance on leaving its policy rate at near-zero, the two-day meeting that ended today was a damp squib in …
24th October 2012
Even though our 1.3% estimate for annualised third-quarter GDP growth is already well below the consensus forecast of 1.8%, we're a little concerned that growth could turn out to be even weaker because inventories may end up being an even bigger drag than …
The US economy has developed something of a split personality lately, with consumer confidence hitting a five-year high, while capital goods orders, an indicator of business investment, fall at a pace not seen since the height of the last recession. It is …
23rd October 2012
New figures show that US banks have not just continued to reduce their exposure to those euro-zone nations most in trouble, but they have also started to trim their exposure to German banks. This suggests that US banks have taken steps to insulate …
22nd October 2012
It is encouraging that only a small part of the recent acceleration in consumption growth is due to the release of Apple’s iPhone 5 and that the recovery in the housing market is gathering pace. But these green shoots of recovery are unlikely to blossom …
After the launch of QE3 and the strengthening of its forward-looking guidance at the last meeting in mid-September, we don't anticipate any major changes from the Fed at next week's two-day FOMC meeting, which concludes on Wednesday 24th October. … Fed …
18th October 2012
The US economy appears to be developing a split personality. Households, seemingly oblivious to the scheduled jump in marginal tax rates that will reduce their after-tax income next year, are apparently growing in confidence and boosting expenditure. At …
17th October 2012
