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The latest consensus forecast still puts first-quarter GDP growth as high as 1.8% annualised, whereas our own calculations suggest it was no higher than 1.0%. (See Chart below.) Furthermore, despite the higher consensus, we believe that the risks to our …
20th April 2011
The conclusion of next week's two-day FOMC meeting on Wednesday will mark the start of a brave new world, with Chairman Ben Bernanke scheduled to host the Fed's first post-meeting press conference. We also expect the FOMC to complete its $600bn of …
Given the size of the US Federal deficit, which will be close to 10% of GDP this year, and the daunting medium-term fiscal challenges, it is hard to argue with S&P's decision to put a negative outlook on the country's AAA credit rating. Nevertheless, at a …
18th April 2011
Every data release last week seemed to necessitate a further downward revision to our first-quarter GDP growth forecast. By the end of the week when the dust had finally settled, that estimate was down to only 1% at an annualised pace. Indeed, there is …
The pass through of higher agricultural and commodity prices continued in March, with a 0.8% m/m increase in food prices and a 5.6% m/m increase in gasoline prices leading to a 0.5% m/m increase in overall consumer prices. … CPI, Ind. Prod'n (Mar.) & …
15th April 2011
March's 0.4% m/m increase in US retail sales provides only half the story as the headline numbers are not adjusted for the rise in prices. The key message is that real spending is hardly rising, if at all, and that consumption growth lost a lot of …
13th April 2011
The narrowing in the trade deficit in February is a brief respite before the impact of the more recent surge in oil prices pushes the deficit sharply wider. In any case, it looks like net trade was a drag on real GDP growth in the first quarter, adding to …
12th April 2011
Recent events have left our forecast that the Fed will not raise interest rates either this year or next out on a limb. But we are sticking to our guns. After all, this time last year a fading of the economic recovery and the escalation of the fiscal …
11th April 2011
The possibility of a Federal government shutdown is back on the front pages, with concern growing that no agreement will be reached before the current continuing spending resolution expires this weekend. Once again, both sides appear to be spoiling for …
6th April 2011
In contrast to the widespread view that Treasury yields will jump once the Fed concludes its second round of asset purchases, we think that yields could actually fall. It is even possible that the end of QE2 will go some way to bringing a halt to the …
4th April 2011
Conditions in the labour market are finally starting to show signs of meaningful improvement. Non-farm payrolls increased by a healthy 216,000 last month, slightly above the consensus forecast for a 190,000 gain and the 194,000 increase in February. … …
1st April 2011
The trivial drop back in the ISM manufacturing index to 61.2 in March, from 61.4, still leaves it at a level consistent with GDP growth of more than 5% annualised. Actual growth will be lower than that, however, as the recovery in the services sector has …
We had originally expected first-quarter GDP growth to be pretty strong, possibly even as high as 4% at an annualised pace. The more incoming data we see, however, the more we suspect that growth will end up between 2.0% and 2.5%. It might even turn out …
28th March 2011
Labour market conditions are still improving and our econometric model, which is based on a range of monthly indicators, points to a 175,000 increase in non-farm payrolls in March. After the rapid decline over the past few months, we expect the …
24th March 2011
The 16.9% m/m decline in new home sales to a record low of only 250,000 annualised in February, from 301,000 the month before, underlines just how bad conditions in the housing market still are. … New Home Sales …
23rd March 2011
The labour market is finally showing signs of improvement, with the unemployment rate falling sharply from 9.8% last November to 8.9% this February. That decline, however, owes more to a large exodus of people from the labour force rather than stronger …
22nd March 2011
The statement issued after last week's FOMC meeting made it pretty clear that the Fed wouldn't be rushing to tighten policy in response to the recent surge in commodity prices, at least not while core inflation remained subdued and inflation expectations …
21st March 2011
Higher headline CPI inflation and the strength of the manufacturing recovery are not going to sway the Fed when core inflation remains muted and other sectors of the economy, notably housing, are still in awful shape. … CPI, Industrial Prod'n (Feb.) & …
17th March 2011
The surge in PPI inflation won't sway the Fed. It has already said that it expects the commodity-related upturn will be "transitory". With core PPI inflation still low and the economic recovery constrained by the continued weakness in housing, the Fed is …
16th March 2011
Despite the fact that Fed officials now believe the economic recovery is on a "firmer footing" and that surging commodity prices are putting "upward pressure" on headline inflation, it looks like QE2 will be completed as planned. … Fed likely to complete …
15th March 2011
Halfway through the Fed's second round of quantitative easing there is still no sign that it is boosting broad money growth. M2 is growing no faster than nominal GDP and our measure of M3, which replicates the series discontinued by the Fed, is still …
14th March 2011
One of the unintentional side effects of the current impasse in Congress over raising the debt ceiling is that it has led to a significant expansion of the monetary base. Indeed, the drop in the Treasury's operating cash balance over the past few weeks …
The 1.0% m/m increase in February's retail sales may only have been in line with the consensus forecast, but the composition of that growth and the sizeable upward revisions to the gains in the two months before that make this a very encouraging report. …
11th March 2011
The increase in the monthly trade deficit to a five-month high of $46.3bn in January, from 40.3bn, owed very little to the rising cost of imported oil. Instead, it was mainly due to the strength of real non-oil imports. … International Trade …
10th March 2011
Mortgage applications continued to trend lower in February, underlining the point we've made before that the latest rebound in home sales is being driven almost exclusively by cash buyers and investors. … Mortgage Applic'ns (Feb.) & Negative Equity …
9th March 2011
Despite signs that other central banks may be preparing to tighten policy, we don't expect to see the Fed following suit, either by calling an early halt to QE2 or raising interest rates later this year. At next week's FOMC meeting on Tuesday, we expect …
8th March 2011
The rise in the price of oil to above $100 per barrel (pb) will not send the economy back into a recession or push the Fed much closer to tightening policy. Relative to our existing forecasts, the latest rises in oil and agricultural commodity prices are …
7th March 2011
The 192,000 increase in non-farm payrolls in February is healthy enough, particularly when we take into account the upward revisions to the preceding two months that added an additional 58,000 jobs, the only question is how much of last month's gain was a …
4th March 2011
Even though the ISM manufacturing index increased to a seven-year high in February, in his semi-annual testimony to the Senate Banking Committee Fed Chairman Ben Bernanke offered no hint that he favours ending QE2 early. … ISM Manu. Index (Feb.) & …
1st March 2011
The growing spat surrounding the possibility of a Federal government shutdown and the debate over raising the debt ceiling could turn out to be nothing more than old-fashioned political theatre, with the Republican controlled House and the Democrat …
28th February 2011
The markets will be watching for any signs of a shift in tone in Fed Chairman Ben Bernanke's semi-annual testimony to Congress this week. Despite signs that the economic recovery is gathering momentum and growing speculation about policy rates elsewhere, …
After having been depressed by the unseasonably heavy snowfall in January, we anticipate that payroll employment rebounded by about 250,000 in February. The underlying story, though, is one in which the economy is still struggling to create more than …
24th February 2011
The manufacturing recovery is still picking up momentum. The 2.7% m/m increase in durable goods orders in January is better than it looks when we take into account the big revision to December's figures, which now show only a 0.4% m/m decline compared …
The economic outlook appears to have improved recently, with both the ISM manufacturing and non-manufacturing indices improving to multi-year highs in January. We certainly anticipate a strong first half of this year. Buoyed by the latest round of fiscal …
23rd February 2011
For the first time in a year, real consumption probably declined in January. Last month's unusually heavy snowfalls may be partly to blame. But the bad weather probably only exacerbated the slowing trend that was already underway. Even if spending were to …
21st February 2011
Consumer prices increased by 0.4% m/m in January, as the surge in commodity prices continued to feed through. … Consumer Prices (Jan.) …
17th February 2011
The recovery regained momentum over the final few months of last year and, helped by the boost from the latest fiscal stimulus, we expect GDP growth of 3% this year. … Recovery still dependent on policy …
16th February 2011
The 0.3% m/m increase in manufacturing output in January is actually quite encouraging, given that the already reported drop in average hours worked by manufacturing employees last month suggests the wave of unseasonably severe winter storms held …
Despite the rebound in January, housing starts remain at an unusually low level. This is unlikely to change when there is little need for new homes or when falling prices and rising costs are denting the desire of homebuilders to boost construction. … …
Despite the acceleration in the growth rate of the narrow M1 monetary aggregate, the growth of the broader M2 aggregate remains muted and our M3 measure is still shrinking. … Monetary Indicators Monitor …
15th February 2011
The retail sector started the year on a soft note, suggesting that consumption growth is losing momentum. This is perhaps even more worrying at a time when spending should be receiving a boost from the payroll tax cut and rising equity prices. In …
The decline in the unemployment rate doesn't just reflect an improving job market, it is also equally due to a decline in the labour force participation rate. There are roughly one million people who are no longer in the labour force but would take a job …
14th February 2011
The prospect of a rebound in imports at the start of this year, most probably linked to the recent strength of consumption, suggests that the external sector is unlikely to provide as large a boost to overall economic growth in the first quarter of this …
11th February 2011
In light of recent increases in oil and agricultural commodity prices, we now expect CPI inflation to peak at 2.5% this summer, up from our previous forecast of 2.0%. But this is unlikely to sway the Federal Reserve, not least because higher gasoline and …
7th February 2011
The severe winter weather that occurred during the sample week appears to explain most of the weakness in January's non-farm payrolls, which increased by only 36,000, compared with a 121,000 gain the month before. … Employment Report …
4th February 2011
Today's data releases illustrate the two-speed nature of this recovery, with the manufacturing sector leading the way and the construction sector lagging far behind. … ISM Manufacturing Index …
1st February 2011
The Fed's latest survey of Senior Loan Officers suggests that we could see a marked turnaround in business lending this year, which would presumably boost investment and possibly even employment too. In contrast, demand for residential mortgages has only …
31st January 2011
The latest Federal budget projections from the non-partisan Congressional Budget Office underline the terrible state of the public finances. This year's deficit is now expected to reach $1,480bn, or 9.8% of GDP. Although the deficit should narrow …
The acceleration in GDP growth to 3.2% annualised in the fourth quarter, from 2.6% in the third, confirms that the economic recovery regained some lost momentum over the closing stages of last year. … GDP (Q4 1st …
28th January 2011
Over the past year, payroll employment has increased by just 1.1 million, reversing only a small number of the 8.3 million jobs lost during the recession. What makes the labour market recovery even more disappointing, however, is that those limited job …
27th January 2011
