Newfound optimism unlikely to change dovish stance

We expect the statement following next week’s FOMC meeting to strike a more optimistic tone on the economic outlook, but Chair Jerome Powell is likely to emphasise in his press conference that any changes to the stance of policy are still some way off.
Andrew Hunter Senior US Economist
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US Chart Book

Data provide mixed signals on Delta impact

The latest data provide mixed signals on the impact that the Delta variant is having on the economy. The high frequency indicators for high contact services suggest that activity levelled out in August and weakened a little in early September. Last month’s retail sales report also revealed that spending on food services was broadly flat, but control group sales nevertheless rebounded strongly, as households refocused their spending online and in favour of goods consumption. Elsewhere, leisure and hospitality employment was unchanged in August which, because that sector had been such an important contributor to the strength of the gains in earlier months, helps to explain why payroll employment increased by little more than 200,000 last month. Finally, even though activity only stagnated, the prices for some high contact service activity like hotels and air fares fell quite sharply. The good news is that, with Delta variant infections having now peaked, we should see some rebound in affected activity and employment soon, although the downside is that could contribute to a renewed pick-up in inflation linked to reopening.

21 September 2021

US Economics Weekly

Delta impact evident in both CPI and retail sales

While the data released this week showed retail spending picking up in August as price gains moderated, the figures are still consistent with a sharp slowdown in consumption growth in the third quarter while underlying inflationary pressures continue to build.

17 September 2021

US Economics Update

Rising cyclical pressure will keep inflation elevated

The spread of the Delta variant domestically has triggered a temporary reversal in the reopening inflation in high contact services, but its spread across other parts of the world will intensify supply shortages and drive goods prices higher. At the same time, transportation costs are soaring, energy prices are proving more resilient than we expected and cyclical inflation is still building. The upshot is that, while price inflation will fall next year, we expect it to rebound to well above 2% in 2023.

16 September 2021

More from Andrew Hunter

US Economics Update

Surveys suggest labour shortages persist

In contrast to the stronger payrolls figures released last week, the latest survey data suggest that labour shortages remain acute. That supports our view that the acceleration in employment growth in June probably wasn’t a sign of things to come and suggests that wage growth is set for a further acceleration.

7 July 2021

US Economics Weekly

Stronger payrolls intensify focus on tapering

We aren’t convinced that it will mark the start of a sustained acceleration, but the stronger gain in June payrolls will embolden those Fed officials calling for an earlier end to the Fed’s asset purchases.

2 July 2021

US Data Response

Employment Report (Jun.)

The stronger 850,000 rise in non-farm payrolls in June may be a sign that some of the temporary labour shortages holding back the employment recovery are starting to ease. But with the labour force rising by just 151,000 and still more than three million below its pre-pandemic peak, we aren’t entirely convinced that this is the start of a much stronger trend.

2 July 2021
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