Durable Goods, Adv. Trade (Oct.), GDP (Q3 2nd Est.)

The 0.5% fall in durable goods orders was not as bad as it looked, given that it was entirely due to a fall in volatile aircraft orders. But the bigger news this morning was the huge 10.7% m/m surge in exports in October, which is why we now estimate that GDP growth will accelerate from 2.1% annualised in the third quarter to more than 5% in the fourth, well above our previous forecast of a rise to 4%.
Michael Pearce Senior US Economist
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US Chart Book

Omicron impact short-lived

The surge in Omicron infections means more people were self-isolating in early-January than at any time since the beginning of the pandemic, although the impact that will have on employment and output remains uncertain. Furthermore, with cases now falling just as quickly as they rose, any effects will be quickly reversed in February. In contrast to earlier waves, the rise in infections hasn’t prompted as big a pullback in services activity, with fears of catching the virus lower than during previous waves. The far bigger factor this time is staff absenteeism, which we think will cause both payroll employment and manufacturing output to decline in January, although the impact should be mostly reversed by the end of the first quarter.

24 January 2022

US Economics Weekly

Omicron reaches plateau, leaving Fed free to hike

We expect the Fed to deliver some heavy hints at next week’s FOMC that it is planning an interest rate hike in March. With the Omicron wave now past its peak nationally, there is little to hold the Fed back, particularly if next week brings news of a further acceleration in wage growth.

21 January 2022

US Economic Outlook

Inflation to remain elevated as GDP growth slows

We expect underlying inflation to remain well above the 2% target this year, which means the Fed will push ahead with four rate hikes even though real GDP growth is likely to disappoint. Core inflation will average 4.3% in 2022 and close to 3.0% in 2023. GDP growth will slow to 2.7% this year and 2.0% in 2023.

20 January 2022

More from Michael Pearce

US Data Response

Retail Sales (Oct.)

The 1.7% m/m rise in retail sales in October, driven by a similarly strong increase in underlying control group sales, suggests that real consumption will rebound to between 3% and 4% annualised in the fourth quarter, from 1.6% in the third.

16 November 2021

US Economics Update

Labour market conditions even tighter

The September Job Opening and Labour Turnover survey shows labour market conditions are far tighter than the 4.6% unemployment rate suggests, and points to continued rapid wage growth. With productivity stagnant, that will add to mounting cyclical price pressures, which we expect to take over from supply bottlenecks and energy prices as the key source of upward pressure on inflation next year.

12 November 2021

US Economics Weekly

Fed risking falling further behind the curve

While the Fed announced tapering as expected at its meeting this week, the big surprise was how dovish the language in the statement and press conference remained, which suggests to us an increasing risk that the Fed is falling behind the curve.

5 November 2021
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