Industrial Production (Jun)

The modest 0.4% m/m increase in industrial production in June was due to a weather-related spike in utilities demand and a recovery in mining output, with manufacturing output dragged down by another big semiconductor-related drop in auto production. With shortages set to persist for a while yet, we expect output to rebound only gradually over the remainder of this year.
Michael Pearce Senior US Economist
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US Economic Outlook

Whiff of stagflation gets stronger

The whiff of stagflation is getting stronger as shortages worsen, leading to surging prices and weaker real GDP growth. Shortages of goods and intermediate inputs will eventually ease, although not for at least six to 12 months. But the drop in the labour force appears to be more permanent, which suggests the pandemic could have a long-term scarring effect on potential GDP after all. We now expect GDP growth to be 2.7% in 2022 and 2.0% in 2023 and we expect CPI inflation to be around 3.0% in both years. We assume the Fed will focus on the weakness in the real economy rather than the sustained overshoot in inflation, however, and are forecasting only two interest rate hikes in 2023.

18 October 2021

US Economics Weekly

Labour force exodus shows no sign of reversing

This week brought more news that acute labour shortages and the resulting surge in wages are rapidly feeding through into the most cyclically sensitive components of the consumer price index.

15 October 2021

US Data Response

Retail Sales (Sep.)

The 0.7% m/m rise in retail sales in September suggests goods spending held up a little better than we had anticipated, but real consumption growth still slowed sharply in the third quarter.

15 October 2021

More from Michael Pearce

US Data Response

ISM Manufacturing Index (Jun.)

The headline ISM manufacturing index was virtually unchanged at a high level in June, but the far bigger story is the further rise in the prices paid index to 92.1 from 88.0, its highest level since the 1970s. That is consistent on past form with CPI inflation rising above 5% in the coming months.

1 July 2021

US Data Response

Durable Goods (May)

The 2.3% m/m rise in durable goods orders last month was driven by another big increase in commercial aircraft orders reflecting the recovery in air travel, with underlying orders weaker than expected. The latter is not too concerning, however, given how far orders are above their pre-pandemic trend, while the continued strength of shipments suggests that business equipment investment is on track for another strong gain in the second quarter.

24 June 2021

US Data Response

Retail Sales (May)

The 1.3% decline in retail sales in May is arguably a lot better than it looks because there were big upward revisions to the April data and spending on food and drink services posted another solid increase last month, with the latter suggesting that the recovery in services consumption is on a solid footing. While real consumption still looks likely to have fallen in May, the offsetting positive news means we are sticking to our forecast that consumption will rise by 10% annualised in the second quarter.

15 June 2021
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