International Trade (Jun.)

The widening in the trade deficit to $75.7bn in June, from $71.0bn in May, is unlikely to be sustained now that consumer goods demand appears to have peaked and surveys show demand for US exports remaining strong. But the weaker base heading into the second half of the year suggests that net trade will nonetheless remain a drag on economic growth in the third quarter.
Michael Pearce Senior US Economist
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US Economics Update

Fed lines up March rate hike

The Fed’s announcement that it will “soon be appropriate” to raise interest rates and the numerous hints dropped by Chair Jerome Powell in the post-meeting press conference all but guarantee that a March rate hike is coming. Meanwhile, the Fed set out a brief outline of how it will run down its balance sheet, but with any decision still “a couple of meetings” away, that process won’t get underway until mid-year.

26 January 2022

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

More from Michael Pearce

US Economics Update

Monetary Indicators Monitor (Jun.)

Although the headline data show bank loans stagnant, that is mostly due to the forgiveness of Paycheck Protection Program loans and mortgage securitisations, with the broader evidence pointing to an acceleration in credit growth.

5 August 2021

US Data Response

ISM Manufacturing Index (Jul.)

The further small decline in the ISM manufacturing index in July probably has more to do with the continued drag from supply constraints than waning demand. The details did at least suggest that supplier delivery times and the accompanying upward pressure on prices may have peaked. But we suspect it will be a long time before supply constraints ease meaningfully.

2 August 2021

US Data Response

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.

15 July 2021
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