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ISM Manufacturing Index (May)

While the headline ISM manufacturing index edged up to 61.2 in May, from 60.7, the main takeaway from the release was that shortages of workers, and not just raw materials, now appear to be playing a key role in holding back production and pushing up prices.
Michael Pearce Senior US Economist
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US Economics Update

Democrats embrace fiscal tightening

The Inflation Reduction Act passed by the Senate over the weekend will, despite its name, do little to rein in inflation, but the climate provisions will make a meaningful difference in efforts to reduce GHG emissions. The bill represents a cumulative fiscal tightening of slightly more than $300bn, or 1.3% of GDP, over the next decade, which is a marked change from the fiscal packages passed by both parties in recent years that all added to the deficit. CPI Drop-In (10th Aug): Will July finally mark the turning point for US inflation? Join our US Economics team for a briefing shortly after the CPI release about the data and likely Fed response. Register now.

8 August 2022

US Economics Weekly

Democrats pivot to fiscal tightening

Alongside Pelosi's visit to Taiwan this week, the recently-passed Chips and Science Act is another illustration of the slow-motion decoupling that is developing between the US and China. The modest fiscal stimulus incorporated into the semiconductor bill should be more than offset by the net fiscal tightening incorporated into the inflation reduction reconciliation bill that should now be passed shortly.
CPI Drop-In (10th Aug): Will July finally mark the turning point for US inflation? Join our US Economics team for a briefing shortly after the CPI release for a briefing on the inflation outlook and the Fed response. Register now.  

5 August 2022

US Data Response

Employment Report (Jul.)

The unexpected acceleration in non-farm payroll growth in July, together with the further decline in the unemployment rate and the renewed pick-up in wage pressures, suggests the economy is still a long way from recession. That raises the odds of another 75bp rate hike in September, although the outcome depends more on the evolution of the next couple of CPI reports.

5 August 2022

More from Michael Pearce

US Economics Focus

Labour shortages will last well into 2022

The widespread labour shortages evident in the survey data and job opening & quit rates are only partly due to transitory factors, including enhanced unemployment benefits, childcare constraints, and virus fears. Limited international migration, the wave of retirements and mismatches in the labour market appear to be playing a bigger role and will last well into 2022. That will put sustained upward pressure on wages, which is a key reason why we expect core inflation will average 2.5% over the coming years.

29 June 2021

US Economics Weekly

Lasting price pressures building

The continued surge in prices last month was again mostly concentrated in sectors reopening or facing intense supply constraints, which allows the Fed to stick with its “largely transitory” story for now. But with signs of cyclical price pressures building and the extremely strong job openings and quits figures pointing to stronger wage pressures, we believe the Fed will eventually have to acknowledge that inflation will remain elevated for much longer.

11 June 2021

US Economics Weekly

Fed remaining dovish as supply-side constraints mount

In a relatively quiet week, the few data releases we did get added to signs that shortages are pushing up prices further and restraining the pace of economic recovery.

21 May 2021
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