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Retail Sales (Dec.)

The 1.9% plunge in retail sales in December in part reflects what appears to be a problem with seasonal adjustment process around the holidays. The initial Omicron wave appears to have had only a modest impact. Nevertheless, it means fourth-quarter real consumption growth was a more muted 3.5% annualised, rather than the near-5% we were expecting.
Michael Pearce Senior US Economist
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US Economics Weekly

Spender of last resort

With China’s economy hampered by its zero-covid lockdowns, and Europe’s economy suffering because of the massive surge in imported energy prices caused by the war in Ukraine, the American consumer has once-again emerged as the world’s spender of last resort.

20 May 2022

US Chart Book

Economy powering ahead

The strength of the hard activity data for April refutes the recent message from financial markets that the economy is at risk of imminent recession. The solid gain in control group retail sales, together with upward revisions to past months leaves the underlying trend in consumer spending looking much stronger. Meanwhile the continued rebound in manufacturing output, in particular the recovery in vehicle output to the pre-pandemic level, illustrates how the gradual easing of supply shortages is supporting a rebound in production. With signs that core inflation is still running far too hot, the continued strength of economic activity supports the Fed’s decision to press ahead with 50bp rate hikes at the next couple of FOMC meetings. Nevertheless, we still expect a drop back in inflation later this year, alongside signs of a slowdown in economic activity will prompt the FOMC to shift back to 25bp hikes by the fall.

18 May 2022

US Data Response

Industrial Production (Apr.)

The 0.8% rise in manufacturing output last month underlines that it is not just consumer spending powering the economy forward. While the survey evidence suggests global manufacturing demand is cooling, the gradual easing of input shortages over recent months is helping to keep output growth strong.

17 May 2022

More from Michael Pearce

US Data Response

Employment Report (Dec.)

While the 199,000 gain in non-farm payrolls once again disappointed the consensus, a much larger gain in the household measure of employment and a tepid rise in participation pushed the unemployment rate back below 4%. Together with another exceptionally strong monthly increase in wages, that raises the odds the Fed brings forward plans to raise interest rates and run down its balance sheet this year.

7 January 2022

US Economics Update

Fed “QT” could include outright asset sales this time

As hinted at in the December FOMC minutes, we expect the Fed will begin shrinking its balance sheet later in 2022. They would start by allowing maturing assets to run off, but if longer-term bond yields were to remain unusually low, we expect officials would go further and begin actively selling some holdings particularly at the long end, in what would amount to a reverse “Operation Twist”.

6 January 2022

US Data Response

International Trade (Nov.)

The sharp rebound in the trade deficit in November means that net trade is now on track to be a small drag on economic growth in the fourth quarter, rather than a small boost as we had previously assumed. Partly as a result, we now expect GDP growth was a slightly less impressive 4.5% annualised in the fourth quarter, down from our previous estimate of 6.5%.

6 January 2022
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