Congress steps up to the plate

The $2trn stimulus package agreed by Congress will include a permanent fiscal expansion worth up to 5% of GDP and, in conjunction with the new lending facilities announced by the Fed, could channel up to $6trn in temporary financing to consumers and firms over the coming months. Even that won’t be enough to prevent a sharp decline in GDP in the second quarter, but it should help to support an eventual recovery once the coronavirus outbreak has been brought under control.
Andrew Hunter 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 Andrew Hunter

US Data Response

Industrial Production (May)

The 0.8% m/m rise in industrial production in May, driven by a 0.9% gain in manufacturing output, suggests that some of the shortages holding back production in recent months could have eased. But manufacturing output is still slightly below its pre-pandemic peak and continues to lag well behind the earlier resurgence in goods demand.

15 June 2021

US Data Response

Consumer Prices (May)

The further jump in core CPI inflation to a 28-year high of 3.8% in May, from 3.0%, was again driven by the same handful of categories most directly affect by the lifting of virus restrictions. But there were also signs of emerging inflationary pressures in other sectors, including housing costs and restaurant prices, which suggests that not all the current upward pressure on inflation will prove transitory.

10 June 2021

US Fed Watch

Talking about talking about tapering

Fed officials may finally begin ‘talking about talking about’ tapering their asset purchases at next week’s FOMC meeting. But with recent data leaving the economy still some way from making “substantial further progress” towards the Fed’s full employment goal, we suspect that taper won’t begin until early next year.

9 June 2021
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