Delta impact evident in both CPI and retail sales

While the data released this week showed retail spending picking up in August as price gains moderated, the figures are still consistent with a sharp slowdown in consumption growth in the third quarter while underlying inflationary pressures continue to build.

Andrew Hunter Senior US Economist
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US Data Response

Industrial Production (Sep.)

The 1.3% fall in industrial production in September partly reflects a temporary hit to mining and chemicals output from Hurricane Ida and a drop in cooling demand, as the weather returned to seasonal norms. That said, most of the 0.7% drop in manufacturing output is due to worsening shortages, particularly of semiconductors, which will hold back production for some considerable time.

18 October 2021

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

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US Data Response

Industrial Production (Aug.)

The 0.4% m/m rise in industrial production in August lifted it back above its pre-pandemic peak, but was nevertheless weaker than we had expected and suggests that the industrial recovery is losing steam. With the Delta variant causing renewed disruption to global supply chains and Hurricane Ida weighing on oil production, a further slowdown looks likely in September.

15 September 2021

US Economics Update

Delta not the main factor weighing on growth

With authorities having shown no appetite to reimpose restrictions on activity and new virus cases now levelling off, the Delta variant is still unlikely to have as big an impact on the economy as previous waves. That said, it adds to a range of other factors weighing on demand, while the renewed disruption to global supply chains could make shortages worse and keep upward pressure on prices.

13 September 2021

US Data Response

US International Trade (Jul.)

The narrowing in the trade deficit to $70.1bn in July, from a revised $73.2bn, suggests that the drag on GDP growth from net trade in recent quarters will be partly reversed in the third. We’ll be online after the August jobs release on Friday to discuss the data and take questions. Registration details here

2 September 2021
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