Fed risking falling further behind the curve

While the Fed announced tapering as expected at its meeting this week, the big surprise was how dovish the language in the statement and press conference remained, which suggests to us an increasing risk that the Fed is falling behind the curve.

Michael Pearce Senior US Economist
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US Data Response

ISM Manufacturing Index (Nov.)

The November ISM manufacturing survey suggests that supply shortages are yet to ease significantly, but it does at least echo anecdotal reports that they are no longer getting worse.

1 December 2021

US Economics Weekly

Powell gets the nod; GDP growth rebounding

The announcement on Monday morning that President Biden would nominate Jerome Powell for a second term as Fed Chair was largely as expected, although the unexplained delays in making it official may have persuaded some in the markets that Biden was leaning toward picking Lael Brainard instead. As far as monetary policy goes, Powell and Brainard hold very similar, largely dovish, views. Elsewhere, as a result of the flurry of economic data releases ahead of the Thanksgiving Holiday we have raised our fourth-quarter GDP growth forecast to 6.5% annualised, from 4.0%.

24 November 2021

US Data Response

Durable Goods, Adv. Trade (Oct.), GDP (Q3 2nd Est.)

The 0.5% fall in durable goods orders was not as bad as it looked, given that it was entirely due to a fall in volatile aircraft orders. But the bigger news this morning was the huge 10.7% m/m surge in exports in October, which is why we now estimate that GDP growth will accelerate from 2.1% annualised in the third quarter to more than 5% in the fourth, well above our previous forecast of a rise to 4%.

24 November 2021

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US Data Response

Employment Report (Oct.)

The stronger 531,000 gain in non-farm payrolls in October suggests the economy is rebounding rapidly from the initial Delta wave but, despite easing virus concerns, there was absolutely no sign of a pick-up in labour supply. That suggests the sharp acceleration in wage growth in recent months has further to run.

5 November 2021

US Economics Update

Shortages holding back investment and productivity

While attention has been focused on how shortages and surging prices are holding back real consumption, those same factors are weighing even more heavily on business equipment investment. Faced with widespread labour shortages, low borrowing costs and elevated business confidence, all the ingredients are in place for a renewed wave of capital deepening that could provide a boost to productivity. But shortages and inflation appear to be holding back potential.

4 November 2021

US Employment Report Preview

Delta drag easing, but shortages worsening

We estimate that non-farm payrolls rose by a slightly stronger 300,000 in October, with the easing Delta wave of infections triggering some rebound in hiring, but worsening labour shortages are a growing headwind.

28 October 2021
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