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April strength offset by downward revisions to earlier months The 253,000 gain in non-farm payrolls in April suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown. Nevertheless, that …
5th May 2023
Strength of exports and unit labour cost growth unlikely to last A rebound in exports drove a sharp narrowing of the international trade deficit to a four-month low of $64.2bn in March, from $70.6bn in February, but the surveys continue to suggest that …
4th May 2023
Strength of exports and unit labour cost growth unlikely to last The sharp fall in the international trade deficit to $64.2bn in March, from $70.6bn in February, was driven by a rebound in exports, but the surveys continue to suggest that renewed declines …
The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation to convince officials to start cutting rates again …
3rd May 2023
Fed’s focus will turn to policy loosening before long The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation …
A bipartisan deal to raise the debt ceiling alongside modest cuts to government spending still appears to be the most likely way out of the current impasse. It's possible that moderate Republicans will step in to help the Democrats push through a …
ISM suggests activity weak in second quarter The slight rebound in the ISM services index to 51.9 in April from 51.2 in March was broadly in line with the small gain in the ISM manufacturing index. Nevertheless, that still leaves the composite index at a …
ADP surge another sign that in April the sweetest showers fall The ADP report – suggesting that private sector employment increased by a stronger 296,000 in April, more than double the 142,000 gain the month before – is another signal that the economy …
The decline in job openings to a near two-year low of 9.6 million in March, from a peak of 12.1 million a year earlier, suggests that, even without a rise in the unemployment rate, labour market conditions are nevertheless easing and are consistent with a …
2nd May 2023
The collapse of First Republic Bank is no big surprise – it had been teetering on the edge since suffering $100bn in deposit withdrawals mostly in March – but it’s a timely reminder that banking turmoil will continue to flare up periodically. After …
1st May 2023
Manufacturing outlook weak, but hi-tech revival boosting construction The trivial rebound in the ISM manufacturing index to a still depressed 47.1 in April, from 46.3, contrasts with the more substantial recovery in the alternative S&P Global PMI but …
Although underlying activity growth rebounded in the first quarter, while wage and price inflation remained too high, we expect the second quarter to bring a sharper slowdown across the board. GDP data show weaker start to year The first-quarter GDP …
28th April 2023
Today’s news on wages and inflation should have eradicated any remaining doubts that the Fed will hike interest rates by an additional 25bp next week. According to the Employment Cost Index (ECI), first-quarter private wages increased by 1.2% q/q, with …
We estimate that employment growth continued to trend lower in April, with non-farm payrolls increasing by a more moderate 180,000. That would be the smallest monthly gain in more than two years, but still a healthy enough increase when compared with the …
27th April 2023
Economy starts the year on a weaker footing The disappointing 1.1% annualised rise in first-quarter GDP indicates that the economy had less forward momentum at the start of this year than previously thought. We continue to expect the drag from higher …
25bp hike next week likely to be the last, with rates peaking at 5.00%-5.25% Economic weakness and falling inflation to prompt rate cuts later this year We expect fed funds target range to have fallen to 2.50%-2.75% by end-2024 The Fed looks set to …
26th April 2023
Details consistent with declining equipment investment The 3.2% m/m jump in durable goods orders in March mainly reflects a stronger-than-expected gain in the more volatile commercial aircraft component, with the details suggesting that first-quarter …
The 3.2% m/m jump in durable goods orders in March mainly reflects a stronger-than-expected gain in the more volatile commercial aircraft component, with the details suggesting that business equipment investment contracted again in the first quarter. …
We now expect the Fed to press ahead with another 25bp rate hike at the FOMC meeting early next month but, with the economic data softening and the risks of a debt ceiling crisis rising, we still think the Fed’s next move after that will be a cut. The …
21st April 2023
We expect rising interest rates and structural headwinds to trigger a deep rout in commercial real estate. The impacts on the real economy will be mostly indirect via the impact on small bank lending, however, rather than the direct impact on …
20th April 2023
The recent undershooting of CPI used vehicle prices relative to wholesale auction prices appears, at least partly, to reflect a squeeze on dealer margins as demand has cooled. The upshot is that we shouldn’t necessarily expect the CPI measure to catch up …
19th April 2023
Note: We discussed our revamped FCIs and took your questions on global financial conditions in a 20-minute online briefing on Thursday, 20 th April . Watch the recording here . We have revamped our financial conditions indices (FCIs) for advanced …
18th April 2023
The strength of the March CPI data may be enough to persuade the Fed to squeeze in a final 25bp rate hike at the early-May FOMC meeting. But with mounting evidence that economic growth is weakening again, we doubt that strength will last much longer. Core …
14th April 2023
Small rebound in confidence suggests no big hit from bank turmoil The small rebound in the University of Michigan consumer sentiment index in early April suggests that the easing of the crisis in the banking sector has reassured consumers. Nevertheless, …
Further evidence of fading economic momentum The 0.5% m/m fall in manufacturing output in March provides more evidence of a loss of economic momentum going into the second quarter. While the return of temperatures to seasonal norms last month appears to …
Sales saved by online strength Retail sales fell by 1.0% m/m in March, adding to the evidence that the strong start to the year was partly due to the unseasonably mild winter weather. With control group sales only falling by 0.3% m/m last month, …
Further evidence of fading economic momentum The 0.5% m/m fall in manufacturing output in March provides yet more evidence of a significant loss of economic momentum going into the second quarter. While the return of temperatures to seasonal norms last …
Sales boosted by online strength Retail sales fell by 1.0% m/m in March, adding to the evidence that the strong start to the year was partly due to the unseasonably mild winter weather. With control group sales only falling by 0.3% m/m last month, …
Fed uncertain about impact that banking turmoil will have on economy The minutes of the Fed’s mid-March policy meeting are, overall, arguably dovish since in the wake of the collapse of SVB and Signature Bank, “several participants noted that…they …
12th April 2023
Core inflation remains elevated despite easing in shelter There were some encouraging signs in the March CPI report, including the first evidence that shelter inflation is slowing, but core prices still increased by 0.4% m/m which, on an annualised basis, …
Core inflation remains elevated despite easing in shelter There were some encouraging signs in the March CPI report, including the first evidence that housing cost inflation is slowing, but core prices still increased by 0.4% m/m which, on an annualised …
Economy losing forward momentum Only two months later the economy’s apparent strong start to the year in January looks increasingly like it was a brief sugar high, in part due to the unseasonably mild winter and possibly the outsized cost-of-living …
7th April 2023
Employment and wage growth continue to trend lower The 236,000 gain in non-farm payrolls in March adds to the evidence that the economy’s strong start to the year was partly weather related, with momentum fading again. With the sharp fall in job openings …
Employment and wage growth continue to trend lower The 236,000 gain in non-farm payrolls in March adds to the evidence that the economy’s strong start to the year was partly a weather-related blip, with momentum now fading again. With the sharp fall in …
Models suggest recession coming soon Our composite models suggest the economy was on track to fall into recession soon even before the impact of the banking turmoil feeds through. There also appears to be a lower, but rising, chance that a recession has …
5th April 2023
Strong start to the year already going into reverse The ISM services PMI fell to 51.2 in March, from 55.1, adding to the evidence that, following a weather-related sugar high to start the year, the economy and labour market are rapidly losing upward …
Falling trade volumes add to signs of economic slowdown The sharp declines in both exports and imports in February add to the signs that economic growth is faltering. Although strong gains in January mean that both are still likely to have risen over the …
Falling trade volumes adds to signs of economic slowdown The sharp declines in both exports and imports in February add to the signs that economic growth is faltering. Although strong gains in January mean that both are still likely to have risen over the …
The sharp fall in job openings in February shows that labour demand was cooling even before the recent banking turmoil and provides another reason to think that the Fed’s tightening cycle is nearly over. The fall in vacancies and downward revision to …
4th April 2023
Narrow money growth has turned negative as savers have shifted out of bank deposits and into money market funds and bonds, which now offer significantly higher returns. (See Chart 1.) Bank loan growth remains robust but, with the tightening in credit …
Domestic weakness offsetting China reopening boost The slump in the ISM manufacturing index to a new cyclical low of 46.3 in March, from 47.7, indicates that the post zero-Covid recovery in manufacturing activity in China has not benefited US producers …
3rd April 2023
Strong start to the year begins to flag After an unexpectedly strong start to the year in January, which was mostly maintained in February, the March data will tell us whether that early strength was a temporary weather-related spike or a genuine pick-up …
31st March 2023
Real spending drops back; core inflation still elevated Although real consumption declined by 0.1% m/m in February, that reversed only a small fraction of the upwardly revised 1.5% surge in January (previously estimated to be 1.1%). Even allowing for …
We expect the March employment report to show that the labour market was cooling even before the recent banking turmoil, with non-farm payrolls rising by a more modest 200,000 and annual wage growth falling close to a two-year low. The March report comes …
30th March 2023
Overview – Acute bank stress will prompt a further tightening in credit conditions, which leaves us even more convinced that the economy will fall into recession this year. With core inflation remaining stickier than we had originally expected, however, …
29th March 2023
Deposits flow from small to big banks The Fed’s H.8 release shows that deposits at small banks declined by $120bn, to $5456bn, in the week ending Wednesday March 15 th . (SVB collapsed on the preceding Friday afternoon.) Borrowings increased by an even …
24th March 2023
Fears over small regional banks in the US have focused on the unrealised losses on debt securities (see Chart 1 ) and deposit insurance but, in what would have echoes of the savings and loan crisis, maybe we should be more worried about deposit flight due …
