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Revisions fail to change picture of economic weakness The annual revision to the national accounts data were more downbeat than we had expected as they show that the previous big gap between GDP and GDI has been narrowed mainly by the latter being revised …
29th September 2022
Orders data suggest equipment investment holding up, for now The 0.2% m/m fall in durable goods orders in August wasn’t as bad as we expected and suggests that business equipment investment is, for now at least, still holding up in the face of surging …
27th September 2022
The Fed’s transformation from inflation-denier back to Volcker-style inflation-slayer is all but complete. As Chair Jerome Powell acknowledged in his press conference this week, “we have got to get inflation behind us. I wish there were a painless way …
23rd September 2022
The Fed stuck to the script in delivering a 75bp rate hike at its September meeting, but in our view still managed to deliver a hawkish message with the accompanying projections , which imply an additional 75bp hike in November and a 50bp move in …
21st September 2022
A hawkish 75bp hike The Fed may have stuck to the script by delivering a 75bp rate hike at its September meeting, but it still managed to deliver a hawkish message with the accompanying projections, which imply an additional 75bp hike in November and a …
The Fed looks set to deliver a third consecutive 75bp rate hike tomorrow, but if we’re right that inflation will fall back soon, officials will quickly pivot to much smaller hikes. The continued drop in gasoline prices and easing food inflation will …
20th September 2022
The economic data this week suggest that slowing activity growth isn’t yet putting downward pressure on core inflation, which is likely to see the Fed remain in hawkish mode at its meeting next week. But we still think that picture could change quite …
16th September 2022
Manufacturing weighed down by global malaise Manufacturing output edged up by 0.1% m/m in August, as notable gains in petroleum & coal, machinery and electronics were partly offset by a drop back in motor vehicles and parts. With global manufacturing …
15th September 2022
Consumers reluctant to spend gasoline savings The stagnation in underlying retail sales in August suggests that plunging gasoline prices are not providing any significant boost to real consumption. But that could change over the coming months as …
Manufacturing struggling under global malaise Manufacturing output edged up by 0.1% m/m in August, as notable gains in petroleum & coal, machinery and electronics were partly offset by a drop back in motor vehicles and parts. With global manufacturing …
Consumers reluctant to spend gasoline savings The stagnation in underlying retail sales in August suggests that plunging gasoline prices are not providing any significant boost to real consumption. But that could change over the coming months as consumer …
August CPI data guarantee rate hike of at least 75bp next week New projections may show rates peaking slightly higher We still expect eventual sharp fall in inflation to prompt rate cuts next year The continued strength of core inflation points to …
14th September 2022
Strength of core inflation confirms Fed will hike by 75bp The 0.6% m/m increase in core consumer prices in August, double the consensus expectation, confirms that the Fed will hike its policy rate by at least 75bp next week. Nevertheless, that outsized …
13th September 2022
Fed still in hawkish mood In the run-up to the Fed’s next policy announcement on 21 st September, the release of August’s consumer price data next Tuesday could still be pivotal in determining whether the Fed will follow the ECB and Bank of Canada with …
9th September 2022
We think the S&P Global composite PMI’s prediction of an imminent plunge in GDP will prove well wide of the mark, with the latest hard data pointing to growth of 3% annualised in the third quarter. At the same time, however, the ISM activity surveys are …
8th September 2022
Deficit narrows as consumer goods imports cool off The trade deficit narrowed to a nine-month low of $70.7bn in July, from $80.9bn, driven by a sizeable drop back in consumer goods imports, although almost half that decline was due to lower imports of …
7th September 2022
Trade deficit narrows as consumer imports slow The trade deficit narrowed to a nine-month low of $70.7bn in July, from $80.9bn, driven by a sizeable drop back in consumer goods imports, although almost half that decline was due to lower imports of …
ISM surveys consistent with solid growth in Q3 The slight rise in the ISM services index to 56.9 in August, from 56.7, strikes a further blow against the idea the economy is close to recession, with a weighted average of the two ISM surveys consistent …
6th September 2022
Our tracker models suggest the odds of a recession are rising although, on balance, we still expect a period of weak growth rather than an outright contraction. If we are wrong and a recession drives the unemployment rate up more significantly, then that …
2nd September 2022
Labour market conditions normalising The slower pace of payroll gains in August, together with the big rebound in the labour force, and the more modest increase in wages, would seem to favour a smaller 50bp rate hike from the Fed next month , rather than …
Labour market conditions normalising The slower pace of payroll gains in August, together with the big rebound in the labour force, and the more modest increase in wages, would seem to favour a smaller 50bp rate hike from the Fed next month, rather than a …
Rebound in new orders provides some reassurance The stabilisation in the ISM manufacturing index at 52.8 in August, unchanged from July, provides some further reassurance that the economy is not yet sliding into recession. While the details suggest …
1st September 2022
The new ADP surveys of employment and wages, unveiled today, have the potential to be a useful independent source of labour market data, but for now their value is hampered by their short history . ADP’s previous series relied on lagged employment data …
31st August 2022
Recession risks rising even as GDP rebounds Our composite tracking models suggest that the chances of a recession within the next year have risen markedly. That said, the immediate risks still appear to be low, with the boost to real incomes from the …
New ADP index provides little insight into official payrolls The ADP’s revamped employment report showed private payrolls rising by a muted 132,000 last month, but with only limited details as to how they arrived at that number, we have little confidence …
The Republican party is on track to regain control of at least the House in the upcoming midterms, though the recent narrowing in the polls means that is no longer the slam dunk it once appeared. There is a small but growing chance that Democrats retain …
30th August 2022
In a hawkish Jackson Hole speech, Fed Chair Jerome Powell argued that “restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening …
26th August 2022
Powell continues pushback against early pivot Fed Chair Jerome Powell’s keynote speech at Jackson Hole added to the tide of recent Fed speakers pushing back against market expectations that the Fed is close to pivoting toward rate cuts. Nevertheless, as …
Inflation moderates, real consumption growth still muted The 0.2% m/m increase in real personal spending was a little weaker than we had expected and, as a result, we now expect third-quarter real consumption growth to be 1.6% annualised, whereas we …
We forecast a smaller, but still rapid, 350,000 gain in non-farm payrolls in August, with the unemployment rate remaining at 3.5%. The blowout 528,000 gain in non-farm payrolls in July appeared to underline the ongoing strength of the labour market so far …
25th August 2022
President Biden has finally unveiled a plan to forgive some student debt via executive order. But the accompanying announcement that the pandemic-era moratorium on student debt will definitely expire at the end of this year means that the changes …
Economy holding up better than headline GDP suggests The upward revision to second quarter GDP, to a contraction of 0.6% annualised, from 0.9%, together with the news that real Gross Domestic Income (GDI) expanded by 1.4% in the second quarter, after a …
Durables dragged down by slump in defence orders The stagnation in durable goods orders in July was principally due to a 50% m/m slump in defence aircraft orders, which are both volatile and not reflective of the strength of private demand. Excluding …
24th August 2022
Composite PMI plunges deep into recessionary territory The further slump in the S&P Global composite PMI for the US to 45.0 in August, from 47.7, leaves it at a level consistent with a deep recession. Based on the historical relationship, it suggests GDP …
23rd August 2022
After a year-long contraction in real disposable incomes, the sharp declines in energy prices over recent weeks are finally providing some relief. Alongside continued strong employment growth, we calculate that the drop in retail gasoline prices to …
22nd August 2022
With the rebound in activity growth in July coming against a backdrop of easing inflation, we still think the Fed will hike rates by a smaller 50bp next month. July data should ease …
19th August 2022
Lower gas prices helping to support spending on other items While overall retail sales were unchanged in July, the details were far more encouraging, with a price-related fall in gasoline sales freeing up households to increase spending on other goods . …
17th August 2022
Darkening global backdrop suggests manufacturing strength won’t last The 0.6% m/m rise in industrial production in July was much stronger than we expected and provides another clear sign that the economy is still in expansionary territory. That said, the …
16th August 2022
The drop back in CPI inflation in July wasn’t enough alone to convince Fed officials to change their plans for interest rate hikes. But we expect the better news on inflation to continue over the coming months, which will eventually persuade the Fed to …
12th August 2022
While history shows that recessions can begin even while employment is still rising, the current rate of payroll employment growth is far too strong to be consistent with an economic downturn. By the same token, although we think an outright contraction …
11th August 2022
The rise in new delinquencies on consumer loans over the first half of the year mostly reflects rising interest costs. With debt levels low, real incomes on track to begin rising again amid a drop back in inflation and the labour market holding up well, …
10th August 2022
With most workers who left during the pandemic mostly returned to the labour force by early 2022, it is little surprise that growth of the labour force has slowed. But the decline in the participation rate over recent months also appears to reflect some …
Headline inflation has peaked, although core will remain elevated Consumer prices were unchanged in July and there's a good chance that prices will fall outright in August. With core consumer prices increasing by a more modest 0.3% m/m last month, which …
The 2.5% slump in productivity over the past year – the worst since records began in 1948 – is another illustration of the chasm that has opened up between the GDP and employment figures. The only plausible explanation to our minds is that one or both of …
9th August 2022
The Inflation Reduction Act passed by the Senate over the weekend will, despite its name, do little to rein in inflation, but the climate provisions will make a meaningful difference in efforts to reduce GHG emissions. The bill represents a cumulative …
8th August 2022
Pelosi goes to Taiwan With the Democrats at risk of losing control of Congress in November’s midterm elections, House Speaker Nancy Pelosi’s visit to Taiwan this week was probably partly motivated by a need to bolster the party’s national security …
5th August 2022
Labour market still hot The unexpected acceleration in non-farm payroll growth in July, together with the further decline in the unemployment rate and the renewed pick-up in wage pressures, suggests the economy is still a long way from recession. That …
