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The surge in narrow money growth is entirely due to regulatory changes and a substitution out of savings accounts due to low interest rates. (See Chart 1.) Our measure of M3 shows broad money growth has slowed, dampening fears that a surge in money will …
20th January 2021
Policy settings & guidance will be left unchanged Vaccinations & additional fiscal relief shift debate towards tapering asset purchases Fed won’t taper until 2022, but may pre-announce plans around Jackson Hole Aside from acknowledging the weakness in the …
Overview – With additional large-scale fiscal stimulus likely to offset the near-term drag on activity stemming from the surge in COVID-19 cases – and the vaccination effort likely to reach critical mass by mid-year – we expect GDP growth to be 6.5% this …
19th January 2021
The inauguration of President-elect Joe Biden and new impeachment of President Donald Trump may signal a dramatic shift in the political landscape, but it remains to be seen whether hopes of a transformative boost to government spending will survive the …
15th January 2021
Industrial rebound has further to run In contrast to the renewed slump in consumption, the December industrial production figures show manufacturing output continuing to rise strongly and, with inventories still lean, we expect that recovery will continue …
Fiscal stimulus unable to prevent near-term weakness The further slump in retail sales in December confirms that the continued surge in coronavirus infections is now weighing heavily on the economy and illustrates that, despite the building optimism over …
Inflation to rebound sharply in the spring Inflation remained low at the end of last year, but strong base effects and rebounding energy prices will push it briefly above 3% in the spring and, even once those effects fade in the summer, we expect CPI …
13th January 2021
The plunge in small business optimism in December is mostly noise related to the election, but the clear signal from both the NFIB and JOLT surveys out today is that inflationary pressures appear to be building . The NFIB headline optimism index tends to …
12th January 2021
Although we think that markets are still over-estimating the potential for additional large-scale fiscal stimulus this year, the Democrats’ unexpected victories in both Georgia Senate run-off elections has undoubtedly shifted the balance of risks a …
8th January 2021
Slump in payrolls due to new restrictions on services The 140,000 drop in non-farm payrolls was due to a plunge in leisure and hospitality employment, as bars and restaurants across the country were forced to close in response to the surge in coronavirus …
Import growth remains strong as firms rebuild inventories The widening of the trade deficit in November came as import growth continued to outpace export growth and means net trade will be a significant drag on fourth quarter GDP growth. Those additional …
7th January 2021
With Democrats picking up both Georgia Senate seats in yesterday’s run-off elections, President-elect Joe Biden will have a much easier time confirming his picks for cabinet positions and the chances of a limited fiscal stimulus passing further down the …
6th January 2021
Factory sector remains resilient to virus surge The jump in the ISM manufacturing index to a two-and-a-half year high of 60.7 in December, from 57.5, is at odds with the wider evidence that the economic recovery is slowing and suggests the manufacturing …
5th January 2021
We estimate that non-farm payrolls fell by 100,000 in December, the first decline since April. Employment gains have been slowing in recent months, as restrictions to curb the spread of the resurgent coronavirus have been tightened. The muted 245,000 …
4th January 2021
Business investment solid, but consumption & job gains heading into reverse The solid gains in durable goods orders and shipments last month underline the continued strength of business equipment investment, but the bigger story for the overall economy is …
23rd December 2020
The $900bn fiscal relief deal agreed by Congress won’t represent as big a fiscal expansion as the headline figures suggest as it appears to mostly involve recycling the unused funding from previous stimulus deals this year. Nevertheless, it provides …
22nd December 2020
The additional $900bn stimulus that looks likely to be passed by Congress within the next day or two means that we are raising our GDP growth forecast for 2021 to 5.5%, from 5.0%. We recently incorporated new assumptions on vaccines into our baseline …
21st December 2020
The decline in retail sales in November confirmed the message from the slumping high-frequency activity data and the rising trend in jobless claims – namely that the restrictions imposed by many states to stem the surge in coronavirus infections are …
18th December 2020
The Fed tweaked the guidance for its asset purchases in the statement issued after the conclusion of today's FOMC meeting, with the new language implying those purchases could continue for longer than previously believed. Nevertheless, with yields already …
16th December 2020
There is now clear evidence that the continued surge in COVID-19 infections and restrictions imposed to control its spread are once again weighing on the economy, with employment growth slowing sharply in November and retail sales dropping back. Moreover, …
Sales hit by new lockdowns The latest surge in coronavirus infections, which has forced a number of states to re-impose lockdowns, resulted in a worse-than-expected decline in retail sales in November. With case numbers still trending higher and …
Production still catching up with consumption The solid 0.8% increase in manufacturing output last month underlines that production is continuing to catch up with the recovery in consumption. Production will continue to rise, even as consumption drops …
15th December 2020
The relative resilience of state & local government tax revenues during the pandemic means that the overall budget shortfalls facing those governments are likely to be smaller than many had feared. That reduces the downside risk of state & local spending …
14th December 2020
This week brought more evidence that the economic rebound has faded in the closing weeks of the year. The near-term risks are still skewed firmly to the downside, even as the vaccine rollout gets underway. Economy goes into reverse in December… Infection …
11th December 2020
Inflation muted for now, but will climb above 2% next spring Both headline and core consumer prices increased by 0.2% m/m in November, as the rebound in the prices of the goods and services that fell the most in the early stages of the pandemic continued. …
10th December 2020
Officials unconvinced of need for, or benefits of, further stimulus But guidance on asset purchases is set to be updated Strength of rebound in inflation next year could catch the Fed off-guard We expect the Fed to keep its main policy settings unchanged …
9th December 2020
President-elect Joe Biden stood for election on a far-reaching environmental plan which, although it will be harder to implement with the Republicans likely to control the Senate, still represents a dramatic U-turn from President Donald Trump’s term in …
Markets received a boost this week from the more positive news on the possibility of a (smaller) fiscal relief package, but it still seems unlikely that a deal will be made that satisfies all sides. At the same time there’s a risk of a government shutdown …
4th December 2020
Payroll gains at risk of stalling in December The slowdown in the pace of non-farm payroll gains to 245,000 in November underlines how the renewed surge in virus cases and restrictions is weighing on services demand, which will only intensify this month . …
Manufacturing recovery little affected by new virus restrictions The fall in the ISM manufacturing index to a still-solid 57.5 in November, from 59.3, suggests that manufacturing production will continue to catch up with the broader economic recovery …
1st December 2020
The recent surge in coronavirus infections means that economic growth will be slower than we previously assumed in both the fourth quarter and the first quarter of next year. As the associated restrictions on activity are eased early next year, however, …
30th November 2020
This week the markets were buoyed by the news that President-elect Joe Biden intends to nominate Janet Yellen to be Treasury secretary but, while she is eminently qualified, her lack of political deal-making experience could be an Achilles heel. Yellen to …
25th November 2020
We expect a further slowdown in the pace of non-farm payroll gains to 400,000 in November, as the recovery in the employment-intensive restaurant and leisure sectors stall. The 638,000 gain in non-farm payrolls last month was the third consecutive month …
Investment rebound continues, but jobless claims rising again October's durable goods data suggest that the economy started the fourth quarter on a strong footing, with business equipment investment continuing to rebound, but the second consecutive weekly …
The huge amount of personal savings built up during the pandemic, if unleashed, represents perhaps the biggest upside risk to the economy over the coming year or two. But even once the spread of the virus is brought under control, there are reasons to …
24th November 2020
The Treasury’s decision not to extend the majority of the Fed’s emergency lending facilities beyond the end of the year is unlikely to have a major impact on the economy given that those facilities made just $25bn of loans. At the margin, however, it …
20th November 2020
The good news on vaccines kept coming this week, but beyond those encouraging headlines, the inexorable rise in coronavirus infections is beginning to trouble us about the near-term economic outlook. Vaccine news mostly positive The news that the mRNA …
The continued surge in COVID-19 infections across the country is prompting a growing number of states to reimpose restrictions on activity. The softer retail sales data in October indicated that this is already starting to weigh on the economy and, with …
19th November 2020
The expiry of the remaining enhanced unemployment insurance programs at the end of the year would hit the incomes of the unemployed but would be unlikely to deal a major blow to the economy. With another stimulus deal possible early next year, it is the …
18th November 2020
Growth in narrow measures of the money supply has continued to edge higher as demand and saving deposits continue to accumulate but, with growth in broader measures of money and bank lending dropping back, there is little threat of that pushing inflation …
17th November 2020
Production catching up with consumption The acceleration in manufacturing output in October suggests that, after lagging the broader recovery over the past six months, the factory sector is now making up some lost ground. With inventory levels still lean, …
New virus wave starting to weigh on spending The weaker than expected 0.3% m/m rise in retail sales in October is still broadly consistent with our forecast that consumption growth will slow to 7.5% annualised in the fourth quarter. But the details …
The pandemic has increased the odds that the US will eventually experience a period of high inflation, principally because we expect the Fed to be less committed to ensuring price stability in the future. The higher public debt burden, slower global …
16th November 2020
President Donald Trump’s failure to concede defeat more than a week after the election is unlikely to trigger a constitutional crisis. What matters more over the final months of his administration is the policy actions Trump might take. That could include …
13th November 2020
Price pressures moderating again The unexpected drop back in core inflation to 1.6% last month, from 1.7%, reflects continued subdued demand in the services sector. With the explosion in virus numbers likely to put further downward pressure on demand in …
12th November 2020
The introduction of one or more highly effective vaccines early next year would prompt us to revise up our 2021 GDP forecast, possibly quite significantly. The prospects of a vaccine might convince Congress to scale back the size of any fiscal stimulus …
10th November 2020
The high-frequency data suggest there is a growing risk that the recovery stalls over the next month or two, even as the growing potential for effective vaccines together with a bipartisan fiscal stimulus mean the balance of risks to our forecasts further …
Much of President-elect Joe Biden’s agenda will be dead on arrival with the Republicans maintaining control of the Senate, but there is still a chance of more fiscal stimulus being passed, albeit probably not until after Biden takes office on 20 th …
7th November 2020
With Joe Biden taking the lead in both Georgia and Pennsylvania, it seems all but certain he will be the next President, while the Senate is likely to remain under Republican control. That means we are set for continued gridlock in Congress over the next …
6th November 2020
Labour market recovery still carrying plenty of momentum The 638,000 rise in non-farm payrolls in October is stronger than it looks as it included a 147,000 drop in temporary Census employment and, alongside the big fall in the unemployment rate, it …
