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The 0.2% m/m rise in industrial production in July, which included a 0.1% m/m decline in manufacturing output, was a little weaker than we had expected. That said, with industrial production rising at its strongest pace in three years in the second …
17th August 2017
We expect the current economic expansion to continue for the next year or two, by which time it will be the longest on record. But all expansions come to an end, and the rise in interest rates we expect over the next few years will push the economy into a …
16th August 2017
The strong gain in retail sales in July, together with the upward revisions to May and June data support our forecast that third-quarter GDP growth will be between 2.5% and 3.0% annualised. With jobs growth showing few signs of slowing, we expect …
15th August 2017
The recent pick-up in productivity growth is at least partly due to tighter conditions in the labour market, with the dwindling pool of the unemployed forcing firms to invest in additional productivity-enhancing capital equipment instead. Given the high …
11th August 2017
The weakness in core CPI inflation persisted in July, although transitory factors continued to play a sizeable role. … Consumer Prices …
The latest JOLT and NFIB surveys show that labour market conditions remain unusually tight and, while this is still not translating into significantly faster wage growth, it might finally be prompting firms to boost their capital expenditures. … NFIB & …
8th August 2017
Annual revisions to the income and spending data released this week mean that the household saving rate is now estimated to have fallen sharply over the past year, calling into question the sustainability of recent economic growth. While those revisions …
4th August 2017
The 209,000 rise in non-farm payrolls in July, together with the drop back in the unemployment rate to a joint 16-year low, suggests the Fed will still need to raise rates again this year, even if inflation remains subdued. … Employment Report (Jul.) & …
Despite the small decline in the ISM manufacturing index in July, the index is still above its average level in the second quarter and is consistent, on past form, with GDP growth of over 3% annualised. … ISM Manufacturing (Jul.), Income & Spending …
1st August 2017
The Fed’s latest policy statement suggests that, barring any disruptive debt-ceiling stand-off, the FOMC is ready to announce it will begin reducing the size of its balance sheet at its September meeting. But policymakers are keeping their options open on …
28th July 2017
The 2.6% annualised gain in real GDP in the second quarter was driven by a rebound in real consumption growth, and suggests that the economy is still on track to grow by around 2.2% in 2017 as a whole. This should convince the Fed that, despite the recent …
We expect a 200,000 increase in non-farm payrolls in July, which should have been enough to push the unemployment rate back down to 4.3%. As labour market conditions tighten further, we expect wage growth to come under some renewed upward pressure before …
27th July 2017
The 6.5% m/m rise in headline durable goods orders in June was flattered by a 131% surge in the ever-volatile commercial aircraft category. But the underlying details were also fairly encouraging and suggest that, after surging in the first quarter, …
As widely expected, the Fed left its policy settings unchanged today, while hinting that it will begin the process of winding down its balance sheet as soon as September. The Fed will have plenty of opportunity to clarify its intentions before then, not …
26th July 2017
The small rise in the Conference Board consumer confidence index in July takes it to its second highest reading in 16 years, and suggests that consumption growth will accelerate in the second half of the year. While other measures point to a deterioration …
25th July 2017
The unexpected decline in core inflation over recent months is only partly due to transient factors and suggests that, after raising rates twice in the first half of the year, the Fed will hike rates just once more this year. The Fed had argued that …
The Fed is unlikely to make any major policy changes at next week’s FOMC meeting, but the statement will probably concede that the recent drop back in inflation has been more broad-based than Chair Janet Yellen has previously argued. With core inflation …
21st July 2017
The markets remain sceptical that the Fed will continue to normalise interest rates over the next couple of years. But even with inflation still below target, the simple policy rules that the Fed appears in practice to be following indicate that …
20th July 2017
The apparent failure of the Senate Republicans to agree on a health care bill to replace Obamacare does not mean that President Donald Trump’s plans for a fiscal stimulus are dead and buried. … What does the health care debacle mean for tax …
Given the continued weakness of core inflation, we now expect the Fed to delay the next interest rate hike until December. Accordingly, while there is a chance that the statement following next week’s FOMC meeting will be used to announce the start of …
19th July 2017
Markets focused this week on supposedly dovish comments in Fed Chair Janet Yellen’s semi-annual testimony to Congress, but in truth she did little more than repeat the existing Fed line. As long as core inflation starts to rebound, we still expect a …
14th July 2017
Production data for June confirm that the industrial sector saw its biggest quarterly expansion for three years in the second quarter. Furthermore, while the retail sales and confidence data, also released today, suggest that the consumer sector may have …
The modest 0.1% m/m increase in core consumer prices in June, which left the annual core inflation rate unchanged at 1.7%, continues the recent run of soft inflation data. Earlier this week, Chair Janet Yellen reiterated that the Fed would “be monitoring …
The recent drop back in core inflation, even as the unemployment rate has fallen further, adds to the evidence that the Phillips curve has flattened. The reduced sensitivity of inflation to shifts in activity is usually attributed to globalisation, the …
7th July 2017
The 222,000 gain in non-farm payrolls in June, which was well above the consensus forecast at 179,000 and even our own more upbeat 200,000 estimate, is another illustration that the real economy is in good health. … Employment Report …
Despite the small narrowing of the trade deficit, from $47.6bn in April to $46.5bn in May, net trade still looks to have been a small drag on GDP growth in the second quarter. Meanwhile, the non-manufacturing ISM index for June, also released this …
6th July 2017
The prospect of a renewed downturn in manufacturing activity is a concern, particularly with activity in the mining sector also likely to be hit by lower oil prices. Despite the weakness of some of the surveys, however, the wider evidence suggests that …
5th July 2017
There is still considerable uncertainty over whether Congress will vote to approve a new healthcare bill but, if it does, the short-term effects on the economy would probably be mildly positive and could compound the benefits of any tax cuts passed …
The rise in the ISM manufacturing index to 57.8 in June, from 54.9, leaves it at its highest level in nearly three years and supports our view that annualised GDP growth has rebounded quite strongly in the second quarter. … ISM Manufacturing Index …
3rd July 2017
Even if Illinois legislators manage to agree on a new budget and stave off the threat of a credit rating downgrade in the near-term, adverse demographics mean that the public finances in Illinois and many other rust belt states will come under increasing …
30th June 2017
We estimate that the monthly gain in non-farm payrolls rebounded from 138,000 in May to 200,000 in June. The unemployment rate probably fell further, perhaps to as low as 4.1%. Meanwhile, base effects will push annual earnings growth higher. … …
29th June 2017
Yield curve inversions have been near-perfect leading indicators of recessions over the past forty years, but there is little evidence to suggest that the flattening of the curve that we have seen recently will be followed by a slowdown in GDP growth. … …
28th June 2017
The continued strength of the Conference Board consumer confidence index, which rose from 117.6 to 118.9 in June, is beginning to look a little suspect when other measures have fallen back in recent weeks. Nonetheless, sentiment is at a very healthy level …
27th June 2017
The softness in underlying durable goods orders in May suggests that business equipment investment expanded at a much slower pace in the second quarter. Nonetheless, we still estimate that second-quarter GDP growth was between 2.5% and 3.0% annualised. … …
26th June 2017
The further drop in oil prices this week, to below $43pb, means that the recovery in mining investment seen in the first half of the year may be at least partly reversed in the second. That said, we still expect oil prices to rebound, and even if they …
23rd June 2017
The latest data indicate that GDP growth has rebounded to nearly 3% annualised in the second quarter, mainly due to a similar-sized gain in real consumption growth. Indeed, although underlying retail sales edged lower in May, strong gains in previous …
21st June 2017
The drop in the University of Michigan index of consumer confidence to a seven-month low in June isn’t overly concerning as confidence had been unusually elevated for some time. In any case, the index is still at a fairly strong level by past standards …
16th June 2017
Fed officials continue to anticipate one more rate hike in the second half of this year, but markets are not even convinced that the Fed will hike rates again within the next two years. The Fed has brought some of the market scepticism on itself, by …
In our baseline scenario, which still includes a fiscal stimulus early next year, we expect GDP growth to accelerate from 2.2% this year to 2.5% in 2018. The downside risks to that scenario have increased, however, in particular the danger of a damaging …
15th June 2017
The stagnation in industrial production in May is nothing to worry about since it follows a large gain in April, which itself was revised higher. Admittedly, recent falls in the oil price have darkened the outlook for the mining sector, but the Empire …
As widely expected, the Fed raised its policy rate target by an additional 25bp today, to between 1.00% and 1.25% and, despite the recent weakness of core inflation, Fed officials still expect to raise that rate once more in the second half of this year. …
14th June 2017
The continued weakness of core inflation, which fell to a two-year low of 1.7% in May, presents a dilemma for Fed officials. It won’t stop them from hiking interest rates later today, but it increases the downside risks to our forecast that there will be …
Although the sharp slowdown in C&I bank loans over recent months has received plenty of attention, total corporate sector debt actually expanded by a record amount in the first quarter, suggesting that firms are doing just fine. … Firms shun banks for …
13th June 2017
A decline in frictional unemployment and shifts in the composition of the labour force, which is now on average older and better educated, mean that the so-called natural unemployment rate has fallen to between 4.0% and 4.5%. That decline in the natural …
The Fed is almost certain to raise interest rates at its policy meeting next week, but faces a growing dilemma over its plans for the rest of the year. Core inflation has dropped back recently, while at the same time the unemployment rate has fallen …
9th June 2017
We expect the Fed will press ahead and raise interest rates for the third time in seven months at the FOMC meeting that concludes on 14th June. There is also a good chance that it announces formal plans to phase out the reinvestment of maturing securities …
7th June 2017
The slowdown in payroll employment growth over the past year or so has been concentrated in low wage occupations, indicating that the overall mix of jobs being created has improved. This makes the recent weakness of wage growth even more puzzling, and …
5th June 2017
The rise in real consumption in April, following an upwardly revised gain in March means that a sharp increase in consumption growth in the second quarter is now largely baked in the cake. Following the muted 0.6% annualised expansion in the first …
2nd June 2017
With the unemployment rate dropping to a 17-year low, the Fed will continue to hike interest rates even though trend employment growth has slowed and core inflation remains stubbornly below target. … Employment Report (May) & Internat’l Trade …
The ISM manufacturing index was little changed at a fairly healthy level in May, suggesting that economic growth is still on track to rebound to 3% annualised in the second quarter. … ISM Manufacturing Index …
1st June 2017
