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Congress might need to raise the debt ceiling by late August, a little earlier than previously anticipated, and it has become increasingly clear that, even though the Republicans control both Houses of Congress, reaching an agreement could prove to be …
31st May 2017
The small decline in the Conference Board measure of consumer confidence in May is nothing to be worried about because the index is still at a very high level. Taken together with the personal spending data also released today, consumption growth is on …
30th May 2017
While the overall participation rate has continued to trend down, there has been a sharp rebound in the share of 25-54 year-olds in the labour force. This has added 1½ million additional people to the labour force over the past eighteen months. It is …
26th May 2017
The weakness in April’s durable goods figures suggest that the 7.2% annualised increase in equipment investment the first quarter is unlikely to be repeated in the second. Nevertheless, allowing for a rebound in consumption growth, we still expect …
We estimate that non-farm payrolls increased by 200,000 in May. The unemployment rate probably held steady at 4.4%, but the surveys suggest that it will fall further soon and the upward pressure on wage growth is set to intensify. … How much further can …
25th May 2017
The latest FOMC meeting minutes revealed that the Fed intends to gradually phase out the reinvestment of maturing securities in its portfolio. The upshot is that the balance sheet will shrink more slowly than we previously suspected. That means that the …
24th May 2017
The White House budget proposal for the 2018 fiscal year, which incorporates severe cuts to non-defence discretionary spending and entitlement spending, is never going to pass the Senate, which requires the support of some Democrats to reach a …
23rd May 2017
The economic slowdown underway in China is perhaps the biggest external risk facing the US economy. However, growth would need to slow far more than we think is likely to knock the US recovery off course and the bigger picture remains that the global …
22nd May 2017
The latest New York Fed report on consumer debt and credit made waves this week with the news that household debt surpassed its 2008 peak in dollar terms in the first quarter. But that is nothing to worry about since nominal incomes have risen by around a …
19th May 2017
The latest decline in the core CPI inflation rate to 1.9% in April, at the same time as the unemployment rate dropped to a decade low of 4.4%, presents a dilemma for the Fed. The price stability part of its dual mandate suggests that it would be prudent …
17th May 2017
The recent weakness in core CPI inflation in March and April has forced us to revise down our inflation forecasts for the next couple of years. Even if the recent drop in the price of cell phone plans, which explains half of the slowdown, was a one-off it …
16th May 2017
The bigger than expected 1.0% m/m surge in industrial production in April was mainly due to an encouraging 1.0% m/m gain in manufacturing output. (Consensus forecast was 0.4% m/m.) … Industrial Production …
Almost every indicator suggests that US labour market conditions are the tightest they have been since the financial crisis, possibly even the tightest in decades. Nearly every sector is now operating with very little spare capacity. What’s more, surveys …
12th May 2017
The small increase in the University of Michigan measure of consumer confidence leaves it at a level consistent with consumption growth rebounding to over 5% annualised in the second quarter. Spending growth is unlikely to rise that rapidly, but this …
The weakness in core CPI inflation, which dropped below 2% in April for the first time since October 2015, will give Fed officials some pause for thought. But with the unemployment rate at a decade low of 4.4%, we still anticipate another interest rate …
There is little evidence to support the claim by Treasury Secretary Steven Mnuchin that tax cuts would pay for themselves by boosting economic growth to 3% or even higher, particularly not when the economy is already so close to full employment. The risk …
11th May 2017
A flood of off-lease vehicles has hit used car prices and new vehicle sales, and the glut of vehicles still in the pipeline suggests that the sector’s woes will worsen in the months ahead. But this is unlikely to mark the beginning of a broader slowdown …
10th May 2017
Recent surveys show that the strength of business sentiment is fuelling a recovery in capital investment while ensuring that firms’ demand for labour is as strong as ever. With the pool of unemployed workers continuing to diminish, the surveys also …
9th May 2017
The Fed’s latest Senior Loan Officer Survey (SLOS) reveals that the recent weakness in bank lending is principally due to weak demand for loans rather than banks tightening lending standards. … Senior Loan Officer Survey shows weaker loan …
8th May 2017
The stubbornly-low level of inflation expectations, even as actual inflation has been trending higher, could become a troublesome issue for the Fed. On some measures, household inflation expectations are close to a record low, while the only evidence of …
5th May 2017
The robust 211,000 increase in non-farm payroll employment in April confirms that the more modest 79,000 increase in March was just a weather-related blip. With both the official and the broader U6 unemployment rates falling to decade lows, we still …
The very modest narrowing in the trade deficit to $43.7bn in March, from a revised $43.8bn, confirms that net trade provided a small boost to first-quarter GDP growth. … International Trade (Mar.) & Productivity …
4th May 2017
The Fed left its policy rate unchanged today, but the statement kept the door open to another rate hike at the June FOMC meeting. We still expect another three 25bp hikes from the Fed this year, taking the fed funds target range to between 1.50% and 1.75% …
3rd May 2017
After coming to a near standstill in the first quarter, we expect consumption growth to rebound to more than 2% annualised in the second quarter. Furthermore, there are good reasons to expect even stronger consumption growth in the second half of 2017. … …
2nd May 2017
The drop back in the ISM manufacturing index in April is not a huge worry since the index is still well above its average over the past two years and at a level historically consistent with 3% GDP growth. Elsewhere, the 0.3% m/m rebound in real spending …
1st May 2017
The tax plan released by the White House on Wednesday was short on detail, but looked broadly similar to President Donald Trump’s pre-election plan. With the deep cuts to individual income and corporate tax rates estimated to increase the Federal budget …
28th April 2017
The trivial 0.7% annualised gain in first-quarter GDP, below the consensus forecast at 1.2%, won’t stop the Fed from hiking interest rates again in June. … GDP (Q1 1st …
We estimate that non-farm payroll employment recovered from last month’s weather-related blip with a robust 185,000 increase in April. The unemployment rate probably ticked back up to 4.6%, but this won’t prevent a continued gradual acceleration in wage …
27th April 2017
The 0.7% m/m rise in durable goods orders in March was weaker than expected, but confirms that business equipment investment enjoyed a strong first quarter. … Durable Goods …
Only a few weeks after the Treasury passed up the chance to label China a currency manipulator, a new report from Politico suggests that the White House is close to finalising an Executive Order on withdrawing from NAFTA, the free-trade agreement with …
26th April 2017
The “new” tax plan that the White House unveiled today looks a lot like President Donald Trump’s old economic plan from the election campaign, with deep cuts to corporate and individual tax rates. Even with dynamic scoring, however, the old plan was …
The Fed is almost certain to leave interest rates unchanged at its policy meeting, which concludes next Wednesday, but the statement should keep open the prospect of a hike in June. Admittedly, the surprise drop in core inflation in March may have …
The small fall in the Conference Board measure of consumer confidence in April only partly reversed the surge in March, and left the index close to a 16-year high. As such, it does little to change our view that consumption growth will rebound in the …
25th April 2017
The acceleration in the pace of retail bankruptcies reflects a structural shift to online sales, while the weakness of restaurant sales is partly due to lower grocery prices. … Will retailers and restaurants drag the economy …
The unexpected decline in core consumer prices in March is not a signal of sudden weakness in the real economy. Nevertheless, it is partly due to heightened competition in some sectors, which will continue to put downward pressure on prices over the next …
21st April 2017
The recent surge in consumer confidence appears to have been partly driven by the election of President Donald Trump, but the strength of the labour market, rising equity prices and low gasoline prices all suggest that confidence should be at its highest …
20th April 2017
The drop back in core CPI inflation to a 17-month low of 2.0% in March was partly due to weather effects, but also reflects an increase in competitive pressures in some sectors, which will persist for at least the next few months. A price war has broken …
19th April 2017
The 0.5% m/m increase in March industrial production was almost entirely due to a weather-related 8.6%m/m bounce back in utilities output. After a near-record warm February, when heating demand fell well below seasonal norms, the weather returned to …
18th April 2017
Some Fed officials will be disturbed by the unexpected drop back in core CPI inflation in March, but this won't prevent a June rate hike, particularly as the fall was partly due to one-off changes and weather effects. Headline retail sales were weak again …
14th April 2017
President Donald Trump’s new-found enthusiasm for realpolitik rather than the “America First” doctrine he championed in his inaugural speech is encouraging, but his administration still faces several key tests over the next few months. We suspect that …
13th April 2017
The small increase in the University of Michigan consumer sentiment index to a three-month high in April is further evidence that household spending growth will rebound in the second quarter. … UoM Consumer Confidence …
First quarter GDP growth is shaping up to be weak again this year, but one bright spot is likely to be a big increase in investment. The rebound in oil prices, continued recovery in the housing market, and a big turnaround in business investment means …
After hiking the fed funds rate at both the June and September FOMC meetings, the Fed will begin to phase out the reinvestment of maturing principal on its asset holdings at the December meeting. A pre-announcement of the reinvestment change should come …
12th April 2017
The latest NFIB and JOLT surveys suggest that, despite the slowdown in payroll employment growth last month, labour market slack continues to diminish. They also provide further evidence that this will soon translate into a renewed acceleration in wage …
11th April 2017
Globalisation has undoubtedly played some role in the loss of five million US manufacturing jobs over the past 15 years. But the evidence suggests that rapid productivity growth driven by automation has also been a key factor. Accordingly, the Trump …
Despite the Fed raising interest rates twice in the past four months, broad financial conditions in the US have actually loosened. The current calm in financial markets, if sustained, would be another reason for the Fed to accelerate the pace of rate …
10th April 2017
The recent weakness of new motor vehicle sales has been causing a bit of alarm, but there are good reasons to think that fears of a sudden collapse in demand will prove to be overblown. In any case, at least part of this weakness is explained by a …
7th April 2017
The disappointing 98,000 increase in non-farm payrolls in March will be seized upon by the usual suspects as confirmation that the US economy is poised for collapse, but the truth is this is mostly just weather-related noise. … Employment Report …
The trade deficit narrowed sharply in February to $43.6bn, from $48.2bn in January, as the surge in imports from China ahead of the Lunar New Year Holiday was reversed. … International Trade …
4th April 2017
The strength of most sentiment and activity surveys, despite the apparent weakness of first-quarter GDP growth, has led to a number of claims that we should put our trust in the so-called ‘hard’ data because the strengthening of the ‘soft’ survey data is …
3rd April 2017
