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With the earlier sharp falls in energy prices now dropping out of the annual comparison, base effects helped to lift headline CPI inflation back above 2% in December, for the first time since mid-2014. Underlying price pressures remained relatively …
18th January 2017
The 0.6% m/m gain in December’s retail sales appears healthy enough, but looking past the headline there are a few concerns about the strength of consumer spending. That headline gain was principally due to a 2.4% m/m rise in motor vehicle sales and a …
13th January 2017
Two months after his surprise election night victory, Donald Trump will be inaugurated as the 45th President of the United States this Friday. We said on election night that, more than anything else, his victory would bring lasting uncertainty and …
Manufacturing appears to be slowly pulling out of its recent slump stemming from the big surge in the dollar in 2014 and 2015, with the ISM manufacturing index and manufacturing employment both improving in December. The more recent dollar appreciation …
6th January 2017
The more modest 156,000 increase in non-farm payrolls in December suggests that labour market conditions weakened just a fraction in the closing stages of last year. Nevertheless, that is still a solid gain, particularly as it followed an even bigger …
The improvement in the ISM manufacturing index to a two-year high of 54.7 in December, up from 53.2 the month before, is another indication that the negative impact stemming from the big surge in the dollar in 2014 and 2015 is now fading rapidly. The …
3rd January 2017
We estimate that non-farm payroll employment growth picked up to 200,000 in December. And although the unemployment rate may have edged back up to 4.7%, this would still leave it below Fed officials’ estimate of its long-run natural rate. In this context, …
November’s durable goods and personal spending reports are consistent with our existing forecast that fourth-quarter GDP growth will be a more modest 2.2% annualised, following an upwardly revised 3.5% gain in the third quarter. It appears that business …
22nd December 2016
The switch to a so-called ‘border adjustment’ system of corporate tax, which was included in the House Republicans’ ‘Better Way’ proposals earlier this year, is beginning to draw more attention in the markets because of the scope for some very big winners …
The survey evidence has strengthened considerably in recent months and even though fourth-quarter GDP growth will probably fall back to 2.2% annualised, as the third-quarter spike in exports is reversed, the outlook for 2017 is encouraging. Assuming a …
19th December 2016
The lack of a sustained acceleration in wage growth suggests the Fed will be in no rush to hike rates again early next year. The stagnation in productivity, however, means that even the current level of hourly wage growth could soon feed through into …
16th December 2016
Donald Trump’s surprise win in the Presidential election has introduced uncertainty across a number of policy dimensions, but the likelihood of a significant fiscal stimulus next year points to a pick-up in GDP growth and inflation. That stimulus will …
15th December 2016
Base effects helped push headline CPI inflation up to 1.7% in November, from 1.6%, but the muted rise in core consumer prices, which left core CPI inflation unchanged at 2.1%, suggests that underlying price pressures are building only gradually. … …
As universally expected, the Fed today raised interest rates for the second time in this economic cycle, with that hike coming a full year after the first increase and more than seven years after the current expansion began. With the economy much closer …
14th December 2016
The trivial rise in headline retail sales in November is partly some payback after the very strong gains in recent months. Nonetheless, real consumption growth is now likely to be a more modest 2.0% to 2.5% annualised in the fourth quarter. … Retail Sales …
The sharp rise in the NFIB optimism index in November shows that the election result has had a clear positive impact not only on consumer confidence but small business sentiment too. The details suggest that while this may not be enough to boost business …
13th December 2016
The rise in the University of Michigan measure of consumer confidence in December, to its highest level in almost two years, suggests that the post-election rebound in sentiment has been sustained. It also supports our view that real consumption will …
9th December 2016
Despite claims that China is to blame for the five million manufacturing jobs lost since 2001, the evidence suggests that rapid productivity gains, driven by rising automation, have also played a significant role. Protectionist measures designed to close …
The uncertainty surrounding next week’s Fed meeting is not about the out come of that meeting – a 25 basis point rate hike is all but guaranteed – but over President-elect Donald Trump’s potential reaction to that decision. Trump has said little about the …
8th December 2016
The sharp widening in the trade deficit in October was mainly a result of the unwinding of the distortion caused by the spike in soybean exports earlier in the summer. It also suggests that net trade will be a drag on GDP growth in the fourth quarter. … …
6th December 2016
Donald Trump’s unexpected election victory means that we are likely to see a major fiscal stimulus enacted in the first half of next year. As a result, we now expect GDP growth to accelerate to 2.7% in 2017, before slowing to a still healthy 2.2% in 2018. …
5th December 2016
We are sceptical of the claim made last week by Donald Trump’s nominee for Treasury Secretary, Steven Mnuchin, that lowering taxes, particularly corporate taxes, will be enough to boost average annual GDP growth to 3% or even higher. Admittedly, at 35%, …
2nd December 2016
November’s employment report wasn’t perfect, with average hourly earnings contracting by 0.1% m/m, but the solid 178,000 gain in payroll employment and the drop in the unemployment rate to a nine-year low of 4.6% are good enough to all but guarantee that …
The improvement in the ISM manufacturing index to a five-month high of 53.2 in November, from 51.9, is another illustration that the US factory sector is gradually recovering from the impact of the dollar’s very big surge in late 2014 and in 2015. … ISM …
1st December 2016
The surge in the Conference Board consumer confidence index to a nine-year high in November echoes the improvement in other measures and suggests that the election result had a clear positive impact on sentiment. It also supports our view that consumer …
29th November 2016
Donald Trump’s election victory has raised the prospect of a major fiscal stimulus next year, at a time when the economy is already close to full employment. The subsequent surge in Treasury yields and the dollar illustrates that markets think that a …
28th November 2016
With the Republicans maintaining control of both Houses of Congress, Donald Trump’s election victory has raised the prospect that the post-crisis Dodd-Frank Act, which overhauled the financial sector, could be repealed or at least partially reversed. …
25th November 2016
We estimate that non-farm payroll employment growth picked up to 180,000 in November, which was probably enough to cut the unemployment rate to 4.8%. Annual wage growth probably held steady at a seven-year high, but we expect a further acceleration over …
23rd November 2016
The strong rise in headline durable goods orders in October was largely due to a surge in the notoriously volatile commercial aircraft category. That said, even excluding transport, the details of the report suggest that business equipment investment is …
The prospect of a major fiscal stimulus means that we are formally raising our forecasts for real GDP growth, inflation and interest rates. There is still considerable uncertainty surrounding exactly what fiscal, trade and regulatory policies …
22nd November 2016
Although the tightening of financial conditions has persuaded the Fed to hold off from tightening monetary policy on several occasions over the past couple of years, we doubt that the recent surge in the dollar and Treasury yields will prove to be an …
21st November 2016
The markets have convinced themselves that there is a major fiscal stimulus coming early next year, that a roll-back of regulation will boost the financial sector and that Trump will take a much softer line on trade than some of his inflammatory rhetoric …
18th November 2016
Chair Janet Yellen’s remarkably bland prepared congressional testimony today did nothing to change our view that the Fed will hike interest rates at the upcoming mid-December FOMC meeting. Despite Donald Trump’s unexpected victory in last week’s …
17th November 2016
Although the modest monthly gain in core prices pushed the annual core inflation rate down to 2.1% in October, from 2.2%, the details still suggest that underlying price pressures are gradually building. Accordingly, we think the Fed will hike interest …
The stagnation of industrial production in October, which was weaker than the consensus forecast but in line with our own estimate, was entirely due to a weather-related slump in utilities output. Mining output experienced its biggest rise in more than …
16th November 2016
The solid 0.8% m/m increase in retail sales in October brings to an abrupt end the run of weaker underlying sales gains over the past few months and, further, suggests that households were not unduly concerned by the upcoming presidential election. … …
15th November 2016
The rise in the University of Michigan measure of consumer confidence in November suggests that last-minute worries about the presidential election had little bearing on sentiment. With the impact of the shock result not yet known, however, we would be …
11th November 2016
As it stands now, our working assumption is that Trump and Congress will agree on a fiscal stimulus early next year, nearly all of it tax cuts, worth somewhere between $3trn and $5trn over the next decade. The mid-point of which would equate to an annual …
Donald Trump’s conciliatory acceptance speech, which suggests that he can be a more statesmanlike President rather than the demagogue of the election campaign, has helped to reverse some of the initial sell-off in equities in the immediate aftermath of …
9th November 2016
The latest NFIB and JOLT surveys provide further evidence that labour market slack is diminishing only very gradually. That said, they suggest that the recent acceleration in wage growth is set to continue. … NFIB & JOLT surveys suggest wage growth has …
8th November 2016
Going into today’s presidential election, Democratic candidate Hillary Clinton appears to have established a solid three to four point lead in the polls over Republican rival Donald Trump but, given the elevated proportion of undecided voters, there is …
This week’s presidential election is now too close to call. Even in the aftermath of the FBI Director’s letter to Congress a week last Friday, Hillary Clinton still appears to hold a slim lead in the polls. But the relatively high proportion of undecided …
4th November 2016
The solid gain in employment and the acceleration in hourly wage growth in October will reinforce expectations that the Fed will hike interest rates in December (assuming that the election doesn’t throw a spanner in the works.) … Employment Report …
The modest pick-up in the ISM manufacturing index to a three-month high of 51.9 in October, from 51.5, echoes the apparent improvement in global manufacturing conditions, in particular the latest rise in the China PMIs. … ISM Manufacturing Index …
3rd November 2016
As widely expected, the Fed left interest rates unchanged at this week’s FOMC meeting, but it appears to be intent on hiking interest rates at the upcoming December meeting. Nevertheless, next week’s election could still throw a spanner into the works, …
2nd November 2016
The presidential election race is now too close to call, raising the possibility of a near-tied election result that would be aggressively disputed by one or both of the candidates. Under those circumstances, the infamous 2000 election suggests that the …
1st November 2016
The markets are convinced that the Fed will stand pat at this week’s FOMC meeting, which concludes on Wednesday, and will instead raise interest rates at the final policy meeting of the year in mid-December. We broadly agree with that view, but wouldn’t …
28th October 2016
The bigger than expected 2.9% annualised gain in third-quarter GDP confirms that the economic recovery has regained some of the momentum lost within the last year. As such, this leaves the Fed firmly on track to raise interest rates in December and a hike …
We estimate that non-farm payroll employment increased by 190,000 in October. Given the recent rebound in labour force participation, however, we suspect that the unemployment rate was unchanged at 5.0% and that wage growth remained relatively subdued. … …
27th October 2016
