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Despite the 0.1% m/m decline in headline orders last month, September’s durable goods report is actually a very slight positive as far as third-quarter GDP growth is concerned. … Durable Goods …
27th October 2016
The markets are convinced that the Fed will stand pat at the upcoming FOMC meeting, which concludes next 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 …
26th October 2016
Despite the decline in the Conference Board index of consumer confidence in October, it is still at a level consistent with annualised consumption growth of more than 2.5%. Furthermore, given that the index was close to a nine-year high in September, the …
25th October 2016
GDP growth does appear to have accelerated in the third quarter but, after a year of below potential growth, the economy is still struggling to shake off the effects of the stronger dollar and the mining-related investment slump. Other parts of the …
24th October 2016
The third-quarter GDP figures, due for release late this week, could provide a further boost to Clinton’s chances of winning. Although if our estimate that GDP growth picked up to 2.5% annualised is accurate, Trump will presumably claim the data have been …
21st October 2016
The recent strengthening in the dollar and rise in Treasury yields are unlikely to prevent the Fed from raising rates in December. The moves seen so far have been small, and with a December rate hike now at least partly priced in, the prospect of further …
20th October 2016
The conventional wisdom is that a Clinton administration would represent a near seamless continuation of the current Obama administration, but that view could be under-estimating the potential for a fundamental shift to the left within the Democratic …
18th October 2016
Although headline CPI inflation increased to a two-year high of 1.5% in September, the more modest gain in core consumer prices suggests that underlying price pressures are building only very gradually. In this context, the Fed won’t be in any immediate …
Although industrial production only edged higher in September, the 1.8% annualised rebound for the third quarter as a whole provides further evidence that the economy has regained some momentum, after a very weak performance over the previous 12 months. …
17th October 2016
The marked slowdown in the rate at which the remaining slack in the labour market is being absorbed poses a big dilemma for the Fed. The standard unemployment rate has now been broadly unchanged at 5.0% for a full 12 months. The Fed needs to know why …
14th October 2016
Despite the decline in October, the University of Michigan measure of consumer confidence remains at a fairly high level by past standards and consistent with a decent rate of real consumption growth. Accordingly, despite the weaker retail sales data …
The 0.6% m/m increase in September retail sales was largely due to a rebound in motor vehicle sales, with underlying sales growth now at a three-year low. Real consumption growth was still between 2.5% and 3.0% annualised in the third quarter, but there …
The latest NFIB and JOLT surveys add to the recent evidence that labour market conditions have weakened a little over the past year, and that slack is no longer diminishing at such a rapid pace. … NFIB & JOLT surveys point to slightly weaker labour …
12th October 2016
At face value, there are substantial differences between the fiscal plans of the two presidential candidates. While Hillary Clinton’s policies would essentially maintain the status quo, Donald Trump’s plan could entail a massive fiscal expansion. Attempts …
7th October 2016
The more modest 156,000 gain in non-farm payrolls in September, combined with the tick up in the unemployment rate to a five-month high of 5.0%, won’t stop the Fed from hiking interest rates at the December FOMC meeting, but it should quell any …
There is little evidence that the upcoming presidential election played any role in the weakness of economic growth in the first half of this year or, despite the early optimism, what is shaping up to be no more than a moderate acceleration in growth in …
5th October 2016
Although the trade deficit widened slightly to $40.7bn in August, from $39.5bn, net external trade is now on track to make a big contribution to third-quarter GDP growth. Elsewhere, the big rebound in the ISM non-manufacturing index in September is …
After a sharp fall in August, the rebound in the ISM manufacturing index in September should soothe fears that the US economy is headed for a serious downturn. Nevertheless, the index remains at a muted level and the other news today that construction …
3rd October 2016
While the decline in the neutral real fed funds rate in recent years can be explained in part by the decline in potential GDP growth, there are other factors, including increased risk aversion, higher costs of financial intermediation and higher savings. …
30th September 2016
We estimate that non-farm payroll employment increased by a slightly stronger 190,000 in September, but this would probably leave the unemployment rate unchanged at 4.9%. … Stronger payrolls may not be enough to cut …
29th September 2016
Although durable goods orders were unchanged in August, the details of the report were weak. It now appears that equipment investment contracted in the third quarter, which means the risks to our estimate that third-quarter GDP growth was 2.5% are now …
28th September 2016
If Donald Trump wins November’s presidential election, there is now a clear possibility that Fed Chair Janet Yellen would resign almost immediately, perhaps even before the mid-December FOMC meeting. It is hard to see how she could continue in her …
27th September 2016
A marked gap has opened up between the incoming expenditure-based data, which point to a healthy rebound in third-quarter GDP growth and the production-based business survey evidence, which has weakened over the past few months. We still think there are …
26th September 2016
The Fed left its policy rate unchanged at between 0.25% and 0.50% at last week's FOMC meeting, but it appears to be firmly on track for a December hike. However, the fed funds rate is likely to increase more gradually over the next few years than we had …
23rd September 2016
The Fed left its policy rate unchanged at between 0.25% and 0.50% at the conclusion of this week's FOMC meeting, but it appears to be firmly on track for a December hike. However, the fed funds rate is likely to increase more gradually over the next few …
21st September 2016
The annual growth rates of all the monetary aggregates accelerated in August, with a particularly pronounced pick-up in narrow M1 money growth, but bank loan growth has slowed slightly. The latter is principally due to a moderation in loans to businesses. …
20th September 2016
The big gap that has opened up between the CPI and PCE measures of core price inflation is now largely due to just one category, medical care. The Fed's preferred PCE measure of core inflation is still being depressed by declines in the administered …
19th September 2016
The cash held overseas by US firms has continued to grow at a rapid pace, rising to almost $2.5tn in 2015. The substantial tax bill most firms would face if they attempted to bring this cash home, however, means that it is still very unlikely to ever be …
Hillary Clinton’s recent stumble, both figuratively and literally, appears to have thrown the US presidential election race wide open again. The conventional wisdom is that the markets could react badly to a Trump win, particularly if next January he …
16th September 2016
The University of Michigan measure of consumer confidence was unchanged at a five-month low of 89.8 in September, although it is still at a level that, historically, has been consistent with real consumption growth of around 4% annualised. … UoM Consumer …
Although core CPI inflation edged higher in August, it has been broadly unchanged this year, suggesting that the Fed doesn’t need to rush to raise interest rates next week. … Consumer Prices (Aug. …
The weakness in retail sales and industrial production in August underline that the rebound in third-quarter GDP growth could be weaker than previously hoped, which is another reason for the Fed to pass on raising interest rates next week. … Retail Sales …
15th September 2016
It is always possible that the Fed could surprise us with an unexpected rate hike next week, but we very much doubt that will happen, it just doesn’t fit Chair Janet Yellen’s more cautious style. At this stage it would also be a big shock too, with the …
14th September 2016
Since the start of this year the rate of improvement in labour market conditions has slowed to a crawl. While a welcome rebound in the participation rate helps to explain why the unemployment rate has remained stuck at just below 5%, the progress in other …
There is now a marked gap opening up between the incoming expenditure-based data, which point to a healthy rebound in third-quarter GDP growth and the production-based business survey evidence, which is not far above recessionary levels. On balance, we …
9th September 2016
The rise in the job openings rate to a record high of 3.9% in July, from 3.8%, suggests that, despite the slowdown in payroll gains in August, labour market conditions continue to tighten, which should eventually generate a pick-up in wage growth later …
7th September 2016
The unexpected slump in the ISM non-manufacturing index to a six-year low of 51.4 in August, from 55.5, should all but rule out any possibility of a September rate hike, particularly as the manufacturing index fell back below the 50 mark last month. … …
6th September 2016
The gradual decline in the unemployment rate over the past couple of years has generated a cyclical rebound in labour’s share of income, which we suspect has further to run. At first glance, this appears to be good for the economy (assuming that …
2nd September 2016
The August employment report is not going to convince Fed officials to vote for a rate hike later this month, although an increase in December is still likely. … Employment Report (Aug.) & Int. Trade …
The decline in the ISM manufacturing index to 49.4 in August, from 52.6, is another reason to believe that the Fed will take a cautious approach and delay the next rate hike until December. With that decline, the index is now at a level that has …
1st September 2016
The rise in the Conference Board measure of consumer confidence to an 11-month high of 101.1 in August, from 96.7 leaves the index at a healthy level and suggests that real consumption growth will remain robust in the third quarter. It also implies that …
30th August 2016
After providing a small but valuable contribution to growth over the past couple of years, residential investment unexpectedly became a drag in the second quarter, contracting at a 7.7% annualised pace. However, we don’t expect this weakness to last. …
26th August 2016
Our econometric model suggests that non-farm payrolls increased by a more sustainable 180,000 in August. Otherwise, we suspect that after remaining unchanged in recent months, the unemployment rate edged down to 4.8%, from 4.9%. … Gradual slowdown in pace …
25th August 2016
Although the strong rise in durable goods orders in July was partly due to a massive rebound in the ever-volatile commercial aircraft category, the details of the report provide tentative evidence that business equipment investment may be set for a …
The stagnation in retail sales in July was not entirely surprising. Following the 4.2% annualised surge in real consumption in the second quarter, it was inevitable that spending growth would ease to a more sustainable pace. The fundamentals have also …
23rd August 2016
With the growth rate of our M3 broad money aggregate at a solid 4.4% y/y in July and bank loan growth at an even stronger 7.7% y/y, the economy appears to be in good health. … Monetary Indicators Monitor …
19th August 2016
The latest data show that household debt is now close to its 2008 peak in dollar terms. However, the gains in income over the past eight years and the decline in interest rates mean that households are now in a far stronger position to pay down that debt …
After a muted performance over the past 12 months, we expect GDP growth to accelerate in the second half of this year, albeit mainly because the drags from falling investment and inventories will fade. GDP growth should pick up from 1.5% this year to 2.2% …
17th August 2016
Headline CPI inflation remained unusually low in July and the latest drop in energy prices will keep it below 2% for longer than we first thought. Core consumer prices rose by 0.1% m/m, which was below consensus expectations for a 0.2% m/m rise and will …
16th August 2016
The latest data suggest that while firms are reluctant to increase capital expenditure, they are nonetheless continuing to expand their workforces. With the unemployment rate below 5%, however, the current pace of hiring is unlikely to be sustained for …
12th August 2016
