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The February retail sales report was disappointing (taking account also of downward revisions to January data) and means that the risks to our forecast for first quarter-GDP growth of 2.5% annualised now lie on the downside. Nonetheless, while real …
15th March 2016
It is questionable whether the surge in commercial property prices can be sustained. The rise in multi-family apartment prices, which explains a large part of the overall increase in commercial property values, is partly explained by the low vacancy rate, …
11th March 2016
We are often characterised as being “bullish” on the US economy, but our economic growth forecasts are hardly upbeat. Instead, where we really differ from the consensus is in believing that even moderate economic growth will be enough to generate a marked …
10th March 2016
Despite the clear improvement in the incoming economic data over the past month, which has triggered a reversal of the earlier tightening in financial conditions, the chance of the Fed raising interest rates at next week’s FOMC meeting, which concludes on …
9th March 2016
The rapid growth of auto loans in recent years has prompted claims that the next unsustainable debt bubble is emerging. For now, however, there appears to be little cause for concern. Although the nominal dollar value of auto loans outstanding is above …
4th March 2016
With employment rising at a rapid pace and labour market slack still shrinking, we think the Fed will resume raising interest rates in June. A marked pick-up in wage growth is still notably absent, but that won’t matter to the Fed when there are clear …
Despite the rebound in the ISM manufacturing index to a five-month high of 49.5 in February, from 48.2, the factory sector continues to be battered by the strong dollar and weak global demand. The good news is that manufacturing is not getting weaker. At …
1st March 2016
The slowdown in real consumption growth to a more modest 2.0% annualised in the final quarter of last year was a disappointment, particularly as households were benefitting from a further decline in gasoline prices, leaving them with more money to spend …
26th February 2016
Our econometric model points to a more muted 180,000 gain in non-farm payrolls in February. We estimate that the unemployment rate was unchanged at 4.9%, with the growth rate of average hourly earnings edging back up to 2.6%. … Pace of employment gains …
25th February 2016
The 4.9% m/m increase in durable goods orders in January was flattered by a strong rebound in the notoriously volatile aircraft component, but details of the report bode well for equipment investment in the first quarter and should quell fears that the US …
The pick-up in core CPI inflation to a three-and-a-half-year high of 2.2% in January illustrates that rising domestic price pressures won’t allow the Fed to leave interest rates at near-zero levels for that much longer. The 0.3% m/m increase in core …
23rd February 2016
The decline in the Conference Board measure of confidence to an eight-month low of 92.2 in February, from 97.8 suggests that the financial market turmoil earlier in the month is beginning to weigh more heavily on consumer confidence. Nevertheless, healthy …
The dollar’s near 20% rise since mid-2014 has slowed the growth rates of both manufacturing output and employment, but there is no sign of any collapse that could drag down the wider economy. The manufacturing surveys remain particularly downbeat, but …
19th February 2016
The pick-up in core CPI inflation to a three-and-a-half-year high of 2.2% in January, from 2.1%, illustrates that rising domestic price pressures won’t allow the Fed to leave interest rates at near-zero levels for that much longer. … Consumer Prices …
The 0.9% m/m increase in industrial production in January, which more than reversed a 0.7% m/m decline in December, was mainly due to a weather-related snap back in utilities output. … Industrial Production …
17th February 2016
Although a number of other central banks have now adopted negative policy rates, the chances of the Fed following suit are pretty small. Even if US economic conditions deteriorated, we suspect that the obstacles to setting the fed funds rate below zero in …
16th February 2016
Futures markets now expect the Fed to leave rates unchanged for all of this year and anticipate a single 25 basis point hike next year. In contrast, we expect the Fed to begin raising rates again in June, as it becomes clear that neither China nor the US …
12th February 2016
The markets may have decided that the economy is heading for a recession, but obviously no-one told US consumers. … Retail Sales …
Financial conditions have tightened in recent months, as the dollar has continued to trend higher, corporate credit spreads have widened and stock markets have suffered a correction. Nevertheless, while conditions are not as accommodative as they were, …
11th February 2016
Fed Chair Janet Yellen’s testimony to Congress today revealed that, while the FOMC might not be ready to raise interest rates for a second time in March, she still anticipates a “gradual” series of rate hikes over the next couple of years. That view is …
10th February 2016
The slump in market-based breakeven inflation rates has raised fears that falling inflation expectations could trigger a deflationary spiral in the US. But breakeven rates are measures of inflation compensation rather than actual inflation expectations. …
8th February 2016
In her semi-annual testimony to Congress this week (to the House on Wednesday and the Senate on Thursday), Fed Chair Janet Yellen is unlikely to say that a March rate hike is completely off the table, even though it is effectively. She will stick to the …
5th February 2016
Although the 151,000 gain in non-farm payrolls in January was below the consensus forecast of a 190,000 gain, the rest of the employment report was very encouraging, with the unemployment rate dropping to an eight-year low of 4.9%. … Employment Report …
Putting aside the short-term threats from slower global economic growth, the stronger dollar and tightening financial conditions, the biggest medium-term threat to the living standards of Americans is the chronic lack of productivity growth. … …
4th February 2016
The decline in the ISM non-manufacturing index to 53.5, from 55.8 is disappointing, particularly as it continues a sharp downward trend from the peak of 59.6 last July. Fed officials will be concerned that the weakness in manufacturing and mining is now …
3rd February 2016
The Fed’s latest Senior Loan Officer Survey points to a fairly sharp drop-off in the growth rate of loans to businesses, which suggests that investment will remain muted in the first half of this year. … Demand for business loans …
1st February 2016
The modest increase in the ISM manufacturing index to 48.2 in January from 48.0 is somewhat encouraging but, more broadly, the manufacturing sector is still struggling to cope with the stronger dollar and tepid global demand. … ISM Manufacturing Index …
The Fed certainly didn't rule out a March rate hike completely last week, but it was deliberately non-committal about the risks to the outlook. It's debatable whether the current uncertainty will clear up by the time of that March FOMC meeting. We …
29th January 2016
The slowdown in GDP growth to a very modest 0.7% annualised in the final quarter of last year is a temporary blip. With employment increasing by a monthly average of 284,000 during that quarter and final sales to domestic purchasers rising at a more …
Our econometric model points to a solid 210,000 gain in non-farm payrolls in January, which should lower the unemployment rate to 4.9%, leaving it in line with the Fed’s median estimate of the long run equilibrium rate. Otherwise, we’ve pencilled in a …
28th January 2016
The 5.1% m/m decline in durable goods was due primarily to a sharp decline in the notoriously volatile aircraft component. Nevertheless, the details suggest that equipment investment shrank in the fourth quarter. As such, the risks to our estimate that …
The Fed certainly didn't rule out a March rate hike completely in the FOMC statement released today, but it was notable that it was no longer willing to describe the risks to the outlook as balanced. … Fed doesn't completely rule out March rate …
27th January 2016
The renewed turmoil in global financial markets together with the downward revisions to estimates of fourth-quarter GDP growth in the US have prompted claims that the Fed made a serious policy error in raising interest rates late last year. With the risks …
The growth rate of our M3 broad money measure slowed to a three-and-a-half year low of 4.1% in December, but the slightly narrower M2 measure increased by a solid 6.0% last year, while bank loans expanded by a very robust 8.4%. Since the slowdown in M3 …
26th January 2016
The increase in the Conference Board’s measure of consumer confidence to a three-month high of 98.1 in January, from 96.3, illustrates that households are not buying into the pessimism in financial markets. It also suggests that the apparent slowdown in …
The external deflationary pressure from the stronger dollar and lower commodity prices is persisting for longer than we expected. The lower profile for energy prices now means that headline inflation will remain around 1% for much of the year and won’t …
25th January 2016
Our calculations indicate that fourth-quarter GDP growth slowed to only 1.0% annualised, largely thanks to a more modest 2.0% gain in consumption. The latter is hard to square with the continued decline in energy prices, but the weather may have played a …
22nd January 2016
The latest slump in commodity prices, the renewed market turmoil and the apparent slowdown in fourth-quarter GDP growth are all good reasons why the Fed might ultimately decide against raising interest rates for a second time at the mid-March FOMC …
20th January 2016
Consumer prices fell by 0.1% m/m in December, principally thanks to a 4.0% m/m decline in gasoline prices and, with crude oil prices now below $30 a barrel, we can expect even bigger falls in the coming months. We anticipate declines in gasoline prices of …
Our key theme for this year, that the two big deflationary shocks of 2015 - the slump in energy prices and the surge in the dollar - will fade, leaving rising domestic price pressures to generate a rebound in inflation has had a particularly inauspicious …
15th January 2016
December’s retail sales report was disappointing across the board and suggests that fourth-quarter GDP growth was as low as 1.0% annualised. … Retail Sales & Industrial Production …
The magnitude and duration of the slump in oil prices has far exceeded what we originally expected and the longer it persists, the harder it is to argue that decline will ever be a net positive for the US economy. As a net importer of oil, lower prices …
11th January 2016
The latest incoming monthly data suggest that fourth-quarter GDP growth slowed to between 1.0% and 1.5% annualised. Added to the widening in corporate credit spreads, the renewed weakness in stock markets and the news that the ISM manufacturing index fell …
8th January 2016
The 292,000 surge in non-farm payroll employment, together with the 50,000 upward revision to the gains earlier months should put paid to any fears that, even if fourth-quarter GDP growth ends up being lacklustre, the US recovery is in serious difficulty. …
Although the trade deficit narrowed to an eight-month low of $42.4bn in November, from $44.6bn, the decline was only because imports fell at a faster pace than exports, which is hardly a positive sign. … Internat’l Trade (Nov.) & ISM Non-Manu. …
6th January 2016
Our econometric model indicates a 210,000 gain in non-farm payroll employment in December, which should be enough to nudge the unemployment rate down to 4.9%. Base effects mean that even a modest 0.2% m/m increase in average hourly earnings will push the …
4th January 2016
The decline in the ISM manufacturing index to 48.2 in December, from 48.6, leaves it at its lowest level since June 2009 and will add to concerns about a deterioration in global demand triggered by the data releases from China earlier today. … ISM …
The monthly data on consumption and investment released this morning do little to change our view that fourth-quarter GDP growth will be around 2.0% annualised. … Durable Goods & Personal Spending …
23rd December 2015
The growth rate of our M3 broad money aggregate slowed to 4.6% in November, but M2 growth was still a very healthy 6.2% and, most importantly, the growth rate of bank loans is running at 8.0%. … Monetary Indicators Monitor (Nov. …
22nd December 2015
Inflation is currently being held down by the impact of falling commodity prices and the stronger dollar but, as those deflationary forces fade next year, we expect rising domestic price pressures to push inflation back towards the Fed’s 2% target. …
21st December 2015
