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The Fed is still likely to raise its policy rate later this year. A September lift-off is the marginal favourite, but June and July are possibilities, if it becomes clear quickly that the first-quarter slowdown was a temporary weather-related blip rather …
24th April 2015
The 4.0% m/m rise in durable goods orders in March was entirely due to a sharp rise in transportation orders. The fall in core orders suggests that the outlook for business investment in equipment remains weak after a likely contraction in the first …
With no scheduled press conference or forecast update at next week's FOMC meeting, expectations about the timing of the Fed's first rate hike will hinge on any changes to the accompanying statement. We expect the Fed to acknowledge that economic growth …
22nd April 2015
Core inflation is beginning to show signs of firming. The rebound in the annual core CPI inflation rate to 1.8% in March may not be enough to leave Fed officials "reasonably confident" that inflation will move back to the 2% target over the medium term. …
21st April 2015
With broad money growth expanding at close to 6% over the past year and bank loans growing at an even faster 8%, there is little evidence of a sustained slowdown in real economic growth or price inflation. … Monetary Indicators Monitor …
20th April 2015
The weakness of real consumption growth in the first quarter is puzzling since the slump in energy prices effectively gave a large tax cut to households. In that respect, it appears to have parallels with the surprising resilience of consumption in early …
17th April 2015
The rebound in the University of Michigan consumer confidence index in April which, aside from this January's reading, left it at its highest level since 2007 and well above the long-term average, suggests that consumption growth will rebound in the …
Although headline consumer prices increased by a slightly smaller than expected 0.2% m/m in March (the consensus forecast was 0.3% m/m), there are now clear signs of a firming in underlying inflation. Maybe not enough of a firming yet to make Fed …
Although the 0.6% m/m decline in March industrial production was mainly due to the unwinding of the weather distortion, which triggered a spike in utilities output in February, the weakness in the manufacturing sector continued. … Industrial Production …
15th April 2015
The 0.9% m/m rebound in retail sales in March would seem to confirm that the coldest winter on record in the Northeast explains much of the weakness in the preceding two months. … Retail Sales & Producer Prices …
14th April 2015
According to the National Climatic Data Center , we now know that the Northeast suffered its coldest winter ever this year. At the same time, the West Coast saw record high average temperatures. The upshot is that using the national average monthly …
10th April 2015
New York Fed President William Dudley noted last week that the pace of rate hikes will depend a lot on the reaction to the initial lift-off in financial markets. The upshot is that, while there is an awful lot of uncertainty surrounding the path of short …
Rumours of the demise of the US economy have been greatly exaggerated. The run of weaker economic data hasn't shaken our belief that, now credit is flowing more freely and the fiscal drag has faded, the recovery will strengthen. Nevertheless, given how …
7th April 2015
The well below consensus 126,000 increase in non-farm payrolls in March, particularly when combined with the 69,000 downward revision to earlier gains, will raise fears that the labour market is imploding. It isn't. That said, a slowdown in the pace of …
4th April 2015
At first glance, the recent monthly construction spending figures look awful. The three-month-on-three-month growth rate of residential construction spending at least climbed back into positive territory in February. But private non-residential …
3rd April 2015
The sharp declines in both imports and exports in February suggest that the West Coast port dispute had a bigger impact than we had anticipated. Exports fell by 1.6% m/m in February, while imports declined by 4.4% m/m. … International Trade …
The modest decline in the ISM manufacturing index to a 22-month low of 51.5 in March, from 52.9, illustrates that the stronger dollar and soft overseas demand are still an obstacle for export-orientated producers. Other surveys indicate that the …
2nd April 2015
The rebound in the Conference Board's measure of consumer confidence to 101.3 in March, from 98.8, should reassure those worried that households haven't yet spent their savings stemming from the slump in gasoline prices. The delay appears to be …
1st April 2015
In an attempt to justify leaving the fed funds rate at near-zero until some time later this year, Fed Chair Janet Yellen last week hinted that she thought the current equilibrium (or neutral) real rate might be as low as zero, which almost puts her in the …
31st March 2015
The recent weakness in durable goods orders and shipments is not due to a mining-related slump triggered by the collapse in oil prices. Instead, it is principally due to a drop back in industrial machinery orders and shipments, which follows what was a …
27th March 2015
Our econometric model suggests that non-farm payrolls increased by 240,000 in March. We anticipate that the unemployment rate was unchanged at 5.5%. … Decline in mining employment will be relatively …
26th March 2015
Fed officials haven't had a lot to say about the slump in productivity growth but, just as the upsurge in productivity growth in the 1990s was crucial in allowing the Fed to leave rates lower for longer, the slump now is a reason why the Fed shouldn't …
25th March 2015
Equipment investment probably contracted in the first quarter, but the improving survey evidence points to a rebound in the second quarter. The consensus forecast that durable goods orders increased by 0.2% m/m in February always looked too optimistic, …
The further acceleration in broad money growth in February is indicative of a strengthening real economic recovery that will eventually put more upward pressure on underlying inflation. The annual growth rate of our own measure of the broadest M3 …
24th March 2015
The 0.2% m/m increase in February's consumer prices was enough to pull the US out of deflation after only one month, with the annual inflation rate rebounding from -0.1% to 0.0%. But there is a good chance that base effects will drive that inflation rate …
Our initial view that lower oil prices would be a net positive for the real economy is not borne out in the first quarter data. The negative impact on mining investment almost outweighed the positive impact from rising purchasing power on real …
20th March 2015
The downward revisions to the FOMC's interest rate projections last week suggest that Fed officials are caught in two minds between beginning to hike rates in June or September. We still think that a continued run of strong Employment Reports will tip the …
Even after the run of weaker economic data for February, we still expect first-quarter GDP growth to be close to 2.0% annualised. It is pretty obvious by now that, for the second year in a row, the unseasonably severe winter weather was a much greater …
19th March 2015
Although the Fed dropped its pledge that it could be "patient" in beginning to normalise monetary policy, paving the way for a June lift-off, the substantial downgrades to the interest rate forecasts made by Fed officials explain the knee-jerk rally in …
18th March 2015
February’s industrial production figures continue the recent run of weak news on the US economy and may make some Fed officials more inclined to keep interest rates on hold for longer. Nonetheless, we still think the Fed will signal that rates are likely …
16th March 2015
The $79bn increase in household debt in the fourth quarter was dwarfed by the $211bn increase in non-financial corporate debt. The latter was the biggest increase since 2007. … Corporate sector boosts its …
13th March 2015
For the second year in a row, the unseasonably severe winter weather appears to have hit retail sales, which contracted by 0.6% m/m in February. As a result, we now anticipate that first-quarter GDP growth will be a more modest 2.0% annualised. …
With the labour market still evidently on fire in February, we expect the FOMC statement next Wednesday to omit the language that the Fed can be "patient" in beginning to normalise monetary policy. Even with headline inflation below zero, we then …
11th March 2015
With the overall economy in good shape, it is only a matter of time before households start to spend more of the cash freed up by the plunge in gasoline prices. Indeed, in recent years households have waited roughly six months before adjusting their …
6th March 2015
The 295,000 increase in payroll employment in February (consensus forecast 235,000) and the further fall in the unemployment rate to 5.5% illustrate that, even if wage growth is still subdued, the Fed can’t hang around before raising rates. … Employment …
The economic data released today suggest that first-quarter GDP growth should be between 2.5% and 3.0% annualised , which is a little lower than we previously envisaged. … ISM Manuf. Index (Feb.), Income & Spending …
2nd March 2015
In her congressional testimony last week, Chair Janet Yellen appeared to lay the groundwork for the Fed to begin raising rates in June. Yes, the exact timing is still data dependent. But assuming we are right, and the unemployment rate continues to trend …
27th February 2015
Although the CPI inflation rate dipped into negative territory in January, this bout of deflation is likely to be brief and it won't prevent the Fed from beginning to raise its policy rate from near-zero in June. The decline was entirely due to the slump …
26th February 2015
Our econometric model indicates that non-farm payrolls increased by a slightly more modest 230,000 in February, down from an average monthly gain of 336,000 over the preceding three months. It is worth bearing in mind that those earlier gains were the …
The 0.7% m/m decline in consumer prices in January was entirely due to a massive 18.7% m/m fall in gasoline prices. As a result, the annual rate of inflation fell to -0.1%, which is technically a "deflation". But this deflation is nothing to worry about. …
Despite falling in February, the Conference Board measure of consumer confidence continues to show that consumers have started 2015 in an optimistic mood. Confidence is still at a level consistent with decent consumption growth in the first quarter of …
24th February 2015
Chair Janet Yellen's prepared congressional testimony, which struck a more upbeat tone on labour market conditions and included a detailed discussion of how the forward guidance will be amended, suggests that the Fed is on course to begin raising its …
The strong pace of growth in both broad money and bank loans is another reason to believe that the temporary bout of negative inflation, which almost certainly began last month, will not develop into an adverse debt-deflation spiral. Both M2 and our …
20th February 2015
This week we expect to learn that, principally because of the recent collapse in energy prices, US headline inflation plummeted into negative territory in January. Once the temporary effects from lower energy prices and the stronger dollar fade, however, …
The modest 0.2% m/m increase in industrial production in January reflects the early impact of the collapse in energy prices on the mining sector. Otherwise, manufacturing output increased by a similarly modest 0.2% m/m, with the factory sector struggling …
18th February 2015
The fall in February's University of Michigan consumer confidence index is nothing to be alarmed about. The decline merely reversed the gain in January and, other than that reading last month, confidence is the highest it has been for seven years. … …
13th February 2015
The collapse in crude oil prices does not bode well for Texas and North Dakota, the two key producers of shale oil. These states have experienced a surge in oil production since 2008 and are now heavily reliant on the mining sector. Although lower oil …
Even if we ignore the 0.8% m/m drop in January's retail sales, since it was entirely due to a massive 9.3% m/m price-related slump in the value of gasoline station sales, non-gas sales were still only flat. Nevertheless, with lower gasoline prices leaving …
12th February 2015
As a result of the recent slump in crude oil prices and the decline in long-term borrowing costs, we are raising our real GDP growth forecast for 2015 to 3.3%, from 3.0%. The boost to real consumption growth from lower energy prices should easily outweigh …
10th February 2015
The latest NFIB and JOLT surveys point to further strong job gains and a pick-up in wage growth. … NFIB & JOLT surveys highlight labour market …
