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The weakness of wage growth is partly due to the near-stagnation in productivity. Unfortunately, the news last week that non-farm productivity was unchanged over 2014 as a whole, suggests there is little prospect of a pick-up in real wage growth in the …
6th February 2015
We keep trying to tell everyone that the US economy is enjoying a period of unusual strength, maybe now people will believe us. Non-farm payroll employment increased by 257,000 in January and the gains in the preceding two months were revised up by a …
The widening in the trade deficit to $46.6bn in December, from $39.8bn, may have wrong-footed the markets (the consensus forecast was $38.0bn). But it was broadly in line with the assumptions that the BEA made for fourth-quarter GDP growth, so the latter …
5th February 2015
The decline in the ISM manufacturing index to a one-year low of 53.5 in January, from 55.1, reflects the recent surge in the dollar and the weakness of global demand. … ISM Manufacturing Index …
2nd February 2015
The funds raised by President Obama’s proposals to tax foreign earnings could, in theory, provide a 1.5% boost to GDP. Despite tax reform being a shared goal of both parties, however, there is no guarantee that the Republican-controlled Congress will …
Last week, mixed news on corporate earnings and an unexpected decline in underlying capital goods orders in December renewed fears that recent market moves are somehow a net negative for the US economy. The combined impact of lower oil prices, the …
30th January 2015
The 2.6% annualised gain in fourth-quarter GDP was slightly below the 3.0% consensus forecast but, following the breakneck 5.0% gain in the third quarter of last year, this slowdown is nothing to worry about. … GDP (Q4 1st …
Our econometric model indicates that non-farm payrolls increased by as much as 250,000 in January, which would broadly match the increase in December. As a result, we expect the unemployment rate to fall to 5.5%. Unless it is accompanied by a rebound in …
29th January 2015
The lack of any meaningful pick-up in the growth rate of average hourly earnings over the past 12 months, even as the unemployment rate has fallen below 6%, is not because of the poor quality of the jobs being created. … Wage puzzle not explained by mix …
28th January 2015
The surge in the Conference Board measure of consumer confidence to a seven-year high in January suggests that consumers started the year in a buoyant mood and that the decline in retail sales in December was nothing more than a blip. … Conference Board …
27th January 2015
The weakness in non-defence capital goods shipments in December means that the balance of risks to our estimate that fourth-quarter GDP increased by 3.0% annualised now lie a little to the downside (data due out on Friday). … Durable Goods …
Although the Congressional Budget Office's (CBO) latest projections show the Federal budget deficit at only 2.6% of GDP in fiscal year 2015, it does still expect the deficit to widen again before the end of this decade. Those projections are based on an …
26th January 2015
While the strength of real economic growth and employment suggest that the Fed should begin to raise interest rates very soon, the mixed news on wages, the lack of any pick-up in core inflation and recent market volatility seem to have persuaded officials …
23rd January 2015
While financial markets are concerned that the slump in energy prices and the drop back in long-term interest rates partly reflect the weakness of economic growth in Europe and Asia, consumers have no such worries. Instead, the boost to real incomes and …
22nd January 2015
While the strength of real economic growth and employment suggest that the Fed should begin to raise rates very soon, the mixed news on wages, the lack of any pick-up in core inflation and recent market volatility seem to have persuaded officials that …
21st January 2015
The growth rates of the various measures of broad money have remained robust even after the Fed halted its large-scale asset purchases late last year. For 2014 as a whole, M3*, our estimate of the broadest measure of money, increased by 6.0%. … Monetary …
20th January 2015
The drop in gasoline prices is adding to the already-favourable outlook for vehicle sales, which we expect to hit all-time highs soon. … Drop in gasoline prices will help drive vehicle …
The rise in the University of Michigan measure of consumer confidence to an 11-year high in January supports our view that the fall in retail sales in December was nothing to worry about. Fed officials will also be reassured that long-run inflation …
16th January 2015
Even though headline inflation will spend most of this year in negative territory, if we’re right in thinking that core inflation is unlikely to fall much further, the Fed will still raise interest rates this year, probably by June at the latest. … …
Following the collapse in crude oil prices, a sizable drop in mining investment is inevitable. Nevertheless, the shale oil boom, which has been going for less than a decade, is so new that it’s hard to know exactly what the impact on investment will be, …
Despite the 0.9% m/m fall in the value of retail sales in December, it still looks as though real consumption growth in the fourth quarter was a decent 3.5% annualized and GDP growth was close to 3.0%. … Retail Sales …
14th January 2015
The latest batch of survey data released this morning suggest that labour market conditions are even stronger than we previously believed and leaves the slowdown in wage growth looking even odder. … NFIB & JOLT surveys hard to square with wage …
13th January 2015
Despite the prospect of inflation spending most of this year below zero and the mixed news on wages, we still believe that the Fed will raise rates by June at the latest. Nonetheless, it is worth considering what would keep the Fed on hold all year. Three …
The boost to economic activity from the further plunge in oil prices and decline in 10-year Treasury yields since late last year will more than offset any additional drag from the further rise in the dollar. As such, in the past few weeks, the economic …
9th January 2015
The combination of a decent 252,000 rise in payroll employment in December and a further fall in the unemployment rate to 5.6%, from 5.8%, still leaves the door open to the Fed raising interest rates as soon as March. … Employment Report …
The collapse in global crude oil prices means that consumer price inflation will fall below zero in January and could remain in negative territory for most of the next 12 months. Nevertheless, the risk of a damaging debt-deflation spiral developing in the …
8th January 2015
The full effects of the plunge in oil prices on the US international trade deficit have yet to be felt, which means that the deficit may soon shrink to a five-year low of around $34bn. … International Trade …
7th January 2015
The latest fall in crude oil prices means that headline CPI inflation will drop below zero in January and could remain in negative territory for most of the year. Nevertheless, this bout of deflation will be temporary and, since the US is a net importer …
6th January 2015
The latest evidence suggests that the impressive 321,000 rise in non-farm payroll employment in November was no fluke. We expect that it was followed by a gain of 300,000 in December. That would push the unemployment rate down to 5.7%, which may make some …
5th January 2015
The clear strengthening in activity towards the end of 2014 may prompt some Fed officials to consider whether they need to raise rates before the middle of 2015. … GDP (Q3), Durable Goods/Consumption …
23rd December 2014
Our macro forecasts for this year turned out to be broadly correct, with GDP growth accelerating,the unemployment rate falling further and the Fed winding down its asset purchase programme.Our big mistake was believing that, in the improving economic …
19th December 2014
The incoming news on activity has been unambiguously strong and, when taken together with the boost from the further fall in oil prices, has made us more confident that GDP will grow by at least 3% next year. The 1.3% m/m rise in manufacturing output and …
18th December 2014
The FOMC statement issued today had something for everyone but, on balance, it does not dissuade us that unexpectedly strong employment growth over the next few months could still prompt the Fed to hike rates next March, sooner than most others expect. … …
17th December 2014
The recent slowdown in the growth rates of the monetary aggregates should not be interpreted as a sign that economic growth will soon slow. In fact, the surge in bank lending is a clear indication that the economic recovery has shifted into a higher gear. …
November’s consumer prices figures leave inflation on course to fall someway below 1.0% next summer. But this won’t prevent the Fed from dropping its “considerable time” pledge from its policy statement later today. Given that the decline in headline …
Today’s flash manufacturing PMIs suggest that the pace of global growth has cooled a little further in recent weeks. Nonetheless, the slowdown since the summer has been milder than the tone of media reports would suggest and is certainly not sharp enough …
16th December 2014
The outlook for real economic growth was already looking up even before the recent collapse in energy prices. We expect real GDP growth to accelerate from 2.3% this year to 3.0% in 2015, before slowing only marginally to 2.8% in 2016. … Fed can't delay …
15th December 2014
November’s industrial production figures build on the message from the recent retail sales data, with both showing that economic activity is unambiguously strong. This may well set the tone for the Fed’s policy meeting, which starts tomorrow. … Ind. …
The rise in the University of Michigan measure of consumer confidence in December to a new 7-year high suggests that the recent strong performance of retail sales will continue in December. … Uni. of Mich. Consumer Confidence …
12th December 2014
The unusual gap that has opened up between the economic performance of small firms and the performance of small-cap equity indices is more likely to be closed by a rise in equity prices. After all, small firms are less exposed to the easing in global …
The Federal Reserve's third-quarter financial accounts help to dispel two myths about the recovery. First, the pick-up in GDP growth over the past few quarters is not being driven by a renewed boom in credit. Second, non-financial businesses are not …
11th December 2014
The strong rise in retail sales in November shows that we were right to dismiss all the reports that holiday sales have been weak. The truth is that the rapid rises in employment mean that this holiday shopping season will be the best in nine years. … …
The upcoming two-day FOMC meeting, which concludes next Wednesday (17th December), should provide a clear signal whether our non-consensus call that the Fed will hike rates as soon as next March is still plausible. If the Fed maintains its language that …
10th December 2014
The NFIB small business survey is more useful than the JOLTs survey since it tells us what is going to happen to labour market conditions rather than what has just happened. It suggests that payrolls will continue to rise by at least 250,000 a month and …
9th December 2014
There is a good chance that Congress will pass an omnibus spending bill this week, which should keep most of the Federal government funded until next October. We still think it is unlikely that there will be another major Federal government shutdown over …
5th December 2014
October’s trade data will quite rightly do little to temper the optimism generated by the Employment Report, even though they suggest that net trade will make a slightly weaker contribution to GDP growth in the fourth quarter than previously expected. … …
The massive 321,000 gain in non-farm payrolls in November, together with the 44,000 upward revision to the two preceding months, bolsters our view that the Fed will begin to hike interest rates as soon as March next year. As Fed officials keep stressing, …
We are concerned that the ISM activity indices are painting a misleading picture of the strength of the economy. We’re inclined to place more faith in the Markit PMIs, which point to more realistic annualised rates of GDP and manufacturing output growth …
3rd December 2014
The US is still a large net importer of crude oil, so the recent collapse in oil prices will provide a net boost to real economic growth of about $150bn or 0.8% of GDP. … Slump in oil price will provide a net boost to US …
2nd December 2014
The continued strength of the ISM manufacturing index is starting to look a bit odd when set against the economic backdrop and the other survey evidence. We remain optimistic about the outlook for both overall GDP growth and industry, but are not …
1st December 2014
