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Our econometric model points to a 300,000 gain in payrolls in November although, hedging our bets, we have trimmed our actual forecast to 250,000. Nevertheless, any gain above 200,000 should be enough to push the unemployment rate down a tick to 5.7%. …
26th November 2014
The economic backdrop is a much more reliable guide to the holiday shopping season than sales on Black Friday. With employment rising rapidly, real incomes being boosted by falling gasoline prices and households’ debt positions improving, there is every …
October's durable goods and personal income and spending reports together suggest that fourth-quarter GDP growth will be around 2.5% annualised, whereas we had previously expected it to be closer to 3.0%. … Durable Goods/Personal Inc. & Spending …
The fall in the Conference Board measure of consumer confidence to a four-month low just ahead of the crucial holiday shopping season shouldn’t worry retailers. Much more important is the improvement in the outlook for employment and real incomes. … …
25th November 2014
The unexpected slump in the national retail gasoline price, from a peak of $3.80 per gallon in the summer to a near four-year low of $3.00 now, will provide a sizeable boost to fourth-quarter real consumption growth, underlining why we think that …
24th November 2014
Russian activity data for last month suggest that the economy withstood the initial sharp drop in the price of oil better than some had feared. But even so, the big picture is that growth is still extremely sluggish at around 0.5% y/y. … Yen's collapse to …
21st November 2014
Regardless of what happens on Black Friday, other more useful indicators suggest that this holiday shopping season could be the best in nine years. … This holiday shopping season could be the best in nine …
20th November 2014
October’s consumer prices data go some way to underlining that price deflation in the US economy is confined to the energy sector. That said, we wouldn’t be surprised if some of the recent fall in gasoline prices filtered into core inflation, although not …
When the time comes next year to begin normalising interest rates, we believe that, using the interest on excess reserves (IOER) rate and its new liquidity management tools, the Fed will be able to exert sufficient control over the effective fed funds …
19th November 2014
Although the Fed recently concluded its quantitative easing (QE), the Bank of Japan has announced an expansion in the pace of its own asset purchases and the ECB is edging closer to full-blown QE. We don't expect these new QE programmes to have much of an …
18th November 2014
The growth rate of broad money has eased, as the Fed has wound down its asset purchases and expanded its reverse repo and term deposit facilities. As the Fed expands the use of those liquidity management tools, there will be an even bigger negative effect …
The 0.1% m/m fall in industrial production in October will boost concerns that the global slowdown and stronger dollar are taking their toll on activity. While industry should be hit harder than other sectors, the strength of domestic demand will prevent …
17th November 2014
Although 10 million more people now have health insurance following the introduction of the ACAprovisions last year, the data suggest that trends in healthcare consumption and inflation have beenbroadly unchanged. Obviously, these things are hard to …
14th November 2014
The rise in the University of Michigan’s measure of consumer confidence to an eight-year high in November means there is a very good chance that retailers’ holiday wishes will be granted. … Uni. of Mich. Consumer Confidence …
The 0.3% m/m rise in the dollar value of retail sales in October was even stronger than it looks because the headline figure was depressed by a price-related drop in gasoline station sales. Real fourth-quarter consumption growth is on track to accelerate …
With the unemployment rate now within a whisker of most estimates of the natural rate and more comprehensive measures of wage growth showing a clear acceleration, we believe that the markets are too complacent in expecting the Fed to wait until at least …
12th November 2014
The growing pile of cash held abroad by US firms, which has now reached more than $2trn, or 12% of GDP, is unlikely to provide much of a boost to the economy, not least because the prospects of that cash being repatriated are fairly low. … Growing pile …
Several factors determine how currency weakness affects firms in different export sectors. Over the past two years, the chemical industry and the car industry have seen the biggest gains in export values, but chemical firms have had to contend with a …
7th November 2014
Although the 214,000 gain in non-farm payrolls in October was slightly below the consensus forecast of 235,000, this was still, on the whole, a strong employment report. In particular, a 638,000 surge in the alternative household survey measure of …
Even though consumption growth lost momentum at the end of the third quarter, the conditions for stronger growth are falling into place ahead of the crucial holiday shopping season. … Conditions in place for consumption growth to …
6th November 2014
Although the midterm elections have tipped the balance of political power towards the Republicans and could kick start progress on some trade and energy policies, they don’t alter the economic landscape much. Even a Republican party which is in control of …
5th November 2014
The increase in the trade deficit to $43.0bn in September, from $40.0bn, means that third-quarter GDP growth is now set to be revised down from the initial 3.5% annualised estimate to about 3.0%. Nevertheless, that would still represent a healthy pace of …
4th November 2014
The Fed's latest Senior Loan Officer Survey indicates that commercial banks are making it easier for households and smaller businesses to obtain credit, suggesting that the Fed's QE taper has had no adverse impact on credit conditions. The demand for bank …
3rd November 2014
The rebound in the ISM manufacturing index back to a three-year high in October supports our view that the US economy will largely shrug off the recent easing in global demand and the effects of the stronger dollar. In fact, the ISM index is consistent …
The reported leap in third-quarter defence spending, which added 0.7 percentage points to annualised GDP growth was, as far as we can tell, largely due to a failure of the BEA’s seasonal adjustment process. As a result, we expect defence spending to …
31st October 2014
The survey-based and anecdotal evidence has been pointing to a sharp acceleration in wage growth for some time, yet the growth rate of the monthly average hourly earnings measure has remained unusually muted. But the alternative quarterly employment cost …
With QE3 done and dusted, the Fed has emphasised that the incoming economic data will determine when interest rates first rise. Our forecasts that the unemployment rate will fall faster than the Fed expects and that core inflation will rise earlier are …
There’s a good chance that October’s Employment Report will send a very strong signal that, despite the recent signs of some softening in overseas demand, the US economy continues to grow at a rapid pace. We estimate that the 248,000 rise in payroll …
30th October 2014
The better than expected 3.5% annualised rise in third-quarter GDP, which was above the 3.0% consensus forecast and even our own 3.3% call, illustrates that the Fed was right to adopt a slightly more hawkish tone in yesterday's FOMC statement. … GDP (Q3 …
As expected, the Fed today announced an end to its third round of large-scale asset purchases (aka QE3). Slightly less expected, however, is that despite the recent market volatility, the statement issued after the FOMC meeting was, if anything, more …
29th October 2014
The indirect impact on core inflation from the recent fall in energy prices is one more reason why coreinflation won’t increase as fast as we previously expected. Nonetheless, we still think that both the CPIand PCE measures of core inflation will rise …
The leap in the Conference Board measure of consumer confidence in October to a seven-year high suggests that households are becoming more upbeat just as the crucial holiday shopping season draws close. … Conference Board Consumer Confidence …
28th October 2014
The rebound in orders for new durable goods in May will help ease any fears that the economy is headed for a double-dip recession. Nevertheless, it doesn't change the broader picture that economic growth has slowed sharply over the past few months. … …
Recent financial market volatility won’t prevent the Fed from announcing an end to its asset purchases this week, at the conclusion of the two-day FOMC meeting on Wednesday. The bottom line is that the economic outlook remains strong. Our calculations …
24th October 2014
There are still areas of the labour market where conditions could be better, particularly the elevated number of part-time workers looking for full-time work and the lack of a meaningful acceleration in the growth rate of average hourly earnings. …
23rd October 2014
While the recent financial market volatility won’t prevent the Fed from announcing an end to its asset purchases at the meeting due to conclude on Wednesday 29th, it does mean the Fed is unlikely to alter its forward guidance until December’s meeting. And …
22nd October 2014
The drag from lower gasoline prices is only just beginning and will eventually result in CPI inflation falling from 1.7% in September to just 1.2% in December. Core inflation will remain higher, but there’s no denying that the outlook has softened. … …
The tapering of the Fed's monthly asset purchases might finally be having a knock-on impact on the growth rates of the broader monetary aggregates. Our estimate of the broadest M3 measure shows that growth slowed to an eight-month low of 5.3% in …
21st October 2014
Since the recent fall in US inflation expectations is solely being driven by the decline in oil prices, it won’t prevent the Fed from ending QE3 or raising interest rates next year. … Fed shouldn’t respond to lower inflation …
20th October 2014
The rise in consumer confidence to a seven-year high in October is another indication that the US economic outlook remains strong. That said, the preliminary survey results pre-date the recent equity market sell-off, so the final survey reading could come …
17th October 2014
The recent market moves could help the Fed to hit the employment part of its dual mandate but will take it further away from its inflation target. While we don’t think this necessarily means that a rate hike in March of next year is no longer possible, …
The rise in housing starts in September continued the recent volatile pattern whereby a decline in one month has been followed by an increase in the next. But while there has been little underlying growth in housing starts so far this year, the outlook is …
The 1.0% m/m surge in industrial production in September and the very modest decline in October's Philly Fed regional manufacturing index are helpful reminders that the slowdowns evident in China and the euro-zone and the slightly stronger dollar are not …
16th October 2014
The growing sense of market panic evident in the sharp declines in equity prices and the strong rally in US Treasury bonds over the past week is hard to square with the solid outlook for US economic growth. We would still argue that the declines in oil …
15th October 2014
The weak tone of the latest retail sales, manufacturing and PPI data is the first real sign that the stronger dollar and the global slowdown are taking their toll on the domestic economy. But it’s hard to see a sustained slowdown when the economy is still …
As it is consistent with slower investment growth, lower inflation and a rise in the unemployment rate, the NFIB’s latest survey of small firms bolsters the case of the doves at the Fed. … Small businesses struggle in …
14th October 2014
We expect the boost from lower long-term interest rates to outweigh any negative impact on economic growth from the stronger dollar. The 10-year yield started the year at 3.0%, but most recently has slumped to a 16-month low of 2.3%. Just as the "taper …
10th October 2014
Although we anticipate that the first interest rate hikes in both the US and the UK will come around the same time, towards the end of the first quarter next year, we expect the subsequent pace of tightening to be more gradual in the UK. Indeed, by the …
8th October 2014
The fall in part-time employment is one more positive trend to emerge from September’s Employment Report. And more recent releases provide further signs that the labour market is improving rapidly. … More signs of labour market …
7th October 2014
We don’t think that the US will catch the latest economic cold that is currently afflicting Europe and parts of Asia. It’s worth remembering that the US is a fairly closed economy, which means it’s relativity immune to global developments. In any case, …
3rd October 2014
