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September’s strong Employment Report and August’s decent international trade release have increased the chances that the Fed will raise interest rates next March, as we have been forecasting for some time, rather than wait until June. … Employment …
3rd October 2014
The decline in the ISM manufacturing index in September won’t cause any sleepless nights at the Fed when the index has fallen from a high level and when it is still consistent with GDP growing at an annualised rate of at least 3%. … ISM Manufacturing …
1st October 2014
While the new iPhone release may have some effect on forthcoming consumption and import data, it won’t have any notable effect on GDP. Nonetheless, the outlook for consumption remains positive. … iPhone 6 release won’t be a plus for the …
The decline in the Conference Board measure of consumer confidence in September doesn’t change the bigger picture that households’ financial positions are stronger now than they have been for most of the past five years. … Conf. Board Consumer …
30th September 2014
While the recent softening in price pressures suggests that core inflation won’t hit the Fed’s 2% target until a bit later than we previously thought, we still think it will get there by mid-2015. That means a rate hike in March is still possible, …
26th September 2014
Stripping out the aircraft-related volatility, the underlying strength in capital goods orders and shipments in August indicates that business investment in equipment continues to expand at a healthy pace in the third quarter. … Durable Goods …
25th September 2014
Our econometric model suggests that the recent slowdown in payroll employment growth is at odds with the strengthening in other measures of labour market conditions. As such, we expect that August’s disappointing 142,000 increase in payrolls will be …
Despite the weaker core inflation readings over the past couple of months, we still expect core inflation to climb gradually, rising above the Fed's 2% target in the first half of next year. Admittedly, the stronger dollar will help to keep a lid on …
24th September 2014
Even as the Fed has reduced the pace of its monthly asset purchases, the annual rate of broad money growth has remained largely stable at close to 6%. … Monetary Indicators Monitor …
22nd September 2014
Private sector debt growth accelerated in the second quarter, as both household and business borrowing increased at a healthy pace. Nevertheless, debt growth is still running at a slower pace than gains in both nominal GDP and asset values, suggesting …
19th September 2014
The recent strength evident in much of the incoming survey and activity data suggeststhat we were right to believe GDP growth would accelerate once credit conditions eased and thefiscal drag faded. We expect the economy to expand at an annualised pace of …
18th September 2014
Even though the dollar has recently risen to a four-year high, other developments mean that overall financial conditions are supporting the economy by more than they were earlier in the year. As such, the stronger dollar won’t prevent the Fed from raising …
Although the Fed opted to keep the language in the FOMC statement that there will be a "considerable time" between the end of the asset purchases in October and the first rate hike, we suspect that the 8-2 vote and the more hawkish interest rate …
17th September 2014
The further softening in core price pressures in August eases the pressure on the Fedto weaken its “considerable time” rate pledge at today’s policy meeting. … Consumer Prices …
The fall in industrial production in August was just due to problems seasonally adjusting autos production and is therefore not a sign that the recovery is running out of steam. The more upbeat survey evidence emphasises that industry remains healthy. … …
15th September 2014
Even a further rise in the dollar above its current four-year high won’t prevent a period of higher inflation and stronger GDP growth. It would be odd to conclude that the dollar will significantly weaken economic growth when it is the stronger economy …
12th September 2014
The solid rise in retail sales in August, together with the upward revision in July, suggests that annualised real consumption growth in the third quarter as a whole will come in between 1.5% and 2.0%. That’s a bit stronger than we previously expected. … …
The Fed will continue to trim its asset purchases at the upcoming FOMC meeting, which concludes on the 17 th September. There is the possibility that it could also tweak its forward guidance and/or provide more details on its exit strategy. We wouldn't be …
10th September 2014
The latest NFIB small business and JOLTS surveys indicate that the disappointing gain in payroll employment in August was just a blip rather than the start of a major slowdown. What’s more, the surveys still suggest that the tightening in the labour …
9th September 2014
We’re not convinced that equity prices will continue to boost consumer confidence, but an acceleration in wage growth should allow confidence to rise further above its long run average. … Confidence to continue …
8th September 2014
Last week was the best of times and the worst of times. Just as it looked as though the US recoverywas finally moving into a higher gear, as credit conditions eased and the fiscal drag faded, the142,000 gain in August payrolls sparked fears of another …
5th September 2014
The modest 142,000 increase in non-farm payrolls in August, which was well belowthe consensus forecast at 230,000 and the smallest gain this year, will inevitably sparkspeculation that the US recovery is somehow coming off the rails again. We're not too …
The further decline in the trade deficit to a six-month low of $40.5bn in July, from $40.8bn the month before, suggests that net external trade will make a larger positive contribution to third-quarter GDP growth than we had expected, perhaps adding …
4th September 2014
The labour market conditions index referred to by Fed Chair Janet Yellen in her speech at Jackson Hole doesn’t tell us anything that we don’t already know. Moreover, it may not be very useful in the current situation since it places little weight on …
29th August 2014
Our econometric model implies that the easing injob growth and the rise in the unemployment ratein July were just blips in otherwise improvingtrends. We estimate that payroll employment roseby around 225,000 in August and that theunemployment rate fell …
28th August 2014
The CBO’s latest budget projections highlight the extent of the improvement in America’s fiscalposition in recent years. At the same time, the CBO appears to agree with the Fed’s assessment thatthere is still a “significant” amount of slack in the labour …
27th August 2014
Both businesses and households have started to enjoy the fruits of an economicrecovery that appears to be becoming stronger and more widespread. A weightedaverage of the two ISM business activity indices rose to an eight-year high in Julywhile the …
The rise in the Conference Board measure of consumer confidence in August to itshighest level since before the recession looks a bit odd when other measures ofconfidence have weakened. Nonetheless, this adds to the recent evidence that the USeconomy is …
26th August 2014
July’s spectacular durable goods orders provide a misleadingly strong signal on thestrength of the economy, although the outlook for business investment is improving. … Durable Goods …
If the release of the minutes of July’s FOMC meeting on Wednesday suggested that the Fed had takentwo steps closer to raising interest rates, then today’s speech by Fed Chair Janet Yellen at Jackson Holecould be interpreted as it taking one step back. …
22nd August 2014
The main reason why the stock of loans to small businesses has yet to surpass its previous peak is because weak sales have restrained the demand for new borrowing. The recent rise in the NFIB small business optimism index and improvement in the NFIB …
The minutes of the FOMC meeting that took place at the end of July suggest that the Fed has takenanother step closer towards raising interest rates. This is consistent with our view that “lift-off” willtake place in March next year. … Fed moving closer to …
21st August 2014
The recent rapid rise in bank loans, which is partly being driven by auto loans, is not a cause for concern and instead is a sign that the economy is becoming stronger. … Monetary Indicators Monitor …
20th August 2014
The recent slowdown in the pace at which core consumer prices are rising eases some of the pressure on the Fed to start considering rate hikes, although only temporarily. … Consumer Prices …
19th August 2014
Federal Reserve officials will be heading to their annual policy get together at Jackson Hole later this week. We expect little in the way of direct insights into the monetary policy outlook. Nevertheless, the focus on labour market dynamics could throw …
18th August 2014
The decline in the University of Michigan's consumer confidence index to an eight-month low of 79.2 in August, from 81.8, principally reflects the drop back in stock markets over the past few weeks. With equity prices now rising, it won’t be long before …
15th August 2014
The surge in industrial production in July offsets the weaker news on retail salesreleased earlier this week, suggesting that the recovery remains intact. … Industrial Production & Producer Prices …
The NY Fed's latest data on household debt help to alleviate concerns that a bubble in sub-prime auto loans is forming. Relative to households incomes, auto loan debt is still at comparatively low levels and the value of loans begin taken out by those …
14th August 2014
The ISM activity indices have risen to levels that previously prompted the Fed to raise interest ratesand the yield curve to steepen. This is unlikely to force the Fed into action immediately – in 2004 itwaited a further six months before increasing …
The weakness of retail sales in July is at odds with the recent acceleration in income growth, rises in household wealth and greater availability of credit, which all suggest that the outlook for consumption is improving. … Retail Sales …
13th August 2014
We believe that the slack in the labour market is dwindling and we expect a resulting accelerationin wage growth to be one of the big stories over the next 12 months. Unless productivity growth breaks out of its slump, that acceleration in wage growth …
12th August 2014
Recent trends in the small business sector suggest that the labour market has continued to strengthenand that the loosening in credit conditions will allow businesses to boost investment. … Credit flowing more freely to small …
The recent fall in equity prices and stagnation in house prices has not taken much of the gloss off the strengthening in the other economic news. As such, the economic outlook is even brighter now than it was a couple of weeks ago. … Outlook …
11th August 2014
Most monetary policy rules, many of which suggest that interest rates should already have risen, arelargely useless in the post-crisis world. If we make adjustments to allow for a lower neutral rate and thepossibility that there is more labour market …
The decline in the monthly trade deficit to a five-month low of $41.5bn in June, from$44.7bn, means that second-quarter GDP growth will be revised even higher from theinitial estimate of 4.0% annualised to about 4.2%. … International Trade …
6th August 2014
The strengthening in mortgage demand evident in the Fed’s latest Senior Loan Officer Survey suggeststhat the housing recovery is back on track after having stalled in the first half of the year. Meanwhile,the further rise in the demand for business loans …
5th August 2014
The rise in the ISM manufacturing index to a three-year high in July suggests that the third quarter began on a high note. The index is consistent with the 4.0% annualised gain in GDP in the second quarter being followed by a rise of up to 3.5% in the …
1st August 2014
Consumption growth has been remarkably stable at around 2% since the recovery began in mid-2009. Nevertheless, we anticipate that the pick-up in income growth and past gains in householdwealth will fuel an acceleration in consumption growth to around 2.7% …
It is a sign of how far the US economy has come in recent months that the 209,000increase in non-farm payroll employment in July will probably be viewed as adisappointment in the markets. The consensus forecast was as high as 230,000.Admittedly, the …
The Fed's policy announcement was largely as expected, with the monthly asset purchases reduced by an additional $10bn, to $25bn per month. But subtle changes to the statement and Philadelphia Fed President Charles Plosser's dissent suggest that the hawks …
30th July 2014
