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Most of the decline in the University of Michigan's measure of consumer confidence to 79.9 in March, from 81.6, can be attributed to the unseasonably bad weather. After all, the usual determinants of confidence have remained resilient; stock markets are …
14th March 2014
As the rise in retail sales in February didn’t get anywhere close to reversing all of the drop in the previous two months, the unusually bad weather is still hurting retailers. But since households are spending more on heating and healthcare, annualised …
13th March 2014
At the policy meeting due to end on Wednesday 19th March, the Fed will almost certainly reduce the size of its monthly asset purchases by a further $10bn, to $55bn, and will probably abandon the 6.5% unemployment rate threshold in favour of using a wider …
12th March 2014
It will be a few months yet before we know for sure whether or not the recent pick-up in wage growth is just a temporary distortion caused by the unusually severe weather, but it does chime with the strengthening in the survey evidence over the past six …
10th March 2014
The unusually severe winter has been playing havoc with the incoming economic data but, once the weather returns to seasonal norms, we expect the US economy to perform strongly this year and in 2015. Indeed, we now expect GDP growth of 2.8% in 2014, up …
The Affordable Care Act, or “Obamacare”, remains a contentious piece of legislation, but the fact of the matter is that it boosted real consumption growth in January and will probably support it in February and March too. It may well increase overall GDP …
The fact that payroll employment rebounded in February despite the unusually bad weather pretty much guarantees that the Fed will taper its asset purchases further at the mid-March policy meeting. … Employment Report (Feb.) & Int. Trade …
7th March 2014
We’re not very concerned by the recent decline in State and local government spending when States’ own spending plans are consistent with a decent rebound both this year and next. This will compliment the easing in the drag from Federal government …
5th March 2014
The biggest and longest-lasting impact from the recent rise in natural gas prices could be a boost to business investment in mining structures. That could add 0.3 percentage points to annual GDP growth, albeit not immediately and not all at once. … …
4th March 2014
While the ISM manufacturing index rebounded to 53.2 in February, from 51.3, the extent of the increase was limited because of the ongoing severe winter weather. We expect a further improvement in March. … ISM Manufacturing Index …
3rd March 2014
There is a strong possibility that February's labour market figures, due out this Friday, will only make the Fed's job even harder. There is a chance that the unemployment rate could have hit the 6.5% threshold in February. Even if it doesn't reach the …
Most of the recent weakness in housing activity is due to the unusually bad weather rather than the lagged effects of last year’s rise in mortgage rates. While higher mortgage rates have clearly taken some steam out of the housing recovery, they won’t …
28th February 2014
A third consecutive month of weak payroll growth in February would raise speculation that the Fed will pause the tapering of its asset purchases. But because any weakness this month was probably due to the unusually bad weather, we believe the Fed will …
27th February 2014
The 1.0% m/m decline in durable goods orders was mainly due to a drop back in the notoriously volatile commercial aircraft component. More generally, there is some evidence that the growth rate of equipment investment is strengthening but, as with much of …
The drop in the Conference Board consumer confidence index to 78.1 in February, from 79.4, was probably weather-related, with a massive storm hitting the eastern seaboard during the sample period. Now that the weather is slowly returning to seasonal norms …
25th February 2014
With the unemployment rate falling to 6.6% in January, leaving it only trivially above the 6.5% threshold, the Fed will soon need to update its forward guidance on when it might begin to raise the fed funds rate from near-zero. We suspect that rather than …
24th February 2014
It’s possible that the unusually bad weather is masking a strengthening in underlying consumer price pressure that will only become clear in a few months’ time. Despite the fall to 1.6% in January, core CPI inflation may soon head back towards 2.0%. … …
20th February 2014
The revamp of the producer prices data has made the release much more comprehensive, but it hasn’t changed the bigger picture. There is not much sign of any near-term inflationary pressure. … Producer Prices …
19th February 2014
Broad money growth appears to have stabilised, with our measure of the M3 aggregate rebounding slightly to 4.6% in January, from 4.4%. (See Chart below.) Elsewhere, the slowdown in the growth rate of bank loans primarily reflects the impact that higher …
18th February 2014
January’s industrial production data join a growing list of economic releases affected by the unusually bad weather. Given that the weather has been just as severe in February, the lost output may not be recouped until at least March. … Industrial …
14th February 2014
Our best guess is that the severe weather has played a key role in the apparent deterioration in the incoming economic data for December and January. With much of the country currently digging out from another major storm, the weather could also affect …
13th February 2014
Some of the weakness in retail sales in January was probably due to the bad weather. Nonetheless, it looks as though GDP growth in both the fourth quarter of last year and the first quarter of this year could be a little weaker than we previously thought. …
The two key takeaways from new Fed Chair Janet Yellen's first congressional testimony on monetary policy is that neither the recent drop off in the pace of employment growth nor the turmoil in emerging markets will prevent the FOMC from continuing to …
11th February 2014
The latest improvements in small business hiring and labour market turnover indicate that the fall in the unemployment rate may be a more accurate gauge of labour market slack than the Fed currently believes. Moreover, these two surveys suggest that a …
With the unemployment rate falling to 6.6% in January, putting it very close to the Fed's threshold level of 6.5%, new Chair Janet Yellen could use her congressional testimony this week to signal how the FOMC's forward guidance might evolve. Fed officials …
10th February 2014
In her semi-annual monetary policy testimonies to Congress this week, we expect new Fed Chair Janet Yellen to emphasise that the weak tone of some of the incoming data and the turmoil in emerging markets are not enough to prompt the Fed to slow the pace …
The disappointing 113,000 increase in non-farm payrolls in January cannot be blamed on the weather but, nonetheless, with the unemployment rate continuing to edge lower, to only 6.6% last month, we expect the Fed to maintain its policy of reducing the …
7th February 2014
Low vacancy rates, falling unemployment and faster earnings growth will drive the rents inflation higher over the next year or two. In addition to signs that wage growth is poised to accelerate, this is another reason to believe that core inflation, which …
6th February 2014
The rebound in the monthly trade deficit to $38.7bn in December, from $34.6bn, means that fourth-quarter GDP growth will likely be revised down slightly to about 2.9% annualised in the second estimate, from the initial 3.2%. … International Trade …
The decline in the Federal budget deficit over the past few years has been impressive, but the longer-term budget challenges linked principally to the aging of the population have still to be resolved. … Federal budget improvement may not …
4th February 2014
The sharp drop in January's ISM manufacturing index has led to some speculation that the US recovery might be coming off the rails, particularly as it followed an unexpectedly weak gain in payroll employment in December. We think these fears are overdone. …
The revamp of the producer prices data will provide a more comprehensive measure of pipeline price pressures, but it may not give us a greater insight into where consumer price inflation is heading. … New PPI data won't predict CPI inflation any …
The Fed's latest Senior Loan Officer Survey indicates that the jump in borrowing costs last year is still undermining demand for residential mortgages. The more recent drop back in mortgage rates could provide some much-need support, but not until later …
3rd February 2014
The unexpected plunge in the ISM manufacturing index to an eight-month low of 51.3 in January, from 56.5, appears to have more to do with the unseasonably severe winter weather, than a major slowdown in both domestic and overseas activities. … ISM …
The Fed is only concerned with the US economy's performance and the recent bout of emerging market turmoil poses little threat to that. It is worth remembering that despite the currency crises which spread through Asia in 1997 and 1998, which were …
Our econometric model suggests that the sharp slowdown in jobs growth in December, which resulted in payroll employment rising by just 74,000, was due to temporary factors that are unlikely to have been repeated in January. We estimate that payrolls rose …
31st January 2014
When we take into account the near three-week Federal government shutdown at the start of the quarter, the 3.2% annualised gain in fourth-quarter GDP growth is pretty impressive, particularly since it followed a 4.1% gain in the third. The broader picture …
30th January 2014
Despite last minute suggestions from some commentators that the emerging markets wobble could prompt a delay, the Fed opted to continue the gradual winding down of its asset purchases today, reducing them by another $10bn a month to $65bn. It also issued …
29th January 2014
In spite of the unseasonably severe winter weather, the Conference Board measure of consumer confidence rose to 80.7 in January, from 77.5. This probably reflects the continued improvement in labour market conditions and the strength of stock markets …
28th January 2014
The rebound in US export growth late last year can be linked directly to strengthening demand in both China and the euro-zone. Given that growth in China is now slowing and that the dollar is strengthening against the euro, US exports are unlikely to …
27th January 2014
The current rates of wage and price inflation may be unusually low, but we are becoming increasingly concerned that the dwindling slack in the labour market will trigger a rise in wage inflation this year. Barring an unexpected acceleration in …
23rd January 2014
Despite the modest 74,000 increase in payroll employment in December, we expect the Fed to stick to its existing plans and reduce the monthly asset purchases by a further $10bn, to $65bn, at the upcoming FOMC meeting that concludes next Wednesday. … Fed …
22nd January 2014
Our estimate that GDP grew at a decent annualised rate of 3.5% in the fourth quarter even though activity was hit by the Federal government shutdown and the unusually bad weather suggests that the economic recovery has become more robust. The slowdown in …
21st January 2014
Our latest calculations indicate that fourth-quarter GDP growth was as much as 3.5%. (We have raised our estimate from 3.0% on the back of the release of December's retail sales figures and November's business inventory numbers.) Moreover, we estimate …
20th January 2014
Despite record high stock markets and gradually improving labour market conditions, the University of Michigan's measure of consumer confidence dropped back to 80.4 in January, from 82.5. Nevertheless, the headline index only reversed a small part of …
17th January 2014
With both domestic and overseas demand improving, the timid increase in industrial production in December does little to alter our view that 2014 could be a stellar year for American producers. … Industrial Production …
With core CPI inflation steady at 1.7%, as upward pressure from shelter inflation offset a fall in medical care inflation, December’s CPI data won’t prevent the Fed from further trimming its asset purchases at the policy meeting late this month. … …
16th January 2014
Broad money growth continues to slow but, given the rebound in long-term interest rates over the past six months, we suspect that moderation reflects a waning speculative demand for money and is not a signal that the economic recovery is in peril. The …
15th January 2014
