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The rebound in the monthly trade deficit to $39.1bn in July, from $34.5bn in June, is nothing to worry about. For a start, it didn't even fully reverse the unexpected decline in the deficit in June, from $43.7bn in May. The latest survey evidence points …
4th September 2013
Another rise in the ISM manufacturing index to a 28-month high of 55.7 in August, after the surge to 55.4 in July, suggests that the improvement in overseas activity is benefiting US producers. This strengthens the case for the Fed to begin tapering QE3 …
3rd September 2013
Recent global and domestic developments are more likely to lead the Fed to taper QE3 by a relatively small amount at September’s policy meeting rather than prompt it to hold fire until October or December. … Global developments unlikely to influence Fed …
2nd September 2013
A rebound in employment growth and an unchanged unemployment rate should reinforce expectations that the Fed will begin tapering its monthly asset purchases in September. Our econometric model of non-farm payroll employment points to a monthly increase of …
29th August 2013
The much bigger than expected 7.3% m/m decline in July's durable goods orders dampens hopes of a pick-up in the growth rate of business investment in the third quarter. … Durable Goods …
26th August 2013
While it's far from a certainty, the minutes from the FOMC meeting in late July appear to support our view that the Fed will begin to slow its monthly asset purchases at the next meeting in mid-September. Nevertheless, with the FOMC still split on when to …
21st August 2013
A fall in new vehicle prices and a further improvement in the availability of auto loans, especially to households with lower credit scores, may soon trigger a more rapid rebound in vehicle sales. … Vehicle sales may soon shift into a higher …
20th August 2013
We expect GDP growth to accelerate over the next few quarters as the Federal fiscal tightening begins to ease although, at the same time, it looks like the economic recovery will receive less support from the rebounding housing sector. The growth rate of …
19th August 2013
The incoming news over the past couple of weeks suggests that the so-called twin deficits – the current account and Federal budget – are both improving, in the case of the Federal budget quite dramatically. … Threat from twin deficits begins to …
The drop in the University of Michigan's measure of consumer confidence to a four-month low of 80.0 in August, from 85.1, reversed only part of the sharp gains of the previous three months. Since most of the usual determinants of confidence didn't …
16th August 2013
After incorporating the revisions to the historical GDP figures, America's recent productivity performance looks even worse. The stagnation in productivity isn't going to have any major impact on Fed policy in the short-term but, if it continues, then Fed …
Despite the recession in Europe and the slowdown in economic growth in China, the US current account deficit has continued to narrow. Our calculations suggest that in the second quarter it hit a 15-month low of 2.4% of GDP, less than half the peak of 6.2% …
15th August 2013
The fading of the downward pressure on core inflation and the fall in initial jobless claims to a six-year low mean that the odds on the Fed beginning to taper QE3 next month have shortened further. … Consumer Prices & Industrial Production …
The Fed's continuing monthly asset purchases haven't prevented a further slowdown in the growth rate of the narrow M1 monetary aggregate, although our measure of the M3 aggregate suggests that broad money growth has remained largely unchanged at slightly …
14th August 2013
July’s retail sales data suggest that in response to the recent gains in employment, equity prices, house prices and the modest improvement in the availability of credit, households have started to spend more vigorously. … Retail Sales …
13th August 2013
The latest signs that economic growth is gathering momentum are especially encouraging as they imply that a broad-based improvement in domestic demand may be underway. A continuation of the housing recovery, an acceleration in business investment growth …
9th August 2013
The unexpectedly severe narrowing in the monthly external trade deficit to a near four-year low of $34.2bn in June, from $44.1bn, suggests that second quarter GDP growth was significantly stronger than the first estimate of a 1.7% annualised gain, …
6th August 2013
The 1.7% annualised gain in second-quarter GDP was pretty modest, even if it did come in above market expectations. Nevertheless, most other data releases last week indicated that GDP growth is accelerating in the second half of the year. Under those …
5th August 2013
The 162,000 increase in non-farm payrolls was a little below the consensus forecast at 185,000, but this isn't going to stop the Fed from reducing its monthly asset purchases at September's FOMC meeting, particularly not when the unemployment rate dropped …
2nd August 2013
The entire surge in the ISM manufacturing index to a two-year high of 55.4 in July, from 50.9, was due to an improvement in domestic activity. This new level is consistent with a further acceleration in third quarter GDP growth and should strengthen the …
1st August 2013
There is nothing in the latest FOMC statement released today to suggest that Fed officials have changed their minds about starting to taper the monthly asset purchases in September. … Fed likely to begin QE taper in …
31st July 2013
Real GDP growth actually accelerated from 1.1% annualised in the first quarter to 1.7% in the second, suggesting that the recovery is gaining momentum and probably strengthening the Fed's resolve to taper its asset purchases in September. … GDP (Q2 1st …
Despite impressive gains in equity prices, the recent rebound in gasoline prices and rising interest rates hit consumer confidence in July. The Conference Board measure dropped back modestly to 80.3, from 82.1, only partially reversing the sharp gain in …
30th July 2013
Contrary to the speculation over the past few days, regardless of whether Lawrence Summers, Janet Yellen or a third candidate gets the nod, we suspect that the outlook for US monetary policy would remain largely unchanged from what it is now. The bottom …
29th July 2013
Although the recent incoming data have suggested that second-quarter GDP growth could be particularly disappointing, with a sub 1.0% reading possible, we still expect the Fed to begin tapering its monthly asset purchases in September. Gains in employment …
Despite the much bigger than generally expected 4.2% m/m surge in orders in June (consensus forecast was 1.4%, Capital Economics was 4.0%), the latest durable goods report actually suggests that business investment contracted in the second quarter, adding …
25th July 2013
Our econometric model suggests that the pick-up in jobs growth in June was maintained in July. A rise in payroll employment of 200,000 last month would be the fourth such gain in as many months. … Fewer than normal auto shutdowns may lift …
There is only a remote chance that the Fed will make any major changes at the upcoming two-day FOMC meeting, which concludes next Wednesday (31st July), waiting instead until September to begin tapering its monthly asset purchases. … Fed not quite ready …
24th July 2013
There are reasons to believe that the recent period of sluggish economic growth and near-zero interest rates are coming to a close. While the economy's potential growth rate is probably now only slightly above 2%, the unused capacity means that actual …
23rd July 2013
Even as estimates for second-quarter GDP growth have been revised lower in response to the disappointing incoming news on activity, the continued resilience of monthly employment gains has persuaded investors that the Fed is still on track to begin …
The second half of the year is likely to be much better than the first for both retailers and manufacturers. Faster income growth should help households shrug off the lingering effects of January’s tax hikes and allow them to spend more freely, while the …
22nd July 2013
The filing for bankruptcy by the City of Detroit last night does not pose a systemic risk to America’s financial system. The amount of debt that Detroit is likely to default on is small compared with the outstanding stock of municipal bonds. More …
19th July 2013
Even though Fed Chairman Ben Bernanke just repeated the party line in a slightly different way in his semi-annual testimony to Congress today, the message that the tapering of QE3 is not set in stone and that the end of the asset purchases won’t be …
17th July 2013
Broad money growth has stabilised at a healthy rate, but the further slowdown in the growth rate of bank lending is disconcerting. … Monetary Indicators Monitor …
16th July 2013
June’s consumer prices and industrial production releases had something for everyone at the Fed but, on balance, they leave the central bank on course to slow the pace of its asset purchases at the meeting scheduled for September. … Consumer Prices & …
The disappointing rise in retail sales values in June increases the chances that GDP grew at an annualised rate of less than 1% in the second quarter. Even more worrying is that sales growth appears to be losing momentum heading for the third quarter. … …
15th July 2013
We don’t think the balanced discussion that took place at the FOMC meeting in mid-June means that the Fed is less likely to slow the pace of its monthly asset purchases sooner rather than later. In fact, the stronger news on employment released since the …
The trivial drop in the University of Michigan measure of consumer confidence to 83.9 in July, from 84.1, was probably in reaction to the recent sharp decline in stock markets. But since equity prices and the other usual determinants of confidence have …
12th July 2013
The recent improvement in the sentiment among small businesses is an encouraging sign that the overall economy is becoming fundamentally stronger, although changes to taxes and regulations will continue to hold back the small business sector. … Small …
11th July 2013
The economy has recently been enjoying something of a “job-full” recovery as employment has been rising at a faster rate than GDP. Activity will probably catch up later this year, but in the near-term the Fed will place more emphasis on the improving jobs …
9th July 2013
It now looks as though annualised GDP growth in the second quarter could be as low as 1.0%. But growth will still accelerate later in the year. It is also encouraging that, so far at least, activity in the interest rate-sensitive housing and auto sectors …
8th July 2013
Any doubts (or hopes!) that the Fed wouldn’t follow through on its plan to taper QE3 later this year in response to some of the recent weaker activity data were dealt a major blow by the 195,000 increase in payroll employment in June. The resulting 20 …
5th July 2013
The sharp widening in the international trade deficit in May suggests that second-quarter annualised GDP growth may be even weaker than the 1.5% we have been expecting. At the same time, the improvement in the ADP employment survey in June may not …
3rd July 2013
Recent evidence on employment and construction spending has supported our view that a rebound in spending by State and local governments this year will offset some of the drag on GDP growth from a continued contraction in Federal government spending. … …
The Fed’s exit strategy is a work in progress that will be determined by the economic data and the evolution of the Fed’s thinking on the costs of unwinding its ultra-loose monetary policies. But we currently expect the exit strategy will include five …
2nd July 2013
The rebound in the ISM manufacturing index back above the supposed boom/bust level of 50 in June means that the US economy has passed the first of this week’s two QE3 tapering tests. We expect June’s Employment Report, which forms the second test when it …
1st July 2013
Last week brought a plethora of economic data which, on balance, indicated that second-quarter growth could be a little weaker than previously expected. We now estimate a modest 1.5% gain in real GDP although, as the impact of the tax hikes and the …
The recent weakening in the survey evidence suggests that jobs growth in June may not have quite matched the 175,000 rise in payroll employment in May. But an increase in payrolls of around 150,000 last month is unlikely to put too large a dent in the …
27th June 2013
The increase in Conference Board's measure of consumer confidence to a five-and-a-half-year high of 81.4 in June, from 74.3, was quite surprising given that the usual determinants of sentiment didn't show much improvement during the survey period. We …
25th June 2013
While the 3.6% m/m jump in durable goods orders in May was mainly due to a 51% m/m rebound in volatile commercial aircraft orders, the rest of the report was relatively upbeat. Even if second-quarter business investment growth turns out to be trivial, the …
