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If the economy has entered another spring slowdown, we doubt it will be as severe as in recent years. Admittedly, the latest news on employment and retail sales suggests that the economy lost some momentum at the end of the first quarter. But so far that …
23rd April 2013
The boom in domestic energy production and the indirect benefits to the rest of the economy from lower natural gas prices have played only a minor role in the US economy's strong performance compared with most other developed countries. … US recovery due …
Despite the Fed’s continuing quantitative easing, the growth rates of the broad monetary aggregates have actually fallen over the past few months. The annual growth rate of our measure of the broadest M3 aggregate edged down to 5.9% in March. … Monetary …
22nd April 2013
The slump in energy prices suggests that second-quarter GDP growth might not be as bad as we had initially feared when the incoming data for March proved to be unexpectedly weak. … Slump in energy prices could provide much-needed …
With inflation remaining unusually low, the Fed is under little pressure to slow or halt QE. We expect it to continue with open-ended asset purchases until early next year, although it may still slow the pace of those purchases in the second half of this …
16th April 2013
The run of weak economic data reports, which continued last week with the news of an unexpected decline in March retail sales, has led to speculation that the US economy is enduring yet another spring slowdown, mirroring what happened in 2011 and 2012. … …
15th April 2013
Coming after a weak retail sales report for March, the sharp drop in April's University of Michigan's index of consumer confidence to a nine-month low of 72.3, from 78.6, is another sign of a slowdown at the start of the second quarter. With gasoline …
12th April 2013
The surprise fall in retail sales in March adds to other evidence that the US economy is experiencing another spring slowdown. But we doubt that the easing in economic growth in the coming quarters will be as severe as in recent years. … Retail Sales & …
President Obama's budget proposals for fiscal year 2014 will now kick-start a renewed round of negotiations in Congress that, at best, could result in a much-coveted grand bargain or, at worst if the discussions collapse into acrimony, could end in a …
10th April 2013
Contrary to widespread belief, America is not broke. Our calculations suggest that total domestic net worth was as much as 550% of GDP in 2011. America is not deep in debt to foreigners either. Net external liabilities are a modest 30% of GDP, well below …
8th April 2013
It is impressive that in the first quarter, when households were hit by higher taxes and everyone had to contend with a spike in gasoline prices, GDP probably grew at an annualised rate of at least 3.0%. But more recent evidence suggests that the economy …
The larger than expected narrowing in the international trade deficit in February is scant consolation when some of the more up-to-date figures suggest that economic growth has started to lose a bit of momentum. … International Trade (Feb. …
5th April 2013
The modest 88,000 increase in non-farm payrolls in March is further evidence that the US economy is undergoing another spring slowdown, albeit from a pretty rapid pace of growth in the first quarter. … Employment Report (Mar. …
The manufacturing sector has added half a million jobs over the past few years, prompting speculation that, after a decade of offshoring production to lower cost countries like China, firms are now beginning to relocate production back to America. The …
3rd April 2013
It is tempting to blame the decline in the ISM manufacturing index to a three-month low of 51.3 in March, from 54.2, on the faltering global economic recovery. However, that theory is hard to square with the details of the report and also the evidence …
1st April 2013
The Cypriot bank bailout, which imposed losses on bondholders and large depositors, is never likely to be repeated in the US. For a start, while the Cypriot banking system is equivalent to a massive 716% of domestic GDP, the US banking system is a much …
It’s going to be almost impossible to observe what impact the sequester government spending cuts is having on the labour market. But we expect it will be fairly small. In any case, it is too soon for any impact to show up in March’s data, which are likely …
27th March 2013
Despite endless claims that the US is hopelessly indebted to foreigners, which will eventually lead to a collapse in the dollar and/or rampant inflation, its net external liabilities are actually modest and well below the levels that have triggered …
26th March 2013
March's sharp decline in the Conference Board's measure of consumer confidence to 59.7, from 68.0 in February, is probably a delayed reaction to higher gasoline prices, which were prevalent during most of the survey period. As long as the underlying …
The 5.7% m/m rebound in February's durable goods orders, which was above the 3.9% consensus forecast and a bit below our 6.5% call, is not quite as good as it looks. Nevertheless, business investment still appears to be expanding at a healthy pace. … …
Renewed falls in vehicle prices probably won’t reduce CPI inflation by much. But, along with the latest drop in financing rates and loosening in loan criteria, they provide support to our view that over the next few years vehicle sales will rise rapidly …
25th March 2013
We are heartened by the recent signs that economic growth is being driven by more sustainable domestic forces rather than potentially temporary overseas influences. This leaves the economy well placed to weather any slowdown in global growth, which the …
The Fed acknowledged in its statement today that the economy was again growing at a "moderate" pace and FOMC participants revised their forecasts for the unemployment rate slightly lower for 2014 and 2015. Nevertheless, the majority of participants still …
20th March 2013
The US economic recovery appears to be strengthening. Despite the impact of the payroll tax hike and higher gasoline prices on real incomes, first-quarter real consumption growth is on course to increase by around 2% annualised. The key activity surveys …
The growth rates of broad money, including our own measure of M3, have slowed recently, even as the Fed has expanded its quantitative easing. We suspect this decline reflects a fall in the precautionary demand for money, however, and it should not …
19th March 2013
In addition to the direct boost to GDP from homebuilding, the housing recovery has started to provide an indirect boost by supporting both industrial activity and employment. The possibility that the housing recovery proves to be stronger than we expect …
18th March 2013
The current signs of inflationary pressure in the labour market will probably amount to nothing. Although we are mindful that accelerating earnings growth could be an early indication that unemployment is closer to the natural rate than we thought, at …
The combination of the payroll tax hike and rising gasoline prices was probably behind the unexpected drop in the University of Michigan measure of consumer confidence to a 15-month low of 71.8 in March, from 77.6 in February. … Ind. Production (Feb.) & …
15th March 2013
Aside from the rise in gasoline prices, which is now being reversed, it is hard to find any evidence of major consumer price pressures in the economy. This will allow the Fed to maintain its attack on the unemployment rate at next week’s policy meeting. …
We don’t expect that the recent improvement in labour market conditions and growing concerns over the costs of ultra-loose monetary policy will prompt the Fed to reduce the size of its monthly asset purchases soon. The most that can be expected from the …
13th March 2013
February’s retail sales figures suggest that, so far at least, households are coping well with the burden of more taxation and higher gasoline prices. It now looks as though consumption growth in the first quarter will be a bit stronger than we had …
The recent strengthening in the labour market is encouraging, but today’s news on the rates at which workers are being hired and are quitting is further evidence that it falls short of the “substantial” pick up that would prompt the Fed to trim the size …
12th March 2013
The willingness of investors to snap up the record amount of corporate bonds issued in the fourth quarter of last year may concern some Fed officials as it could be a sign that low interest rates are encouraging some institutions to “reach for yield”. … …
11th March 2013
The US recovery still appears to be on track and is possibly even strengthening a little, despite the lingering impact of the expiry of the payroll tax cut, the recent surge in gasoline prices and the sequestration cuts to government spending. … Recovery …
February's Employment Report isn't a game changer, but it adds to the evidence from the upbeat ISM surveys released earlier this week that, despite the expiry of the payroll tax cut, higher gasoline prices and government spending cuts, the recovery is …
8th March 2013
The economy-wide deleveraging process, which has constrained the economic recovery over the past four years, may now be over. Moreover, as any remaining deleveraging in the household sector can be achieved by debt rising at a slower pace than income, …
The rebound in the trade deficit to $44.4bn in January, from $38.1bn in December of last year, was a bit bigger than expected (consensus forecast was $42.6bn) and suggests that net external trade will make either a neutral or slightly negative …
7th March 2013
Rapidly rising delinquency rates have made us more concerned about the quadrupling in student loan debt over the past decade to £1trn. But we still don’t think this poses a major threat to the financial system or the government. High student debt may, …
6th March 2013
The sequestration spending cuts will probably only remain in place for a couple of months until Congress reaches a wider budget agreement, so the overall impact on the economy should be modest. More generally, it doesn’t look as though the continued …
4th March 2013
The rise in the ISM manufacturing index to a 20-month high of 54.2 in February, from 53.1, suggests that US producers are undeterred by the fragile recovery in overseas manufacturing activity, for now at least. If the latest softening in the PMIs of …
1st March 2013
Households absorbed the large drop in income in January by reducing their saving rather than their spending. But the effects of the payroll tax hike and the latest surge in gasoline prices will continue to constrain consumption in the first quarter. … …
Our econometric model suggests that payrolls rose by around 175,000 in February, which would leave employment growing at much the same pace as in recent months. Without a meaningful acceleration in job growth, however, the recent resurgence in earnings …
28th February 2013
January's durable goods report is a lot better than the 5.2% m/m drop in headline orders suggests, even after factoring in the downward revision to December's gain, which was trimmed to 3.7% m/m from 4.6%. Nevertheless, the survey evidence is still at a …
27th February 2013
The FDIC’s banking profile for the fourth quarter of last year shows that US banks are well placed to continue boosting lending to both firms and households. At the same time, there is not much evidence that banks are compensating for low net interest …
26th February 2013
Fed Chairman Ben Bernanke's semi-annual congressional testimony confirmed that the FOMC is paying a lot more attention to the potential costs of continuing with its quantitative easing this year. Bernanke still appears to believe that the benefits …
Despite lower household income and surging gasoline prices, consumers were relatively upbeat in February. The Conference Board's measure of consumer confidence rose for the first time in four months to 69.6 in February, from 58.4. Still, first-quarter …
The surge in retail gasoline prices to $3.80 per gallon, from $3.40 only a month ago, will put more pressure on households who are already struggling to cope with the expiry of the payroll tax cut. The only good news is that the most recent dip in …
25th February 2013
In light of last week's revelations in the minutes from January's FOMC meeting, Chairman Ben Bernanke's congressional testimony this week will be watched particularly closely for any signs that he is more concerned about the potential costs of further …
January’s consumer prices data provide a timely reminder that, even though it is now four years since the Fed first started expanding its balance sheet, there are few signs that inflation is becoming problem. … Consumer Prices …
21st February 2013
The minutes from the most recent FOMC meeting in late January suggest that rising fears over the potential costs from further quantitative easing could prompt Fed officials to reduce or even halt the central bank's monthly asset purchases sooner than most …
20th February 2013
