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The slight fall in the Conference Board's measure of consumer confidence to 70.2 in March, from a 12-month high of 71.6, only reversed a small portion of the gain in February. We are not too worried about the level, as the sub-indices are still pointing …
27th March 2012
Households are currently being subjected to a number of diverse and often opposing economic forces, but most will cancel each other out and we still anticipate consumption growth of just above 2% this year. … Do rising equity prices offset higher gas …
26th March 2012
There are reasons to believe that over the next two years the US will perform better than the other major economies. This would build on the trend of the last four years that has seen a disappointing US recovery manage to outperform the recoveries in most …
22nd March 2012
The annual growth rates of all the monetary aggregates remained strong in February, with our measure of the broadest M3 aggregate increasing by 6.0% over the past year. With the euro-zone crisis easing, at least temporarily, and the Fed's latest stress …
21st March 2012
The recent rise in gasoline prices won’t prevent inflation from falling, but it will limit just how far and fast it drops. What’s more, evidence of a strengthening in underlying price pressures suggests that the fall in core CPI inflation will also be …
20th March 2012
The widening in the current account deficit to more than 3% of GDP at the end of last year is no big concern. The US has been running deficits of more than 3% of GDP for most of the past dozen years and yet its net external liabilities are still only a …
19th March 2012
Higher gasoline prices will limit the decline in CPI inflation over the next few months, while the growth rate of manufacturing output is likely to slow to a more sustainable pace. … Consumer Prices & Industrial Production …
16th March 2012
The statement released after today's FOMC meeting included a slightly more upbeat assessment of the economic outlook, but the Fed can hardly be accused of acting as a cheerleader for the recovery. Nevertheless, we suspect that the improvement evident in …
13th March 2012
The recent improvement in retail sales should gain further traction in the coming months, as the stronger gains in employment translate into faster income and consumption growth. … Retail Sales …
The recent sustained run of stronger economic data, particularly on the labour market, has persuaded us to raise our GDP growth forecast to 2.0% this year, from 1.5%. We are also nudging up our 2013 growth forecast to 2.5%, from 2.0%. But despite these …
12th March 2012
The Wall Street Journal reported last week that the Fed was considering a new programme of bond buying, albeit with the twist that it could use large-scale reverse repo operations to offset the potential inflationary impact. This matters because any …
February's Employment Report adds to the evidence that the labour market has turned a corner. Non-farm payrolls increased by 227,000 in February, slightly above the consensus forecast of 210,000, while upward revisions added an additional 61,000 to the …
9th March 2012
Next Tuesday's FOMC meeting (13th March) is expected to be a quiet affair, with Fed officials waiting to see whether the recent improvement evident in the labour market develops into a more vigorous expansion in incomes and expenditure. In his semi-annual …
6th March 2012
Much attention has focused on the surge in European banking stocks since the ECB first announced its LTRO bank lending scheme. But over the same period, US banking stocks have also risen by 20%. And over the last two years, US bank stocks have radically …
5th March 2012
Today’s batch of data casts doubt over hopes that the economy has finally embarked on a strong and sustained recovery. When taken together, the figures support our view that annualised GDP growth in the first quarter may be as weak as 1.0%. … ISM Manu. …
1st March 2012
The labour market appears to have strengthened markedly over the last few months, with non-farm payrolls increasing by a 10-month high of 243,000 in January and the unemployment rate falling to a three-year low of 8.3%. Our econometric model, which is …
Despite surging gasoline prices, the Conference Board measure of consumer confidence shot up to a 12-month high of 70.8 in February, from 61.5 last month. The latest increase presumably reflects the continued improvement in labour market conditions, …
28th February 2012
The 4.0% m/m decline in durable goods orders in January, which more than reversed a 3.2% m/m gain in December, suggests that the expiry at the end of last year of the accelerated tax allowances for capital depreciation may have been a bigger factor than …
The recent resurgence in the price of crude oil has led to speculation that, in a repeat of what happened at this time last year, a spike in energy prices could undermine real economic growth just when the recovery appears to be gathering momentum again. …
27th February 2012
Hopes that the US economy has finally embarked on a significant and sustained recovery are likely to be dashed by events overseas. There is little doubt that the economy has strengthened in the early months of this year, with the consumer, industrial and …
22nd February 2012
It is easy to fall into the trap of debating how large or small the output gap is. The simple truth, however, is that no one knows. But while the output gap is not directly observable, the consequences of it are. And for what it’s worth, the recent …
20th February 2012
January's consumer price data are a mixed bag. Headline inflation fell to a ten-month low of 2.9%, from 3.0%, while core inflation edged up to a three-year high of 2.3%, from 2.2%. Favourable base effects will drive the headline rate even lower over the …
17th February 2012
The recent improvement in the incoming economic data, particularly in relation to the labour market, has raised hopes that the US economy could shrug off the crisis in the euro-zone and finally enjoy a more vigorous self-sustaining recovery. But the US …
16th February 2012
Ignore the fact that industrial production was unchanged in January, well below the consensus forecast of a 0.7% m/m gain, the manufacturing sector is on a tear. Manufacturing output increased by 0.7% m/m in January, still a little below what we expected, …
15th February 2012
Even though our measure of M3 grew by a healthy 5.6% in the year to January, there are some signs that bank lending is starting to grow more slowly. The danger is that a sovereign debt default in the euro-zone could cause a ripple through the global …
14th February 2012
January’s retail sales data are better than they look and provide yet more evidence that the US economy is improving. … Retail Sales …
It has been suggested that the reported decline in the unemployment rate to a near three-year low of 8.3% in January, from a high of 10.0% in February 2009, is not nearly as good as it looks because it mainly reflects an exodus from the labour force …
13th February 2012
The widening in the trade deficit to a six-month high in December shouldn’t lead to a revision of fourth-quarter GDP growth, but it does highlight the deteriorating outlook for exports. … International Trade …
10th February 2012
At first glance, America's fiscal prospects are worse than those of the peripheral euro-zone countries, although the US does have a few key advantages that mean it should continue to enjoy very low borrowing costs. Fiscal austerity and restraint will be …
9th February 2012
The US is not that exposed to the crisis in Europe. Despite the prospect of a very deep euro-zone recession arising from some form of euro break-up, we estimate that US GDP growth will be just 0.5 percentage points lower both this year and next than …
8th February 2012
Last week both the Fed Chairman and the non-partisan CBO issued a stark warning about the fiscal path that America is heading down. Unless corrective action is taken, by the end of this decade Federal debt will have ballooned to 90% of GDP. That would put …
6th February 2012
January's Employment Report was unequivocally strong and points to a rapidly improving labour market. Non-farm payrolls increased by 243,000, a nine-month high, up from 203,000 in December. That was well above the consensus forecast at 140,000. As a …
3rd February 2012
The continued steady turnaround in the industrial sector, as suggested by the rise in the ISM manufacturing index to 54.1 in January, from 53.1, appears to be due to both the resilience of the domestic and global economies. We’re not convinced, however, …
1st February 2012
The decline in the Conference Board measure of consumer confidence in January to 61.1, from 64.8 in December, doesn't sit well with the overall improvement in the economic data. Consumers remain a riddle wrapped inside an enigma. … Consumer Confidence …
31st January 2012
The Fed's latest Senior Loan Officer survey revealed that the ongoing crisis in the euro-zone is beginning to have a more marked impact on domestic credit, with foreign-owned banks tightening lending standards on loans to American businesses. … Euro …
30th January 2012
With the downturn in the housing market drawing to a close, housing should soon start to boost economic growth. But as housing now makes up only a small share of the economy, the sector is unlikely to add much more than 0.2 percentage points to annual GDP …
The Fed's new interest rate projections ended up having only a modest impact on market expectations last week. Indeed, the impact was smaller than we might have expected based on the pledge in the accompanying statement alone. In the end the Fed didn't …
The acceleration in GDP growth to 2.8% annualised in the fourth quarter, from 1.8% in the third, suggests that the recovery is gathering momentum. However, the much bigger than expected positive contribution from inventories in the fourth quarter leaves …
27th January 2012
After incorporating the “known knowns”, our econometric model suggests that payrolls rose by around 150,000 in January, which would be less than December’s 200,000 gain. The “known unknowns” of the payroll benchmark revisions and updated population …
26th January 2012
December's durable goods orders figures are encouraging, suggesting that after stagnating in the fourth quarter of last year, business investment started to pick up again right at the end of that quarter. The latter is a good sign as far as the first …
The publication today of the first set of interest rate projections by the FOMC heralded a historic change in the way that the Fed conducts monetary policy, but had little practical impact on market rate expectations. … Fed's anticipates that rates are …
25th January 2012
It appears that GDP growth accelerated to around 2.4% annualised in the fourth quarter, up from 1.8% in the third. But we suspect that, despite the apparent strength in some of the incoming data, it will slow again in the first quarter of this year. The …
24th January 2012
Recent signs that manufacturing activity is going from strength to strength have prompted some hopes that industry will save the economy from another year of pretty weak growth. The problem is that the recent revival of industry may be due to some …
23rd January 2012
Consumer prices were unchanged in December and the annual CPI inflation rate declined to 3.0%, from 3.4%. Favourable base effects will generate an even sharper drop in that annual inflation rate over the next few months, to less than 2% by the spring and …
19th January 2012
The Fed has already announced that it will be making some major changes to its monetary policy framework at the two-day FOMC meeting that concludes next Wednesday (25th January). Those changes will include starting to publish forecasts for short-term …
18th January 2012
The strong rebound in manufacturing output at the end of last year is encouraging, as is the further decline in producer price inflation. … Industrial Production & Producer Prices …
While the growth rate of the narrower M1 money aggregate has started to slow a little, M2 growth has remained broadly unchanged and the growth rate of our reconstructed measure of the broadest M3 measure has even picked up slightly. … Monetary …
17th January 2012
The recent run of stronger economic data has led to speculation that the US economy could be poised for a good 2012 after all. This is a remarkable turnaround from August last year when speculation began to mount that the US economy was sliding into …
16th January 2012
The widening in the trade deficit in November to a 10-month high is perhaps the first real sign that the crisis in Europe and the more general global slowdown is starting to take its toll on the US. … International Trade …
13th January 2012
December’s disappointing retail sales figures suggest it was not a happy holiday season for retailers. For the fourth quarter as a whole, our calculations now suggest that real consumption increased by a more modest 2.0% annualised, less than our previous …
12th January 2012
