Filtered by Subscriptions: US Economics Use setting US Economics
The Federal Reserve's framework for setting and communicating monetary policy came under the spotlight last week. It is understandable given the persistently high level of unemployment that economists are looking for ways to make monetary policy more …
25th October 2011
Our latest calculations suggest that GDP growth accelerated to 3.2% annualised in the third quarter, more than double the rate in the second. The rebound in spending on motor vehicles as the Japanese-related supply disruptions faded explains some of the …
21st October 2011
The modest 0.1% m/m increase in core consumer prices in September, which was more precisely only a 0.054% gain, should ease fears among the hawks at the Fed that underlying inflation is spiraling out of control. … Consumer Prices …
20th October 2011
The rapid pace of money growth continued in September. To some extent the recent pick up reflects a jump in the precautionary demand for money, however, so it is not necessarily inflationary. … Monetary Indicators Monitor …
19th October 2011
Despite signs of a slowdown in global economic growth and the fragile state of business confidence, manufacturing output is still expanding at a solid pace. … Industrial Production …
18th October 2011
Recent events in Washington suggest that, with fiscal policy largely tapped-out and monetary policy ineffective, trade protection policies are becoming more appealing. Import tariffs are not the first-choice policy, but they are one avenue that …
The decent 1.1% m/m rise in retail sales in September shows that households are not completely down and out. Real consumption in the third quarter probably rose at an annualised rate of close to 2%. That's hardly setting the world alight, but it is better …
15th October 2011
The widening in the bilateral trade deficit with China to a record high in August is only going to make the trade protection bill passed by the Senate this week more popular. With fiscal and monetary policy increasingly impotent, trade policies, such as …
14th October 2011
Our baseline view is still that the US economy will avoid a recession, albeit only narrowly. Furthermore, if there is a recession, we suspect it would be a fairly modest one because the most cyclical parts of the economy have barely recovered from the …
11th October 2011
There is no hint in September's Employment Report that another recession is starting. Nevertheless, the 103,000 increase in non-farm payrolls last month is still consistent with what would normally be considered very weak economic growth. … Employment …
8th October 2011
The modest rebound in the ISM manufacturing index to 51.6 in September, from 50.6, demonstrates that the economy hasn't fallen off a cliff (at least not yet). But, at that level, the index is nevertheless consistent with fairly muted GDP growth of less …
4th October 2011
One reason why wage growth may have not fallen much below 2% could be that the structural unemployment rate has risen by more than most estimates suggest. The extent of skills and location mismatching means there is something in this. Even so, with the …
Our econometric model, which is based on a wide range of labour market indicators, suggests that for the second consecutive month the US economy as a whole failed to create any jobs in September. The main problem is that businesses do not have enough …
30th September 2011
August's durable goods orders data suggest that firms did not pull the plug on their investment spending in the wake of the turmoil in the financial markets. This supports our view that annualised GDP growth in the third quarter could be as good as 2.5%. …
29th September 2011
The Conference Board measure of consumer confidence, which was pretty much unchanged in September, shows that households are just as downbeat as they were last month. With equity prices hardly off their recent lows, the jobs outlook deteriorating and …
28th September 2011
Despite the explosion in Federal government debt, the US economy as a whole has been deleveraging since the financial crisis erupted in 2008. The reduction in debt by the household and financial sectors has more than offset the surge in public debt. …
27th September 2011
Even if another recession is avoided, the economic recovery is going to remain unusually lacklustre. It seems unlikely that a divided Congress will pass much of President Obama's $450bn stimulus plan. Fiscal policy will therefore soon add to the other …
23rd September 2011
Operation Twist is a go, albeit with a small twist on the twist. The Fed's announcement today that it will act to extend the average maturity of its Treasury holdings, by buying $400bn of securities that mature in more than six years and selling an equal …
22nd September 2011
The most recent acceleration in the annual growth rates of M1 and M2 has been dramatic, but the latest moves largely reflect a rise in the precautionary demand for money. The pick-up in the growth rate of our measure of M3 has been more modest because it …
21st September 2011
The marked rebound in the rate of core inflation since late last year is one of the key reasons why Fed officials are more wary of implementing further quantitative easing now. Some of the recent acceleration in core inflation has been due to temporary …
20th September 2011
The continued rise in inflation in August, which saw both headline and core CPI inflation hit two-year highs, is another reason to suspect that the Fed will shy away from a further round of full-blown quantitative easing for the time being. We do think …
16th September 2011
Given the weakness of the incoming economic data, the Fed is now almost certain to do something at next week's FOMC meeting, but exactly what is still not entirely clear. The proposal to lengthen the average duration of the Fed's asset holdings appears to …
15th September 2011
The stagnation in retail sales in August suggests that households became more cautious after the plunge in equity prices towards the start of the month. Sales may also have been dampened by Hurricane Irene. Nevertheless, real consumption in the third …
Recent developments have only reinforced our long-held belief that the economic recovery will remain unusually lacklustre for several more years. We now expect GDP growth of just 1.5% in 2012 and 2.0% in 2013. Only when the structural problems created by …
14th September 2011
Policymakers were back in the spotlight last week, with hopes growing that we could now see further monetary and fiscal stimulus. Unfortunately, we doubt that the Fed will have much success with what has been dubbed Operation Twist. Extending the average …
13th September 2011
President Obama's newly proposed $450bn job creation bill is equivalent to nearly 3% of GDP, so if it was passed by Congress as it stands it would certainly have a significant impact on GDP growth in 2012, which we currently expect to be only 2%. The big …
10th September 2011
The sharp decline in the trade deficit in July is one more reason to believe that annualised third-quarter GDP growth will come in around 2.5%. With global demand clearly weakening, however, the prospects of the external sector consistently and …
9th September 2011
On balance, we still think that the acceleration in core inflation will prevent the Fed from undertaking a third round of quantitative easing, even after the disappointing August payrolls figures. The related proposal to buy longer term securities at the …
6th September 2011
Even after allowing for the disruption of the strike by 45,000 Verizon workers last month, the stagnation in payroll employment is an ominous sign. The monthly gain in payrolls has now been below 100,000 for four consecutive months and the unemployment …
3rd September 2011
The marginal decline in the ISM manufacturing index to 50.6 in August, from 50.9, will further ease fears that the US economy is headed for a recession. At that level, the index is actually consistent with GDP growth of about 2%, which would represent an …
2nd September 2011
By the end of this year, it will be five years since the housing bubble burst. Given that the economy is likely to grow by no more than 2% this year, the US is only halfway through a lost decade. What’s more, the experience of Japan shows that persistent …
30th August 2011
In his speech at Jackson Hole, Chairman Ben Bernanke provided no real clues that the Fed is building up to more policy stimulus, such as QE3. In fact, he placed more onus on the politicians to help the economy by sorting out the fiscal situation. We think …
27th August 2011
There is a real danger that the recent economic slowdown and financial market turmoil resulted in non-farm payroll employment falling outright in August, perhaps by around 25,000. That would be the first decline since February 2010 and would spook both …
26th August 2011
In his speech at Jackson Hole on Friday, Fed Chairman Ben Bernanke is unlikely to fulfil the markets’ hopes that he will pave the way for a third round of asset purchases (QE3). And even if he did, QE3 is unlikely to boost the economy, equity prices or …
25th August 2011
July's durable goods orders data are not good as they might look. Nonetheless, they still suggest that business investment may accelerate in the third quarter. This supports our view that third-quarter GDP growth won't be a complete write-off. … Durable …
The economic slowdown appears to have developed into something more sustained and perhaps even more sinister. The recent plunge in equity prices, the possibility that jobs growth will flounder and a general deterioration in confidence could conspire to …
Much more important than whether or not the US economy contracts for one quarter or more is that a fundamental deficit in demand means there is little prospect of a significant and sustained acceleration in economic growth in the next year or two. The …
23rd August 2011
The plunge in the Philly Fed manufacturing index in August is not a sure-fire sign that a recession is imminent. The ISM index is more reliable. And even if the ISM index were to fall in line with the regional surveys in August, it would still not point …
20th August 2011
A further rise in core CPI inflation in the coming months will probably prevent the Fed from responding more aggressively to the economic slowdown and latest market turmoil with a third round of asset purchases (QE3), at least until early next year. … …
19th August 2011
The sharp acceleration in money growth in July is not a result of the Fed's loose monetary policies but instead has been driven by investors moving out of equities and/or Treasuries and into cash deposits. This is more deflationary than inflationary. … …
18th August 2011
The healthy 0.9% m/m increase in industrial production in July supports our view that GDP growth in the third quarter will rebound a bit as the adverse effects from the Japanese disaster unwind. But there is no escaping the fact that economic growth will …
17th August 2011
If the experiences of the Bank of Canada and Bank of Japan are anything to go by, the Fed's pledge to keep rates low "at least through mid-2013" supports our new forecast that 10 year Treasury yields will fall to 2% by year-end (compared with our previous …
16th August 2011
The rise in retail sales values in July supports our view that there will be at least some rebound in economic growth in the third quarter and that another recession will, in all likelihood, be avoided. The outlook further ahead, though, remains weak. … …
13th August 2011
The sharp widening in the trade deficit in June is a stark reminder that the US cannot rely on a sustained boost from overseas to offset the weak domestic economy. Indeed, today's data open the door to a small downward revision to the already paltry 1.3% …
12th August 2011
The Fed's pledge to keep interest rates exceptionally low for much longer than previously won't significantly boost the real economy. Admittedly, the chances of QE3 have risen. But the rebound in core inflation and the growing division at the Fed mean …
10th August 2011
While we think that the chances of another recession are relatively low, the risks are certainly rising. More generally, the recent run of weak economic data and the sharp falls in equity prices underline what we have thought all along; that this recovery …
9th August 2011
The news that S&P finally pulled the trigger by cutting America's long-term credit rating from AAA to AA+ will surely rock the financial markets when they open on Monday. But any spike in Treasury yields and/or fall in the dollar should be relatively …
6th August 2011
If the recent financial market moves are sustained, the net effect could be to reduce annualised GDP growth by around 0.5%. That would not tip the US into recession. But it supports our long-held view that this recovery would be tepid, and that the …
July's employment report will go some way to reducing fears that the economy is slipping into another recession. But it highlights that the labour market has hardly recovered at all from the recession and that the economy is not growing fast enough to …
As the recent slowdown in economic growth and the rebound in the unemployment rate have come at a time when core inflation has risen rapidly, the Fed is unlikely to announce a third round of asset purchases (QE3) after next Tuesday's policy meeting. But …
3rd August 2011
