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It's taken over two years, but the US is at last exporting as much as it was before the recession. And the lower dollar may soon give exports an extra lift. Nevertheless, as imports are rising just as quickly, and are larger in absolute terms, net trade …
16th May 2011
The pass through of higher commodity prices pushed consumer price inflation up to a two-and-a-half-year high of 3.2% in April, from 2.7%. Nevertheless, with commodity prices now dropping back, the Fed can relax a little knowing that consumer price …
13th May 2011
April's retail sales data were something of a double-edged sword. Upward revisions to sales in both February and March mean that annualised GDP growth in the first quarter may be revised up from 1.8% to around 2.3%. But in April, it appears as though real …
12th May 2011
It's taken two-and-a-half years, but US exports finally recovered in March to the levels seen before the recession. However, imports have risen just as fast. As the level of imports is still much larger than exports, net external trade has been, and will …
11th May 2011
In all likelihood, the Federal government will hit its debt ceiling at the start of next week, although the Treasury can use a number of accounting tricks to delay the day of reckoning, perhaps until early August. The Treasury Secretary has warned that if …
9th May 2011
The 244,000 increase in non-farm payrolls in April will come as something of a relief to the financial markets, particularly after the surge in initial jobless claims reported yesterday and the slump in the ISM non-manufacturing index on Wednesday. The …
6th May 2011
The Fed's latest survey of Senior Loan Officers shows a rapidly widening divergence between the strengthening demand for commercial loans and the falling demand for residential mortgages. … Fed's survey shows diverging demand for …
2nd May 2011
Today's data releases show that while the manufacturing sector is still leading the recovery, the construction sector remains mired in recession. … ISM Manufacturing Index …
Even after the downward revision announced at last week's first ever post-policy meeting press briefing, the Fed's new forecasts for economic growth still look a bit optimistic. In the light of the weak start to the year, we now expect the economy to grow …
Our econometric model suggests that jobs growth was a little bit weaker in April, with payrolls increasing by around 175,000, down from the average rise of 200,000 in the previous two months. This may not be enough to reduce the unemployment rate from …
28th April 2011
The slowdown in first-quarter GDP growth to 1.8% annualised, from 3.1% in the final quarter of last year, was due principally to the surge in energy prices, adverse weather and a sizeable drop in public sector spending. As Fed Chairman Ben Bernanke noted …
In his first post-FOMC meeting press conference, Chairman Ben Bernanke gave the impression that the Fed is in no hurry to tighten monetary policy. … Fed in no hurry to tighten …
27th April 2011
Although March's data on durable goods orders show that industry is still by far the best performing part of the economy, business investment appears to have ground to a halt. This is one reason why we believe that tomorrow's release of first-quarter GDP …
Trade protection is far from an ideal policy, and indeed it carries serious dangers, but in current circumstances it may offer America the only way out of its difficulties. … America may yet embrace trade …
26th April 2011
There are some good reasons why S&P's decision to put America's AAA credit rating on negative watch made more of a splash in the media than in the markets. Admittedly, the fiscal position in the US is arguably worse than in some euro-zone nations that …
25th April 2011
The latest consensus forecast still puts first-quarter GDP growth as high as 1.8% annualised, whereas our own calculations suggest it was no higher than 1.0%. (See Chart below.) Furthermore, despite the higher consensus, we believe that the risks to our …
20th April 2011
The conclusion of next week's two-day FOMC meeting on Wednesday will mark the start of a brave new world, with Chairman Ben Bernanke scheduled to host the Fed's first post-meeting press conference. We also expect the FOMC to complete its $600bn of …
Given the size of the US Federal deficit, which will be close to 10% of GDP this year, and the daunting medium-term fiscal challenges, it is hard to argue with S&P's decision to put a negative outlook on the country's AAA credit rating. Nevertheless, at a …
18th April 2011
Every data release last week seemed to necessitate a further downward revision to our first-quarter GDP growth forecast. By the end of the week when the dust had finally settled, that estimate was down to only 1% at an annualised pace. Indeed, there is …
The pass through of higher agricultural and commodity prices continued in March, with a 0.8% m/m increase in food prices and a 5.6% m/m increase in gasoline prices leading to a 0.5% m/m increase in overall consumer prices. … CPI, Ind. Prod'n (Mar.) & …
15th April 2011
March's 0.4% m/m increase in US retail sales provides only half the story as the headline numbers are not adjusted for the rise in prices. The key message is that real spending is hardly rising, if at all, and that consumption growth lost a lot of …
13th April 2011
The narrowing in the trade deficit in February is a brief respite before the impact of the more recent surge in oil prices pushes the deficit sharply wider. In any case, it looks like net trade was a drag on real GDP growth in the first quarter, adding to …
12th April 2011
Recent events have left our forecast that the Fed will not raise interest rates either this year or next out on a limb. But we are sticking to our guns. After all, this time last year a fading of the economic recovery and the escalation of the fiscal …
11th April 2011
The possibility of a Federal government shutdown is back on the front pages, with concern growing that no agreement will be reached before the current continuing spending resolution expires this weekend. Once again, both sides appear to be spoiling for …
6th April 2011
In contrast to the widespread view that Treasury yields will jump once the Fed concludes its second round of asset purchases, we think that yields could actually fall. It is even possible that the end of QE2 will go some way to bringing a halt to the …
4th April 2011
Conditions in the labour market are finally starting to show signs of meaningful improvement. Non-farm payrolls increased by a healthy 216,000 last month, slightly above the consensus forecast for a 190,000 gain and the 194,000 increase in February. … …
1st April 2011
The trivial drop back in the ISM manufacturing index to 61.2 in March, from 61.4, still leaves it at a level consistent with GDP growth of more than 5% annualised. Actual growth will be lower than that, however, as the recovery in the services sector has …
We had originally expected first-quarter GDP growth to be pretty strong, possibly even as high as 4% at an annualised pace. The more incoming data we see, however, the more we suspect that growth will end up between 2.0% and 2.5%. It might even turn out …
28th March 2011
Labour market conditions are still improving and our econometric model, which is based on a range of monthly indicators, points to a 175,000 increase in non-farm payrolls in March. After the rapid decline over the past few months, we expect the …
24th March 2011
The 16.9% m/m decline in new home sales to a record low of only 250,000 annualised in February, from 301,000 the month before, underlines just how bad conditions in the housing market still are. … New Home Sales …
23rd March 2011
The labour market is finally showing signs of improvement, with the unemployment rate falling sharply from 9.8% last November to 8.9% this February. That decline, however, owes more to a large exodus of people from the labour force rather than stronger …
22nd March 2011
The statement issued after last week's FOMC meeting made it pretty clear that the Fed wouldn't be rushing to tighten policy in response to the recent surge in commodity prices, at least not while core inflation remained subdued and inflation expectations …
21st March 2011
Higher headline CPI inflation and the strength of the manufacturing recovery are not going to sway the Fed when core inflation remains muted and other sectors of the economy, notably housing, are still in awful shape. … CPI, Industrial Prod'n (Feb.) & …
17th March 2011
The surge in PPI inflation won't sway the Fed. It has already said that it expects the commodity-related upturn will be "transitory". With core PPI inflation still low and the economic recovery constrained by the continued weakness in housing, the Fed is …
16th March 2011
Despite the fact that Fed officials now believe the economic recovery is on a "firmer footing" and that surging commodity prices are putting "upward pressure" on headline inflation, it looks like QE2 will be completed as planned. … Fed likely to complete …
15th March 2011
Halfway through the Fed's second round of quantitative easing there is still no sign that it is boosting broad money growth. M2 is growing no faster than nominal GDP and our measure of M3, which replicates the series discontinued by the Fed, is still …
14th March 2011
One of the unintentional side effects of the current impasse in Congress over raising the debt ceiling is that it has led to a significant expansion of the monetary base. Indeed, the drop in the Treasury's operating cash balance over the past few weeks …
The 1.0% m/m increase in February's retail sales may only have been in line with the consensus forecast, but the composition of that growth and the sizeable upward revisions to the gains in the two months before that make this a very encouraging report. …
11th March 2011
The increase in the monthly trade deficit to a five-month high of $46.3bn in January, from 40.3bn, owed very little to the rising cost of imported oil. Instead, it was mainly due to the strength of real non-oil imports. … International Trade …
10th March 2011
Mortgage applications continued to trend lower in February, underlining the point we've made before that the latest rebound in home sales is being driven almost exclusively by cash buyers and investors. … Mortgage Applic'ns (Feb.) & Negative Equity …
9th March 2011
Despite signs that other central banks may be preparing to tighten policy, we don't expect to see the Fed following suit, either by calling an early halt to QE2 or raising interest rates later this year. At next week's FOMC meeting on Tuesday, we expect …
8th March 2011
The rise in the price of oil to above $100 per barrel (pb) will not send the economy back into a recession or push the Fed much closer to tightening policy. Relative to our existing forecasts, the latest rises in oil and agricultural commodity prices are …
7th March 2011
The 192,000 increase in non-farm payrolls in February is healthy enough, particularly when we take into account the upward revisions to the preceding two months that added an additional 58,000 jobs, the only question is how much of last month's gain was a …
4th March 2011
Even though the ISM manufacturing index increased to a seven-year high in February, in his semi-annual testimony to the Senate Banking Committee Fed Chairman Ben Bernanke offered no hint that he favours ending QE2 early. … ISM Manu. Index (Feb.) & …
1st March 2011
The growing spat surrounding the possibility of a Federal government shutdown and the debate over raising the debt ceiling could turn out to be nothing more than old-fashioned political theatre, with the Republican controlled House and the Democrat …
28th February 2011
The markets will be watching for any signs of a shift in tone in Fed Chairman Ben Bernanke's semi-annual testimony to Congress this week. Despite signs that the economic recovery is gathering momentum and growing speculation about policy rates elsewhere, …
After having been depressed by the unseasonably heavy snowfall in January, we anticipate that payroll employment rebounded by about 250,000 in February. The underlying story, though, is one in which the economy is still struggling to create more than …
24th February 2011
The manufacturing recovery is still picking up momentum. The 2.7% m/m increase in durable goods orders in January is better than it looks when we take into account the big revision to December's figures, which now show only a 0.4% m/m decline compared …
The economic outlook appears to have improved recently, with both the ISM manufacturing and non-manufacturing indices improving to multi-year highs in January. We certainly anticipate a strong first half of this year. Buoyed by the latest round of fiscal …
23rd February 2011
For the first time in a year, real consumption probably declined in January. Last month's unusually heavy snowfalls may be partly to blame. But the bad weather probably only exacerbated the slowing trend that was already underway. Even if spending were to …
21st February 2011
