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The rise in consumer confidence in November is not consistent with a sustained acceleration in consumption growth at a time when income growth is weak, the unemployment rate is high and a double dip in house prices is underway. … Cons. Confidence (Nov.) & …
30th November 2010
While the health of European banks is once again in question, the financial crisis is becoming a distant memory for US banks. So far this year, they have enjoyed a decent rise in net income. Moreover, US banks’ exposure to Europe has fallen. They remain …
29th November 2010
Our econometric model suggests that payroll employment increased by around 130,000 in November. That would be consistent with other evidence showing that labour market conditions have yet to improve by enough to reduce the unemployment rate significantly. …
24th November 2010
The US economy once again has to contend with a faltering housing market, in which both prices and activity are falling. Thankfully, this second downward leg should be shorter and less severe than the one that brought the financial system to its knees a …
October's durable goods orders and personal spending data suggest that households have started to pick up the baton of growth from businesses. Whether households will be able to carry the burden on their own is another matter. … Durable Goods Orders & …
The economy appears to have emerged from its summer soft patch, with the growth of employment and retail sales both accelerating at the start of the fourth quarter. But economic growth is still constrained by the damage done to the balance sheets of …
23rd November 2010
Our Capital Economics' measure of M3 is falling year-on-year, albeit at a slower rate. The M2 aggregate is growing at an unusually slow pace, and credit is contracting. Over the past 12 months, the 3.2% expansion in M2 has only just matched the growth in …
22nd November 2010
The US economic recovery shows few signs of any meaningful acceleration, suggesting that unemployment will remain chronically high and inflation will continue to edge towards zero. There is now a greater than 50% chance that underlying inflation will turn …
Fears that the Fed has put the economy on the path towards rampant inflation looked even more misguided last week when it was announced that core CPI inflation fell to a record low of just 0.6% in October. The real danger is that the economy is heading …
The recent sharp rises in agricultural commodity prices will boost inflation a little, help keep real consumption growth subdued and narrow the trade deficit. But the gains in prices seen so far are not big enough to lead to rapid inflation or extinguish …
18th November 2010
October's consumer price inflation figures support the recent argument made by several Fed officials, that they would have launched QE2 even if the Fed's mandate was to target price stability alone. Those officials are just as worried about the threat of …
17th November 2010
After almost completely petering out over the past few months, October's industrial production data suggest that the manufacturing recovery may be gathering momentum again, driven by demand for capital equipment. … Industrial Production & Producer Prices …
16th November 2010
October's retail sales are a fairly encouraging sign that consumption growth may be starting to gain some traction. But households' real spending power will soon be hit by higher gasoline and food prices. … Retail Sales (Oct.) & Empire State Index …
15th November 2010
The Fed's quantitative easing may be unconventional, but it is designed to work through the same channels as conventional changes in short-term interest rates; by lowering long-term interest rates, increasing confidence, boosting asset prices and lowering …
September's US international trade figures may give Chinese officials travelling to Seoul for tomorrow's G20 summit something to cling to. But the key point is that the US bilateral trade deficit with China remains close to its recent record high and …
10th November 2010
The Fed's latest survey of Senior Loan Officers reveals a disturbing drop off in the demand for new loans and the renewed tightening of credit conditions for residential mortgages and other consumer loans. On this evidence, claims that quantitative easing …
8th November 2010
The housing market recovery has yet to begin with activity more or less bouncing along the bottom. Home sales did edge further above their post-tax credit low in September, but they remained 20% below the level seen a year earlier. More worrying is that, …
It is very easy to understand why some fear that the Fed's second-round of quantitative easing will lead to a surge in inflation. But we suspect that the ultimate impact on core inflation will be modest. In fact, we would not be surprised to see core …
The G20 Summit in Korea next week (11th – 12th) will be overshadowed by the fall-out from “currency wars”, hampering any attempt at the improved coordination of policies necessary to help rebalance the global economy. In particular, the US will find it …
5th November 2010
October's employment report was stronger than expected and, at the margin, reduces the risk we will actually see the unemployment rate edge higher over the coming months. Nevertheless, there is still little prospect of any meaningful decline in that …
The Fed's new programme of asset purchases is not going to pull the US economy out of its current malaise because, given the scale of the balance sheet problems affecting households and financial institutions, it is simply too modest. … Fed's QE2 is no …
3rd November 2010
As widely expected, the Republicans regained control of the House of Reprentatives in yesterday's midterm elections but failed to overturn the Democratic majority in the Senate. The division of power all but guarantees fiscal gridlock until after the …
The rebound in the ISM manufacturing index in October will not prevent the Fed from announcing more quantitative easing (QE) on Wednesday. September's personal spending and income data show that spending growth has slowed and that incomes have fallen. …
1st November 2010
With Republicans set to make significant gains in this week's mid-term elections, our suspicion is that fiscal policy will end up being largely paralysed for the next two years. The Fed should announce another round of quantitative easing on Wednesday, …
Stronger August GDP data partially reflect temporary factors related to housing, while supporting prospects of stronger and sustained business investment. Overall, there is nothing in this report to prompt any change in our view that near-term GDP growth …
29th October 2010
At 2.0% annualised, third-quarter GDP growth remained well below the economy's trend growth rate of between 2.5% and 3.0%, underlining why many Fed officials think another bout of quantitative easing is necessary. … GDP …
Our econometric model indicates that payroll employment increased by a disappointing 50,000 in October, suggesting that the labour market recovery is still struggling to find a higher gear. Private payrolls may have increased by a more encouraging 70,000, …
28th October 2010
At this stage, it would be a fairly big shock if the Fed did not announce a new programme of asset purchases at next week's two-day FOMC meeting, which concludes on Wednesday (3rd November). Chairman Ben Bernanke recently added his own endorsement, …
27th October 2010
September's durable goods orders suggest that the industrial recovery is nearing extinction. With the housing market still in no fit state to pick up the baton of growth, the economy is going to struggle in the fourth quarter and throughout 2011. … …
The rebound in equity prices has started to boost consumer confidence, but further gains could be limited by a renewed slide in house prices. Households are unlikely to be in the mood to spend for some time yet. … Cons. Confidence (Oct.) & House Prices …
26th October 2010
The US economy moved a bit closer to deflation in September, when core consumer prices were unchanged for the second month in a row and the annual growth rate fell to a 49-year low of just 0.8%. (See Chart.) It is this gradual downward trend that will …
25th October 2010
The manufacturing sector has been one of the few success stories in the otherwise disappointing economic recovery. But the stellar manufacturing recovery is fading so fast that there is a chance it will go into reverse. What's worse is that none of the …
The Bank of Canada appears some way from further monetary tightening. Economic conditions would have to improve substantially and by enough to offset the increasing downside risks to future inflation stemming from stretched household balance sheets and …
19th October 2010
The annual rate of decline in our Capital Economics' measure of M3 continues to slow. (See Chart below.) There is a good chance that the widely expected second round of quantitative easing from the Fed will provide a bigger boost to the monetary …
Manufacturing output contracted by 0.2% m/m in September, illustrating that the previously robust recovery in the factory sector is definitely behind us now and this could even be the start of a renewed downturn. … Industrial Production (Sep …
18th October 2010
House prices have started to fall back in response to the plunge in sales seen since the homebuyer tax credit expired in April. Both the Case-Shiller and FHFA indices showed prices fell in July. (See Chart below.) It is mildly encouraging that home sales …
The recent freezing of foreclosure proceedings by some major banks may not necessarily be a disaster. But we are mindful that in its early stages the sub-prime crisis did not look too severe either, and we all know how that turned out. … What could the …
September's consumer prices and retail sales figures will do little to ease the Fed's concerns that inflation is too low and that economic growth is too weak. Indeed, in a speech today Fed Chairman Ben Bernanke hinted strongly that the second round of …
15th October 2010
The widening in the international trade deficit in August, and in particular the jump in the bilateral deficit with China to a record high, will only fuel growing speculation of a currency war. … International Trade (Aug.) & PPI …
14th October 2010
13th October 2010
The Fed has not even announced a second round of quantitative easing, yet 30-year mortgage rates have plunged to record lows. But even the mortgage bargain of a lifetime may not be enough to drag the housing market, or the wider economy, out of its …
11th October 2010
September's payroll report adds to the evidence that the recovery is losing what little forward momentum it had and will harden the resolve of the more dovish Fed officials to press forward with another round of quantitative easing. Non-farm payrolls fell …
8th October 2010
It is looking increasingly likely that the Fed will announce a new round of quantitative easing, probably before the end of the year. Our guess is that it will opt for a smaller scale open-ended programme of set monthly purchases of Treasury securities, …
4th October 2010
There is nothing in the economic reports released today to change our view that GDP growth will stumble along at a 2% annualised pace for some considerable time yet. … ISM Manuf. Index (Sep.) & Personal Income …
1st October 2010
This report is only available as a PDF. Click to download. … Wage deflation still a threat …
30th September 2010
This report is only available as a PDF. Click to download. … Cons. Confidence (Sep.) & House Prices (Jul.) …
28th September 2010
Households continued to reduce their debt in the second quarter, but it will still be a few years before they are in any fit shape to become the engine of growth once again. It is also worrying that half of the debt reduction over the last two years has …
27th September 2010
This report is only available as a PDF. Click to download. … Durable Goods Orders & New Home Sales (Aug.) …
24th September 2010
This report is only available as a PDF. Click to download. … QE2 still looks distant …
22nd September 2010
Fears that the US economy is heading for another recession are likely to recede further in the coming weeks, not least because GDP growth is on course to accelerate from 1.6% in the second quarter to around 3.0% in the third. Growth will remain tepid for …
20th September 2010
