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Equipment investment set to stagnate The 5.2% m/m fall in durable goods orders mainly reflected a reversal of the earlier jump in aircraft orders and wasn’t actually as bad as we had expected, with core orders also surprising on the upside. But the …
24th August 2023
Survey consistent with economic stagnation The slump in the S&P Global composite PMI to a six-month low in August casts further doubt on the idea that the economy is accelerating, with the index consistent on past form with GDP growth of close to zero. …
23rd August 2023
Fed officials in wait-and-see mode The minute of the Fed’s late July meeting suggest that, amid “tentative signs that inflation pressures could be abating”, officials were in no rush to follow up the 25bp rate hike at that meeting with another in …
16th August 2023
Manufacturing boosted by seasonal adjustment problems The 1.0% m/m surge in industrial production in July was partly due to a weather-related jump in utilities output and, although manufacturing output also rebounded by a solid 0.5%, the surveys suggest a …
This page has been updated with additional analysis since first publication. Consumer resilience continues The 0.7% m/m jump in retail sales in July suggests that tighter monetary policy is still having remarkably little impact on real economic activity, …
15th August 2023
Falling expectations drag down confidence The University of Michigan consumer sentiment index stalled in August, with the index slipping back to 71.2, from 71.6. With tighter credit conditions and a weaker labour market likely to weigh on confidence …
11th August 2023
Apart from lagging shelter prices, Fed already hit its inflation target The disinflationary pressures continued to build in July, with both headline and core CPI increasing by a moderate 0.2% m/m. Admittedly, the annual headline inflation rate actually …
10th August 2023
Exports set for renewed weakness soon The narrowing in the trade deficit to $65.5bn in June, from $68.3bn, mainly reflected a further slide in imports, with exports little changed. But with the survey evidence suggesting that renewed weakness in exports …
8th August 2023
Labour market conditions easing Non-farm payroll employment increased by 187,000 in July and, while that represented a trivial improvement on the downwardly revised 185,000 gain the month before, those are otherwise the two weakest monthly gains in …
4th August 2023
Surveys point to muted activity growth and lower core inflation The fall in the ISM services index in July illustrates that even though the risks of a recession may be easing, that doesn’t mean the economy is set to enjoy a strong performance over the …
3rd August 2023
Fitch downgrade to have little impact The news that Fitch Ratings is downgrading its US sovereign credit rating one notch from AAA to AA+ has predictably had little to no immediate impact on the Treasury market – yields are up on the day, but down since …
2nd August 2023
This page has been updated with additional analysis since first publication. Subdued manufacturing activity keeping inflationary pressures muted The modest improvement in the ISM manufacturing index to 46.4 in July, from 46.0, suggests the manufacturing …
1st August 2023
Slowdown in wage & price inflation despite resilience in activity The slowdown in both the employment cost index of wage growth and core PCE inflation to their lowest levels in nearly two years suggests that resilient activity growth won’t be enough to …
28th July 2023
Economy shrugs off impact of higher rates The 2.4% annualised gain in second-quarter real GDP growth, which means the economy expanded at close to its potential pace over the first half of the year, suggests that higher interest rates are having …
27th July 2023
Policy rate now at peak, as disinflation will persuade Fed to stand pat in September As everyone expected, the Fed increased its policy rate by an additional 25bp today, taking the fed funds target range to between 5.25% and 5.50% but, while officials are …
26th July 2023
Manufacturing malaise set to continue The further slump in industrial production in June illustrates that some parts of the economy are already struggling and, as global manufacturing demand continues to soften, we expect further weakness in the second …
18th July 2023
Underlying sales better than muted headline gain suggests Despite the modest 0.2% m/m rise in headline retail sales in June, the bigger 0.6% m/m gain in underlying control group sales is a bit more encouraging, although second-quarter consumption growth …
Jump in confidence unlikely to last long The sharp rise in the University of Michigan consumer sentiment index to 72.6 in early July, from 64.4, leaves it close to a two-year high. That said, it remains fairly weak by historic standards, and the chances …
14th July 2023
This page has been updated with additional analysis since first publication. Core inflation has much further to fall The muted 0.2% m/m rise in core consumer prices in June won’t stop the Fed from hiking rates again later this month, but it supports our …
12th July 2023
This page has been updated with additional analysis since first publication. Easing employment growth offset by stubborn wage growth The 209,000 rise in non-farm payrolls in June was the weakest gain since December 2020 and suggests labour market …
7th July 2023
Services activity rebounds; job openings still trending lower The rebound in the ISM services index to a four-month high of 53.9 in June, from 50.3, leaves a weighted average of the services and manufacturing indices at a level that, historically, has …
6th July 2023
Export weakness to hit Q2 GDP; ADP should be treated with caution The May trade data suggest that falling exports will be a big drag on second-quarter GDP growth, and we suspect the reported surge in ADP employment last month is too good to be true. The …
Fed largely united in favour of temporary pause The minutes of the Fed’s mid-June FOMC meeting suggest that participants were largely of the same mind as far as the decision to temporarily pause the hiking cycle was concerned. Just as “almost all” …
5th July 2023
This page has been updated with additional analysis since first publication. Still consistent with recession and disinflation The further fall in the ISM manufacturing index to 46.0 in June, from 46.9, is difficult to square with claims from some …
3rd July 2023
Consumption stagnates as core inflation eases The May income & spending data appear to confirm that real consumption growth slowed sharply in the second quarter, while also providing encouraging signs that core inflation is gradually easing. Although data …
30th June 2023
Equipment investment still set for further declines The 1.7% m/m rise in durable goods orders in May was stronger than we had expected, even accounting for a big rise in the volatile commercial aircraft component. But the wider evidence still suggests …
27th June 2023
Rebound in confidence likely to be short lived The end of the debt ceiling stand-off probably drove some of the rebound in the University of Michigan’s consumer sentiment index to 63.9 in early June, from 59.2. Despite that, confidence remains …
16th June 2023
Manufacturing stagnant, but better than the drop back we had expected The 0.2% m/m decline in industrial production in May was due to a 1.8% m/m drop in utilities output and a 0.4% decline in mining. Manufacturing output increased by 0.1% m/m, which …
15th June 2023
Sales soft, despite suspicious increase in vehicle sales The 0.3% m/m increase in retail sales included a 1.4% m/m gain in the value of motor vehicle sales, which is very hard to square with the 6.5% m/m decline in light vehicle unit sales already …
Fed pauses as expected but, in hawkish move, eyes 50bp in additional rate hikes As expected, the Fed held its policy rate unchanged at between 5.00% and 5.25% today, but it made clear in the accompanying statement that pause was only to allow officials to …
14th June 2023
Core inflation remains uncomfortably high for the Fed Headline CPI inflation fell to a more than two-year low of 4.0% in May, thanks to favourable base effects and another sharp drop back in energy prices last month but, with core price inflation still as …
13th June 2023
Slump in exports to weigh on Q2 GDP growth The widening in the trade deficit to a six-month high of $74.6bn in April, from $60.6bn, means that net external trade is on track to be a big drag on second-quarter GDP growth, with the latter still tracking …
7th June 2023
ISM surveys suggest economy has stalled In contrast to the strength of payroll employment growth last month, the fall in the ISM services index to a five-month low of 50.3 in May, from 51.9, suggests the economy is barrelling towards recession. On past …
5th June 2023
Despite strength of employment, unemployment rises and wage growth moderates The bigger-than-expected 339,000 increase in non-farm payroll employment in May will dominate the headlines, but the employment report was not all positive – with a big drop in …
2nd June 2023
ISM survey suggest recession risks remain high The slight decline in the ISM manufacturing index to 46.9 in May, from 47.1, reinforces our view that the jump in manufacturing output in April won’t be sustained. But the bigger news was the renewed plunge …
1st June 2023
Although President Joe Biden and House Speaker Kevin McCarthy have finalised a deal to raise the debt ceiling, we wouldn’t be surprised if legislative delays mean that deal doesn’t get passed by Congress until late this week. There is little of any …
29th May 2023
Core inflation still elevated The 0.5% m/m increase in real consumption in April got the second quarter off to a good start, although that followed two months’ of declines. We now expect second-quarter consumption growth to be around 2% annualised, which …
26th May 2023
Some officials looking to resume rate hikes The minutes of the early May FOMC meeting reveal that although Fed officials agreed “the extent to which additional increases in the target range may be appropriate after this meeting had become less certain”, …
24th May 2023
Surveys suggest April strength will soon be reversed The 1.0% m/m surge in manufacturing output in April adds to the evidence that the economy enjoyed a strong start to the second quarter, helped by renewed strength in the motor vehicle sector. But the …
16th May 2023
Real consumption growth still slowing The 0.4% m/m rebound in retail sales in April indicates that higher interest rates and tightening lending standards are yet to deal a major blow to consumers. That said, with the April gain coming after two months of …
Sharp drop in confidence reflects poor expectations The tumble in the University of Michigan consumer sentiment index to 57.7 in early May, from 63.5 in April, leaves it at its lowest level since November and illustrates the impact of growing uncertainty …
12th May 2023
Core inflation refusing to budge The 0.4% m/m gains in headline and core consumer prices in April leaves core inflation at 5.5%, broadly unchanged from its level at the start of this year, further illustrating that the previous downward trend has stalled. …
10th May 2023
April strength offset by downward revisions to earlier months The 253,000 gain in non-farm payrolls in April suggests that the labour market remains resilient despite the banking sector turmoil and broader signs of an economic slowdown. Nevertheless, that …
5th May 2023
Strength of exports and unit labour cost growth unlikely to last The sharp fall in the international trade deficit to $64.2bn in March, from $70.6bn in February, was driven by a rebound in exports, but the surveys continue to suggest that renewed declines …
4th May 2023
Fed’s focus will turn to policy loosening before long The Fed’s new policy statement provides the clearest hint yet that the 25bp rate hike today is likely to be the last. We expect economic weakness and a sharper-than-expected drop back in core inflation …
3rd May 2023
ISM suggests activity weak in second quarter The slight rebound in the ISM services index to 51.9 in April from 51.2 in March was broadly in line with the small gain in the ISM manufacturing index. Nevertheless, that still leaves the composite index at a …
ADP surge another sign that in April the sweetest showers fall The ADP report – suggesting that private sector employment increased by a stronger 296,000 in April, more than double the 142,000 gain the month before – is another signal that the economy …
Manufacturing outlook weak, but hi-tech revival boosting construction The trivial rebound in the ISM manufacturing index to a still depressed 47.1 in April, from 46.3, contrasts with the more substantial recovery in the alternative S&P Global PMI but …
1st May 2023
Today’s news on wages and inflation should have eradicated any remaining doubts that the Fed will hike interest rates by an additional 25bp next week. According to the Employment Cost Index (ECI), first-quarter private wages increased by 1.2% q/q, with …
28th April 2023
Economy starts the year on a weaker footing The disappointing 1.1% annualised rise in first-quarter GDP indicates that the economy had less forward momentum at the start of this year than previously thought. We continue to expect the drag from higher …
27th April 2023