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Weaker ISM shows activity stalling, but labour market conditions remain tight The decline in the ISM manufacturing index to a two-and-a-half year low of 48.4, from 49.0, is another sign that the economy was losing momentum at the tail-end of last year. …
4th January 2023
Q4 growth looking ok, but economy losing momentum Real consumption is on course for solid growth of around 3.5% annualised in the fourth quarter, but the income and spending data show that it stalled in November. The sharp fall in durable goods orders …
23rd December 2022
Further signs that economy is losing momentum The 0.6% drop in manufacturing output last month matches the already-reported decline in retail sales and provides further evidence that the economy has lost some serious momentum. With weak global growth and …
15th December 2022
Consumer resilience starting to fade The 0.6% m/m fall in retail sales in November suggests that the resilience of consumers to much higher interest rates is starting to crumble. Solid gains in previous months mean real consumption growth should still be …
The Fed strikes back Despite the increasingly compelling evidence that core inflation will fall sharply next year, the Fed simply doubled down on its recent hawkishness. As expected, the Fed issued an identical statement and raised interest rates by a …
14th December 2022
Stick a fork in it, inflation is done The Fed will still hike its policy rate by 50bp tomorrow and the new projections could show the peak above 5%, but the 0.2% m/m increase in core consumer prices in November provides strong support to our long-held …
13th December 2022
Sentiment remains at recessionary levels The small rebound in the University of Michigan index to 59.1 in December, from 56.8, indicates that the slump in gasoline prices and recovery in the stock market is supporting consumer sentiment. But the index …
9th December 2022
Deficit widens on shift in pharmaceutical trade The trade deficit widened to $78.2bn in October, from $74.1bn, as the weakness in global demand began to weigh on exports, which declined by $1.9bn. At the same time, imports increased by 2.4bn, as a further …
6th December 2022
Activity still holding up, for now The rebound in the ISM services index to 56.5 in November, from 54.4, leaves it consistent with the recent consumption data in pointing to decent activity growth in the fourth quarter. But we suspect that resilience will …
5th December 2022
Strength in employment & wages won’t prevent Fed from slowing rate hike pace The resilience of the labour market and the resurgence in wage pressures don’t change our view that core price inflation is going to fall more rapidly than the Fed believes, and …
2nd December 2022
Index slips below the 50 mark The decline in the ISM manufacturing index to 49.0 in November, the lowest reading since the early stages of the pandemic, from 50.2, leaves it at a level consistent with a stagnation in broader economic growth. The decline …
1st December 2022
Real consumption boosted by motor vehicle rebound The strong 0.5% m/m increase in real spending in October illustrates that consumers are not buckling under the weight of higher interest rates, at least not yet. That gain follows a 0.3% m/m increase in …
How many is “various”? The minutes of the Fed’s early-November policy meeting suggest that although most officials were in favour of slowing the pace of rate hikes at upcoming meetings, there was no consensus on how high the peak in rates would ultimately …
23rd November 2022
Equipment investment refusing to roll over despite surging rates The solid 1.0% m/m rise in durable goods orders in October indicates that business equipment investment continues to hold up reasonably well in the face of higher borrowing costs, helped by …
Manufacturing close to stagnation In contrast to the earlier news of consumer resilience, there are signs of a deterioration in the manufacturing sector, with output rising by only 0.1% in October, September’s gain cut from 0.4% to 0.2%, and downward …
16th November 2022
Consumer refuses to buckle under weight of higher borrowing costs The US consumer is hanging in there under the weight of rapidly rising borrowing costs, with retail sales increasing by a solid 1.3% m/m in October. Admittedly, sales last month were …
Sentiment buckles under weight of higher interest rates The drop back in the University of Michigan’s consumer sentiment index to a five-month low of 54.7 in November, from 59.9, appears to reflect the damage that higher interest rates are doing, …
11th November 2022
Goods disinflation broadening; health insurance flips The better than expected 0.3% m/m increase in core consumer prices in October won’t on its own persuade the Fed to drop its hawkish stance. But we expect this to mark the start of a much longer …
10th November 2022
Republicans fail to deliver knock-out blow While the results remain too close to call, the Republicans are on course to win only the narrowest of majorities in the House, and control of the Senate will probably be decided by another run-off election in …
9th November 2022
Mixed employment report won’t alter the Fed’s hawkish bent The October employment report had something for everyone, with payrolls pointing to continued strong employment gains while the household survey showed a sharp fall in employment and a rise in …
4th November 2022
Services activity at a two-and-a-half-year low The decline in the ISM services index to a two-and-a-half-year low of 54.4 in October, from 56.7, leaves it at a level that has historically been consistent with only muted GDP growth of around 1% annualised. …
3rd November 2022
Strength of net exports fading; better news on unit labour costs won’t stop the Fed hiking yet A drop back in exports and small rebound in imports means the trade deficit bounced back to $73.3bn in September, from a downwardly revised $65.7bn. With the …
Fed continues with 75bp hike, but open to smaller 50bp increase next month The Fed raised its policy rate by another 75bp today, to between 3.75% and 4.00%, but laid the groundwork in the accompanying statement for a probable drop down to a 50bp hike at …
2nd November 2022
Goods price pressures evaporating as demand weakens The further fall in the ISM manufacturing index to 50.2 in October, from 50.9, illustrates that global economic weakness and the earlier surge in the dollar are catching up with the factory sector. But …
1st November 2022
Wage growth gradually slowing, even as economy holds up Although core PCE inflation rebounded to 5.1% in September and real consumption looks to have more momentum than previously thought, the Fed may still draw some encouragement from the more modest …
28th October 2022
GDP rebounds, but underlying demand stagnating The 2.6% annualised rebound in third-quarter GDP looks impressive, but it was entirely due to a 2.7% boost from net external trade. Final sales to domestic purchasers, a better measure of underlying economic …
27th October 2022
PMIs point to rapid slowdown The drop back in the S&P Global composite PMI for the US to 47.3 in October, from 49.5, means that indicator has now been below the 50 boom-bust level for four months. Admittedly, the ISM survey indicators remain at much …
24th October 2022
Manufacturing can’t deft gravity for much longer The 0.4% m/m gain in manufacturing output in September, together with some modest upward revisions to previous months, suggests that the factory sector is just about holding up despite the deterioration in …
18th October 2022
Confidence boosted by lower energy prices The University of Michigan’s consumer confidence index rebounded slightly to 59.8 in October, from 58.6, as the impact of lower gasoline prices and still-strong labour market conditions just about outweighed the …
14th October 2022
Real consumption growth muted as higher rates bite With retail sales unchanged in September there is still little evidence that the boost to purchasing power from the earlier sharp fall in gasoline prices has helped real consumption. Energy prices are now …
Continued hot inflation raises risks that 75bp hikes will keep coming The stronger than expected 0.4% rise in consumer prices in September, driven yet again by a stronger increase in core prices, nails on a 75bp rate hike at the November meeting and, in …
13th October 2022
Fed remains in hawkish mood for now While the minutes provided some hints that Fed officials are beginning to lay the ground for a slower pace of rate hikes eventually, the overall tone was still hawkish, suggesting that the Fed will push ahead with …
12th October 2022
Labour market conditions cooling only gradually The 263,000 gain in non-farm payrolls in September is another signal that labour market conditions are cooling. But with the unemployment rate dropping back to 3.5% the report is unlikely to significantly …
7th October 2022
Services activity growth looks set for sharper slowdown soon The marginal fall in the ISM services index to 56.7 in September, from 56.9, suggests activity in the sector is still holding up well and leaves a weighted average of the two ISM surveys …
5th October 2022
Surging exports keeping economy afloat The further sharp decline in the nominal trade deficit to $67.4bn in August, from $70.5bn, means that net exports provided a big boost to third-quarter GDP growth. But the twin drags from the surging dollar and the …
Manufacturing sector slowing; shortages still easing The sharper than expected fall in the ISM manufacturing index to 50.9 in September, from 52.8, leaves it consistent with GDP growth of just 0.5% annualised. There is at least some comfort, however, that …
3rd October 2022
Real consumption growth slowing despite falling gas prices The 0.1% rise in real consumption in August, together with revisions to previous months’ data, leaves consumption on track for growth of only 0.7% annualised in the third quarter, down from 2.0% …
30th September 2022
Revisions fail to change picture of economic weakness The annual revision to the national accounts data were more downbeat than we had expected as they show that the previous big gap between GDP and GDI has been narrowed mainly by the latter being revised …
29th September 2022
Orders data suggest equipment investment holding up, for now The 0.2% m/m fall in durable goods orders in August wasn’t as bad as we expected and suggests that business equipment investment is, for now at least, still holding up in the face of surging …
27th September 2022
A hawkish 75bp hike The Fed may have stuck to the script by delivering a 75bp rate hike at its September meeting, but it still managed to deliver a hawkish message with the accompanying projections, which imply an additional 75bp hike in November and a …
21st September 2022
Manufacturing struggling under global malaise Manufacturing output edged up by 0.1% m/m in August, as notable gains in petroleum & coal, machinery and electronics were partly offset by a drop back in motor vehicles and parts. With global manufacturing …
15th September 2022
Consumers reluctant to spend gasoline savings The stagnation in underlying retail sales in August suggests that plunging gasoline prices are not providing any significant boost to real consumption. But that could change over the coming months as consumer …
Trade deficit narrows as consumer imports slow The trade deficit narrowed to a nine-month low of $70.7bn in July, from $80.9bn, driven by a sizeable drop back in consumer goods imports, although almost half that decline was due to lower imports of …
7th September 2022
ISM surveys consistent with solid growth in Q3 The slight rise in the ISM services index to 56.9 in August, from 56.7, strikes a further blow against the idea the economy is close to recession, with a weighted average of the two ISM surveys consistent …
6th September 2022
Labour market conditions normalising The slower pace of payroll gains in August, together with the big rebound in the labour force, and the more modest increase in wages, would seem to favour a smaller 50bp rate hike from the Fed next month, rather than a …
2nd September 2022
Rebound in new orders provides some reassurance The stabilisation in the ISM manufacturing index at 52.8 in August, unchanged from July, provides some further reassurance that the economy is not yet sliding into recession. While the details suggest …
1st September 2022
New ADP index provides little insight into official payrolls The ADP’s revamped employment report showed private payrolls rising by a muted 132,000 last month, but with only limited details as to how they arrived at that number, we have little confidence …
31st August 2022
Powell continues pushback against early pivot Fed Chair Jerome Powell’s keynote speech at Jackson Hole added to the tide of recent Fed speakers pushing back against market expectations that the Fed is close to pivoting toward rate cuts. Nevertheless, as …
26th August 2022
Inflation moderates, real consumption growth still muted The 0.2% m/m increase in real personal spending was a little weaker than we had expected and, as a result, we now expect third-quarter real consumption growth to be 1.6% annualised, whereas we …
Economy holding up better than headline GDP suggests The upward revision to second quarter GDP, to a contraction of 0.6% annualised, from 0.9%, together with the news that real Gross Domestic Income (GDI) expanded by 1.4% in the second quarter, after a …
25th August 2022