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The extent of the surge in CPI inflation in April specifically caught us a little off guard, although we had been expecting a pick-up in response to the reopening and the shortages of raw materials, intermediate inputs, and labour too. (See here , here …
14th May 2021
Treasury Secretary Janet Yellen set the cat among the pigeons this week when she remarked in an interview “it may be that interest rates will have to rise somewhat to make sure that our economy doesn't overheat.” That faux pas threatened to undo the …
7th May 2021
President Joe Biden’s Families Plan wouldn’t provide much of an additional boost, but the stimulus already in place should ensure that the economic recovery goes from strength to strength, with the Fed clearly in no mood to stand in the way. Major fiscal …
30th April 2021
This week brought further signs that the surge in demand is triggering much stronger price pressures. That is showing up most clearly in the auto sector, where inventories were already exceptionally lean even before the supply of new vehicles was …
23rd April 2021
The economic data released this week reinforce our view that the recent fiscal stimulus and continued lifting of virus restrictions will drive a marked acceleration in GDP growth this year, while also putting sustained upward pressure on inflation. The …
16th April 2021
The news that a new interpretation of Senate rules would allow Democrats to pass a second reconciliation bill this fiscal year has the potential to be a gamechanger, but we expect moderate Senate Democrats to shoot down any attempt to effectively …
9th April 2021
With the next phase of President Joe Biden’s Recovery plan spending likely to take a considerable time to pass Congress and be largely financed by higher taxes, it looks set to have a far smaller bearing on the near-term economic outlook than the $1.9trn …
1st April 2021
News reports suggest President Joe Biden will unveil plans for a large infrastructure package on Wednesday. We expect the package will take much longer and be harder to pass than the $1.9trn American Rescue Plan, and the economic effects will be more …
26th March 2021
The Fed made clear this week that it still has no plans to raise interest rates within the next three years. But that apparently rests on the belief that the strongest economic growth in nearly 40 years will generate almost no lasting inflationary …
19th March 2021
Discussion now turns to infrastructure package With President Joe Biden having signed the $1.9trn American Rescue Plan into law, the discussion will now move on to the American Recovery Plan, the complementary package that will focus on longer-term …
12th March 2021
The sell-off in Treasuries continued this week, as Fed officials signalled that they are not overly concerned by rising yields and the Senate closed in on passing President Joe Biden’s $1.9trn fiscal package. The latter reinforces our view that both GDP …
5th March 2021
Fed Chair Jerome Powell’s testimony to Congress – together with similarly-dovish speeches from key Board members this week – underlined the Fed’s new commitment to the full employment side of its mandate. That may not have convinced investors, but we …
26th February 2021
Economic activity seems to have responded strongly to the latest round of fiscal stimulus passed in mid-December and the drop in coronavirus case numbers, which has allowed for the easing of containment measures in many states. But there are also signs …
19th February 2021
With fiscal negotiations taking a backseat to the impeachment trial in the Senate, a dovish Powell speech took the limelight this week, together with signs that virus restrictions will continue to be lifted. Dovish Powell Fed Chair Jerome Powell’s use of …
12th February 2021
This week the Democrats took the first step toward forcing a large-scale stimulus through the Senate using reconciliation, which only requires a simple majority. But even though it required an all-night session to pass the budget motion that unlocks …
5th February 2021
The rapidly accelerating vaccine rollout means that the economic outlook continues to brighten. But Fed Chair Jerome Powell’s dovish tone in his post-FOMC press conference this week reinforces our view that the Fed will maintain its current ultra-loose …
29th January 2021
Incoming President Job Biden signed a flurry of executive orders during his first couple of days in office, but it remains to be seen whether the divided Senate will support his broader agenda, particularly his call for more large-scale fiscal stimulus. …
22nd January 2021
The inauguration of President-elect Joe Biden and new impeachment of President Donald Trump may signal a dramatic shift in the political landscape, but it remains to be seen whether hopes of a transformative boost to government spending will survive the …
15th January 2021
Although we think that markets are still over-estimating the potential for additional large-scale fiscal stimulus this year, the Democrats’ unexpected victories in both Georgia Senate run-off elections has undoubtedly shifted the balance of risks a …
8th January 2021
The decline in retail sales in November confirmed the message from the slumping high-frequency activity data and the rising trend in jobless claims – namely that the restrictions imposed by many states to stem the surge in coronavirus infections are …
18th December 2020
This week brought more evidence that the economic rebound has faded in the closing weeks of the year. The near-term risks are still skewed firmly to the downside, even as the vaccine rollout gets underway. Economy goes into reverse in December… Infection …
11th December 2020
Markets received a boost this week from the more positive news on the possibility of a (smaller) fiscal relief package, but it still seems unlikely that a deal will be made that satisfies all sides. At the same time there’s a risk of a government shutdown …
4th December 2020
This week the markets were buoyed by the news that President-elect Joe Biden intends to nominate Janet Yellen to be Treasury secretary but, while she is eminently qualified, her lack of political deal-making experience could be an Achilles heel. Yellen to …
25th November 2020
The good news on vaccines kept coming this week, but beyond those encouraging headlines, the inexorable rise in coronavirus infections is beginning to trouble us about the near-term economic outlook. Vaccine news mostly positive The news that the mRNA …
20th November 2020
President Donald Trump’s failure to concede defeat more than a week after the election is unlikely to trigger a constitutional crisis. What matters more over the final months of his administration is the policy actions Trump might take. That could include …
13th November 2020
With Joe Biden taking the lead in both Georgia and Pennsylvania, it seems all but certain he will be the next President, while the Senate is likely to remain under Republican control. That means we are set for continued gridlock in Congress over the next …
6th November 2020
Joe Biden and the Democrats still look on course to come out on top in Tuesday’s elections. But the surge in early voting means that election night could prove even more of a nail-biter than usual and, even once the results are known, there will still be …
30th October 2020
With the final debate now done and dusted, America enters the final two weeks of the presidential election campaign with Joe Biden still leading in the polls and betting markets suggesting the Democrats will win control of the Senate as well as the White …
23rd October 2020
The renewed upturn in coronavirus infections poses a downside risk to the economy and could also have a late bearing on the Presidential election in a little over two weeks’ time. The rise in new cases in recent weeks – to the highest level since …
16th October 2020
The rise in longer-term Treasury yields this week appears to reflect growing expectations of a Democrat clean sweep in November that could result in a larger fiscal stimulus down the road. Stock markets are benefiting from the speculation, even though any …
9th October 2020
The news that President Donald Trump has tested positive for coronavirus has raised the odds of not only Joe Biden winning in November, but of the Democrats sweeping Congress too. Those braced for an October surprise did not have to wait long this …
2nd October 2020
Concerns about the spread of the pandemic in Europe have continued to weigh on the stock market, but the battle over the Supreme Court could end up having a bigger bearing on the near-term outlook by further reducing the chances of a fiscal stimulus deal …
25th September 2020
Fed underwhelms with new forward guidance After seeming to take a bold new step when it recently announced it would be adopting a flexible average inflation target, the Fed risked disappointing markets this week when it failed to back that up with much …
18th September 2020
The July Job Opening and Labour Turnover Survey (JOLTS) released this week suggests the labour market is in much better health than the downbeat jobless claims figures imply. The JOLTS report did confirm the sharp slowdown in the pace of payroll growth in …
11th September 2020
In the wake of the Fed’s new policy strategy, a range of officials have used speeches in recent days to play down expectations that a major loosening in policy is imminent. While we still expect the Fed to strengthen its forward guidance and step up the …
4th September 2020
The confirmation this week that the Fed is adopting “a flexible form of average inflation targeting” indicates that further monetary stimulus is coming soon. But with long-term interest rates already so low, that’s unlikely to have much bearing on the …
28th August 2020
Housing on fire This week brought more evidence that the housing market has caught fire – with record low mortgage rates driving a V-shaped recovery despite high unemployment and an elevated mortgage delinquency rate. Housing starts rebounded to nearly …
21st August 2020
A week later, it is still unclear whether President Donald Trump’s executive orders on unemployment benefits and payroll taxes will provide any meaningful fiscal stimulus during the second half of this year. With congressional talks deadlocked, the odds …
14th August 2020
The incoming data this week were almost universally stronger than expected, with even July’s non-farm payroll figures coming in above consensus. With the number of new daily coronavirus infections beginning to abate, we expect further improvement in the …
7th August 2020
The second-quarter GDP data released this week, which showed output plunging by a record 32.9% annualised, highlighted the unprecedented hit to the economy from the pandemic. We know that activity started to rebound from May onwards but, with the recovery …
31st July 2020
The first increase in initial jobless claims since late-March last week has heightened fears that the economic recovery has started to go into reverse. Most other high-frequency indicators point to the recovery levelling off, but do not show a consistent …
24th July 2020
With the pace of infections rising across most of the country, and the economic recovery in danger of going into reverse, we suspect that Congress will, at least partially, extend the enhanced $600 per week pandemic unemployment benefit. That temporary …
17th July 2020
A growing range of indicators suggest the economic recovery stalled in late-June and early July, in part because of a resurgence in virus infections. There’s clearly a risk that the virus continues spreading unchecked over the coming weeks, pushing the …
10th July 2020
The renewed wave of coronavirus infections prompted the worst affected states in the South and West to re-introduce measures to restrict activity at bars and restaurants this week. But we are unlikely to see the return of the types of draconian lockdowns …
2nd July 2020
The latest polling and betting odds data suggest that Joe Biden is pulling ahead of Donald Trump in the race to win November’s Presidential election. (See Chart 1.) Trump’s approval ratings have taken a hit from his mishandling of the coronavirus pandemic …
26th June 2020
There was a large disconnect between the extent of the sizeable rebound in retail sales in May and the much more lacklustre recovery in manufacturing output last month. We expect the gap to close over the coming months, however, as more manufacturing …
19th June 2020
There is still huge uncertainty over how quickly activity will recover from the pandemic, but it’s clear that the economy is set for an unprecedented period of near-zero interest rates. The Fed sprang no real surprises on the policy front this week, but …
12th June 2020
The 2.5 million rebound in employment last month reverses only a small fraction of the jobs lost since February. But considering we and the consensus had been braced for another large decline, it builds on the signs from some of the other macro data this …
5th June 2020
A month after the first states began to re-open their economies there is both good and bad news. The good news is that, up to now at least, there is no evidence that re-opening has led to a much-feared second wave of infections. The bad news is that, …
29th May 2020
Most of the 50 states have now begun to ease their lockdown restrictions, with many states in the interior now maintaining only minor restrictions on normal activity, although states on both coasts still have major restrictions in place. Nevertheless, the …
22nd May 2020