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The news this week that core consumer prices fell by 0.4% m/m in April has added to the speculation that the pandemic could tip the US into a Japan-style deflation. At 1.4% last month, the annual core CPI inflation rate is still well above the lows …
15th May 2020
The confirmation that non-farm payroll employment fell by 20.5 million in April, with job losses in every sector underlines just how deep and widespread the economic shock over the past six weeks has been. The official unemployment rate rose to 14.7%, but …
8th May 2020
It’s increasingly clear that the economy took an unprecedented hit in March and April. Barring a renewed national upsurge in coronavirus cases, however, the gradual lifting of containment measures suggests that activity will now start to recover. The end …
1st May 2020
The plunge in activity in the second half of March, as coronavirus restrictions proliferated, means that the first-quarter GDP data – due next week – will show output contracting for the first time in six years and worse is to come in the second quarter. …
24th April 2020
The massive declines in retail sales and industrial production last month make it clear that the slump in activity, which only began in mid-March, was unprecedented in terms of both its speed and its severity. We now calculate that first-quarter GDP fell …
17th April 2020
This week brought early signs that the restrictions put in place over recent weeks are flattening the epidemic curve in the US. But set against that good news, there are clearer signs that the hit to employment has been harder than we initially …
9th April 2020
In case it hadn’t fully hit home yet, the surge in jobless claims last week, the reported collapse in vehicle sales and employment in March, and the size of the Fed’s policy response all underlined that the pandemic has taken us into uncharted waters. …
3rd April 2020
The agreement on a $2trn fiscal stimulus, the Fed’s actions and tentative signs that quarantine measures in Europe are beginning to curb the virus spread have all helped steady the mood in markets this week. But as the grisly 3.3m rise in jobless claims …
27th March 2020
Normally it takes months before economists are sure that the economy has fallen into a recession, but the scale of the declines in the range of daily indicators we’re tracking (available on our website here ) mean it’s all but certain the economy is now …
20th March 2020
The shift to more aggressive containment measures this week has prompted us to lower our forecast for GDP growth this year to just 0.6%. In response, we expect at least a 50bp rate cut by the Fed next week and possibly a resumption of large-scale QE too. …
13th March 2020
The Fed’s emergency rate cut this week made it clear that officials are taking the economic risks posed by the coronavirus outbreak seriously. But with the number of new cases rising sharply, we don’t think lower interest rates will prevent activity …
6th March 2020
The threat of a coronavirus outbreak in the US is a significant downside risk to the economic outlook. The Fed can do nothing to halt the spread of the virus, but a further tightening of financial conditions or a slump in business and consumer confidence …
28th February 2020
While the incoming data have remained mostly positive, the plunge in the Markit composite PMI in February suggests that economic growth could be set for a further slowdown in the first quarter, as the temporary drags from the crisis at Boeing and …
21st February 2020
Judy Shelton’s rocky Senate nomination hearing this week means that President Donald Trump’s efforts to reshape the Fed from the outside could yet fail at the first hurdle. But the dovish Christopher Waller should secure Senate approval and, with the …
14th February 2020
When the results of the Iowa caucuses were eventually released they only increased the uncertainty over who will eventually become the Democratic nominee. According to the latest betting odds, Joe Biden’s fourth place in the caucuses has all but written …
7th February 2020
GDP increased by a decent 2.1% annualised in the fourth quarter, even if the underlying details weren’t quite as upbeat. Final sales to private domestic purchasers increased by a more muted 1.4%, which was a four-year low, as consumption growth slowed …
31st January 2020
Next week’s FOMC meeting is likely to be a low-key affair, with the resilience of the recent economic data and the Phase One trade deal justifying the Fed’s decision to bring its recent rate cutting cycle to a halt last October. This week brought …
24th January 2020
The main economic impact of the signing of the Phase One trade deal this week was to further reduce the downside risks to the outlook. But the details of the deal also suggest some upside risk to economic growth this year if China follows through on at …
17th January 2020
This week brought another round of, on the whole, positive economic data, while the signing of the phase one US-China trade deal next week should further bolster confidence. With tensions in the Middle East easing, those developments support our view that …
10th January 2020
The renewed surge in US-Iran tensions has pushed geopolitical risk back up the list of things to worry about in 2020. But with the US no longer a net importer of oil products, the economy is likely to be resilient even if oil prices spike. With other …
3rd January 2020
As the boost from this year’s loosening in financial conditions feeds through, we expect GDP growth to rebound more sharply than most others anticipate in the second half of 2020. But events this week have highlighted several risks to that more positive …
20th December 2019
The apparent agreement between the US and China to avoid the December increase in tariffs and begin a phased rollback of existing tariffs, together with the more upbeat tone from the Fed, all but eliminates the prospect of a final rate cut in 2020. At the …
13th December 2019
The incoming data this week were, on balance, positive and certainly wouldn’t prompt the sort of “material reassessment” of the outlook that Fed officials have said would be necessary to cut interest rates again at next week’s FOMC meeting. Fed on hold …
6th December 2019
We still expect GDP growth to slow a little further over the coming months, but the latest data suggest that the slowdown in the fourth quarter won’t be quite as bad as we had previously feared. The narrowing in the advance goods trade deficit to $66.5bn …
27th November 2019
The key housing releases this week provided further evidence that the big decline in mortgage rates is feeding through to a rebound in residential investment. That won’t be enough to prevent the overall economy slowing in the fourth quarter. But we do …
22nd November 2019
We expect economic growth to slow over the coming quarters, but the fading downside risks from the global backdrop and trade policy, together with new, less dovish language from the Fed means we are no longer forecasting a final 25bp rate cut. We now …
15th November 2019
We still expect GDP growth to slow a little further in the fourth quarter, but the recent stabilisation in the activity surveys, along with the growing prospect of a meaningful trade truce with China, suggest that the prospects for the economy next year …
8th November 2019
Although the clear message from the Fed this week was that they do not intend to ease policy further, we expect a continued slowdown in economic growth and persistently below target inflation will ultimately force them to cut rates once more. That said, …
1st November 2019
The Fed will probably cut interest rates for third consecutive time at the conclusion of its two-day policy meeting Wednesday. That will come shortly after GDP figures for the third quarter are released, which we expect to show growth was a muted 1.5% …
25th October 2019
Agreement to end GM strike won’t save October The tentative deal agreed this week between General Motors (GM) and the United Auto Workers (UAW) Union came too late to prevent a sharp downturn in October’s employment data, but any declines should be …
18th October 2019
Trade talks with China look set to conclude today with a “mini deal”, reducing the immediate risks of a further rise in tariffs. But existing tariffs will remain in place, including the September tariff hike, which has yet to really affect the economy. …
11th October 2019
The slump in the ISM manufacturing index to a decade-low in September together with the fall in the non-manufacturing index to a three-year low triggered renewed fears that the US economy is headed for a recession. (See Chart 1.) But September’s payroll …
4th October 2019
The impeachment inquiry launched by the House Democrats against President Donald Trump will dominate the headlines over the coming months. It is unlikely to have any major impact on markets or the economy during that time but, if it clears a path for …
27th September 2019
The Fed voted to cut its key policy rate by another 25bp earlier this week, but it is deeply split over what to do next. Close to one-third of the FOMC is projecting another rate cut before year-end, while close to another third disagreed with this week’s …
20th September 2019
The Fed is almost certain to cut its policy rate by another 25bp at next week’s FOMC meeting to between 1.75% and 2.00%. But rising core inflation, the still-solid incoming activity data and the temporary thaw in the US-China trade war all support our …
13th September 2019
In a week of mixed economic data releases, it was the news that the US and China would resume trade talks next month that proved to be the biggest development – pushing the S&P 500 back toward a record high and trimming market expectations for additional …
6th September 2019
The trade dispute with China may be escalating at a rapid pace but, despite the concerns of Fed officials, there is still little evidence that this is having a significant impact on the economy. Following China’s move to levy additional tariffs on $75bn …
30th August 2019
Fed officials signalled this week that they are content for now to take their cue from the bond market, with Chair Jerome Powell's Jackson Hole speech giving a strong hint that a September rate cut is coming. Earlier this week, the minutes from the July …
23rd August 2019
The Trump administration’s surprise announcement this week that it intended to delay the introduction of the 10% tariff on more than $150bn of finished consumer goods may have saved the Holidays, but it provided only a brief respite for the stock market …
16th August 2019
With economic growth slowing rather than collapsing and both wage and price inflation rebounding in recent months, further interest rate cuts are hard to justify on purely economic terms. Admittedly, a further escalation of the trade war in the coming …
9th August 2019
Despite cutting rates by 25bp this week, the Fed gave no indication that it is lining up another cut soon or that this will mark the start of the extended easing cycle investors are hoping for. But with President Donald Trump’s subsequent move to …
2nd August 2019
The Fed is likely to cut interest rates by 25bp at next week’s FOMC meeting. New York Fed President John Williams put the markets into a frenzy last week by arguing in a speech that the Fed should move quickly to ease policy at the first signs of a …
26th July 2019
We expect to learn next week that second-quarter GDP growth slowed to only 1.6% annualised, from 3.1% in the first, which should reinforce expectations that the Fed will cut interest rates at the FOMC meeting a week later. But politics are likely to take …
19th July 2019
Chair Jerome Powell signalled earlier this week that the Fed still intended to push ahead with a July rate cut, despite the post-G20 trade truce, the resilience of the labour market and signs of a rebound in inflation. Powell revealed in his testimony …
12th July 2019
The data this week were consistent with a continued slowdown in economic growth, but don’t yet look weak enough to convince the Fed to cut interest rates immediately. We suspect that Chair Jerome Powell will use his semi-annual testimony to Congress next …
5th July 2019
If the meeting between Presidents Trump and Xi at the G-20 tomorrow is successful, we would expect both sides to agree to resume negotiations and hold off on imposing new tariffs. But, given the fundamental differences between the two sides, we expect …
28th June 2019