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We still anticipate a modest economic downturn rather than a recession, but the spreading weakness in other parts of the global economy has increased the danger of an outright economic contraction in the US. In addition, there are some key downside risks …
14th August 2019
The three-month delay to the imposition of tariffs on more than half of the $300bn of Chinese imports, originally scheduled to take effect next month, is obviously designed to avoid a politically-damaging rise in consumer prices ahead of the holiday …
13th August 2019
The Trump administration’s move to label China a currency manipulator may have few practical implications, but it underscores the speed at which tensions are now escalating. The key risk is that the damage from tariffs is compounded by a sustained …
6th August 2019
The Fed’s Senior Loan Officer Survey suggests that the sharp fall in market interest rates over the past year is feeding through to a turnaround in loan demand. With global growth still slowing and trade tensions escalating, that won’t be enough to …
5th August 2019
The announcement by President Donald Trump of further tariffs on Chinese imports has rattled the markets, but we have long suspected that it was only a matter of time before the trade dispute escalated further. With those tariffs likely to have a more …
2nd August 2019
The Fed reduced the fed funds rate by 25bp — to between 2.00% and 2.25% — at today’s FOMC meeting, but it was arguably a “hawkish” rather than “dovish” cut, which supports our view that the next reduction won’t arrive until much later this year. According …
31st July 2019
The rebound in the three-month annualised rate of core PCE inflation to a seven-year high of 2.5% in June, together with evidence that unit labour costs have been rising more rapidly than thought, suggests that core inflation could surprise on the upside …
30th July 2019
The grounding of the Boeing 737 Max aircraft delivered a hit to business equipment investment and net exports in the second quarter, reducing annualised GDP growth by 0.25% points. A similar hit to third quarter GDP is likely if production is cut further …
29th July 2019
The budget deal agreed by the Trump administration and Congress removes the risk of a damaging debt ceiling crisis in September and prevents a contraction in discretionary spending from October onwards. But our forecasts already assumed that the old …
23rd July 2019
Despite the run of stronger activity data in recent weeks, the deterioration in the survey evidence, lingering uncertainty over trade policy and the prospect of a prolonged period of below-target inflation all suggest there is still a decent case for the …
18th July 2019
Reaching a bipartisan deal to raise the debt ceiling by early September should be a relatively straightforward exercise, but the increasingly confrontational relationship between President Donald Trump and House Democrats means that the odds of another …
17th July 2019
Leading economic indicators underline that most of the recent weakness has been confined to the export-orientated industrial sector, suggesting the risks of an outright recession are contained for now . The Conference Board leading index, which combines …
10th July 2019
Chair Jerome Powell’s semi-annual testimony to Congress indicates that, despite the trade truce following the recent G20 meeting and the strength of employment growth in June, the Fed intends to push ahead with a rate cut at the FOMC meeting at the end of …
The latest NFIB and JOLT surveys point to a contraction in business equipment investment and suggest that labour market conditions are starting to soften. The fall in the NFIB small business index in June left it above its long-run average, but there has …
9th July 2019
The recent acceleration in productivity growth to a decade high of more than 2% y/y has renewed hopes that we could finally be seeing a structural pick-up linked to a new wave of technological advances. (See Chart 1.) We are optimistic about the potential …
President Donald Trump’s recent tweets have sparked speculation that, as part of an escalation of the trade war, he could order the Treasury to intervene in foreign exchange markets to manipulate the dollar lower. Historically, however, attempts to weaken …
8th July 2019
The unprecedented surge in state & local government investment, which added close to 0.4%pts to annualised GDP growth in both the first and second quarters, is unlikely to be sustained. This is another reason to expect growth to slow sharply in the second …
3rd July 2019
Broad money growth accelerated to a decade high in May, as past increases in interest rates boosted portfolio demand, but the more recent renewed slump in rates will trigger a slowdown in the second half of this year. (See Chart 1.) The decline in …
With the economic slowdown feeding through to weaker job gains, the apparent surge in consumption growth in the second quarter will not be sustained. But the strength of households’ balance sheets and the still-elevated saving rate suggest that, barring a …
1st July 2019