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18-Dec-09
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The Upcoming Inflation Scare
The U.S. is about to enter a period of extremely high inflation growth. However, there is nothing to be worried about. The entire reason for the high prices will be due to the remains of the oil shock.
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16-Oct-09
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Mind the Output Gap
As the continuing claims number falls, predicting the unemployment rate from the continuing claims data leads to poor forecasts. Instead, it may be better to use the output gap as the leading indicator.
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12-Oct-09
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The Truth about Economic Survey Indicators
While it is hard to dismiss survey indicators when they often push the market on the day they are released, it is important to understand that a long position should not be developed based on a sentiment reading.
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11-Sep-09
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Are Initial Claims Data Useful for Predicting Unemployment?
Initial claims numbers are generally viewed as a leading indicator in forecasting the unemployment rate. But is this true? Can the unemployment rate be forecasted directly from the initial claims data? As it turns out, not very well.
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16-Aug-09
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Looking at the Jobless Recovery Ahead
We are entering another jobless recovery that will be more protracted and have more economic impact than the jobless recovery following the 2001 recession.
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30-Dec-10
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Data Detail: Jobless Claims - Dec. 19 - 25, 2010
Even if this week's remarkable drop below 400,000 turns out to be an anomaly, the steady decline in the initial claims level over the past few weeks has provided evidence that the labor market is improving.
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28-Dec-10
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Data Detail: Consumer Confidence - December 2010
Perplexing. Confounding. Confusing. Head scratching. These are all adjectives that should be used to describe the unexpected decline in the December reading of the Consumer Confidence Index. Thankfully, however, "the start of a new trend" or "a new weakness is developing within the consumer" are not likely explanations for the December drop.
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23-Dec-10
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GDP Monitor: Dec. 20 - 24, 2010
As we wrap up the final month of 2010, it is nice to know, not only are we finishing on a high note, but the sectors that are leading charge -- consumption, equipment and software investment -- are healthy and sustainable.
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23-Dec-10
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Data Detail: Claims, Durables, PCE, Home Sales, (Nov-10)
As we have stated before, and are glad to state again, the "Super Consumer" charges ahead and continues to be the main leader of the economic recovery.
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22-Dec-10
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Data Detail: GDP - Q3 2010 - Third Estimate
After all was said and done, the difference in economic output over the last two quarters had only to do with inventory growth. Pessimists would see this as weakness in the recovery. However, optimists would look at this as a sign of stronger confidence in demand in the quarters ahead.
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17-Dec-10
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GDP Monitor: Dec. 13 - 17, 2010
The risk to our 2011 forecast from inventory changes became a little clearer this week as retailers reported a surprise cutback in inventory levels. We knew that inventory growth needed to decelerate, and it now looks more likely that the slowdown is occurring in Q4 2010 as opposed to some time in 2011.
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16-Dec-10
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Data Detail: Housing Starts (Nov-10), Claims (Dec 11)
After witnessing a surge in the normally stable single-family construction sector, it should be no surprise that many economists have upped their housing starts forecasts for December. However, starts are only a part of the construction picture. The number of housing units currently under construction has remained the same for the previous three months. This gives an indication that builders are not yet ready to boost actual production.
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15-Dec-10
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Data Detail: Inflation (Nov-10), Production (Nov-10)
Producer prices continue to pick up steam. Yet, firms remain in a difficult position in that they cannot pass on those higher prices to consumers without facing adverse reactions from consumers. In order to maximize their profits, firms are going to have to examine their pricing decisions in the coming year.
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14-Dec-10
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Data Detail: Retail Sales - November 2010
The consumer-led recovery remains on track as the 2010 holiday sales period started off on strong footing. While the fourth quarter is shaping up to be one of the strongest consumption periods since the recovery began, we are beginning to wonder if there will be a significant drop-off in spending after the new year.
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10-Dec-10
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GDP Monitor: Dec. 6 - 10, 2010
The consensus believes the lowering of the Social Security payroll tax rate will boost consumption and thus GDP by 0.7 - 1.0 percentage points in 2011. That type of growth seems uncharacteristic of recent consumer behaviour. We think a minor upgrade to 2011 GDP is more probable.
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10-Dec-10
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Data Detail: Trade Balance - October 2010
The weakness in the dollar, which many media pundits have been complaining about for the past few months as a sign of deteriorating economic prosperity, has allowed U.S. exporters to experience their best month since August 2008.
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03-Dec-10
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GDP Monitor: Nov. 29 - Dec. 3, 2010
For the past 12 months, our medium-term economic view has called for sluggish growth in 2011 followed by a more moderate recovery in 2012. At the same time, we expected unemployment to remain near 10.0% for most of 2011. None of that has changed. In fact, the November employment report only added to the evidence that supports our view.
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03-Dec-10
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Data Detail: Employment Situation - November 2010
After staring at the headline employment numbers, it is difficult to get a feeling other than disappointment in the lack of job creation in November. However, the fact is that the payroll numbers are in-line with the low-growth scenario we have been predicting for the past year.
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02-Dec-10
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Data Detail: Jobless Claims - Nov. 21 - 27, 2010
While we still believe that the initial claims level is on the verge of reaching an inflection point where payroll gains can experience unimpeded growth, firms pushed back during the week ending November 27, introducing more layoffs. Still, the growth in initial claims looks more likely to be due to normal volatility patterns.
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01-Dec-10
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Data Detail: Construction (Oct-10), ISM (Nov-10)
While new construction spending has waned, spending on home improvements has soared. Unfortunately for homebuilders, as more homeowners choose to improve their current home, it leaves a smaller potential buyers pool for a new home. As a result, sales may weaken and leave builders with higher inventory levels or force them to continue to cut back on new construction.
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30-Nov-10
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Data Detail: Consumer Confidence - November 2010
The recent growth in the employment sector, combined with a stronger performance in the equity market helped drive consumer confidence in November to its highest level since June 2010. As we expect the economy to continue to rebound, future employment sector gains should keep consumer confidence inching higher.
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26-Nov-10
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GDP Monitor: Nov. 22 - 26, 2010
No matter how strong the economic data come in over the next several months, positive GDP growth will have a very difficult time overcoming the expected negative contribution from a deceleration in inventories.
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24-Nov-10
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Data Detail: Claims, PCE, Durables, Home Sales (Oct-10)
During an employment recovery, the initial claims level needs to fall into a "recovery zone" where payroll growth outperforms normal cyclical job trends. Typically, the upper bound in the recovery zone is about 400,000. At this level, nonfarm payrolls grow in excess of 100,000 per month. For the first time since the recession ended, the initial claims level has fallen to the upper bound of this range.
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23-Nov-10
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Data Detail: GDP - Q3 2010 - Second Estimate
Newly-revised third quarter GDP data showed a much stronger economy than previously reported and continued to show that the economy is moving in the correct direction. However, we do not expect growth in excess of 2.5% to continue into the fourth quarter.
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19-Nov-10
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U.S. Economic Outlook - Q4 2010
With low growth on the horizon, the Federal Reserve has enacted a second round of quantitative easing in an attempt to spur the economy. With demand for credit down and banks still holding tight to their excess reserves, it is uncertain at this time if the quantitative easing will have its intended effect.
The U.S. economy is growing below its potential and is expected to continue to do so in 2011. However, we believe there is greater upside risk than downside risk to our conservative economic outlook.
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18-Nov-10
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Data Detail: Jobless Claims - Nov. 7-13, 2010
The latest initial claims report might not have produced much of a surprise relative to the consensus estimate, yet it has provided surprisingly good news for the labor market as claims held below the 450,000 level for the second straight week without any special factors. This is the claims report that will factor into the November employment report. That should set an encouraging tone given that initial claims were at 455,000 in the week that factored into the October employment report, which subsequently showed a 159,000 increase in private-sector hiring.
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17-Nov-10
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Data Detail: Inflation (Oct-10), Housing Starts (Oct-10)
Producer and consumer price trends are moving in opposite directions, which does not bode well for future profitability. Producers continue to face an upward-moving commodity price path, but slack in the labor market and the concurrent decline in income make it extremely difficult to pass-through the higher commodity prices to consumers.
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16-Nov-10
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Data Detail: Industrial Production - October 2010
The manufacturing sector continues to be a main source of economic activity as the economy continues to struggle to gain its footing during the recovery. While manufacturing still has a long way to go before output and capacity utilization reach normal levels, it is definitely on the right track and shows few signs of potential weaknesses.
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15-Nov-10
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Data Detail: Retail Sales - October 2010
With all of the so-called problems with the consumer, including high debt loads and a heightened unemployment rate, it would seem that a consumer led recovery would be the most improbable growth scenario. Yet, that is exactly what has happened over the last five quarters, and after the October retail sales report, it looks to continue into the foreseeable future.
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12-Nov-10
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GDP Monitor: Nov. 8 - 12, 2010
The revised data from last month continues to roll in at stronger-than-expected levels. While we still believe that growth will remain sluggish through most of 2011, the surprises have definitely shifted from the downside toward the upside.
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10-Nov-10
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Data Detail: Jobless Claims (Nov 6), Trade Balance (Sep 10)
Following 12 grueling months of stable initial claims data, the labor sector may finally be reaching a turning point as the claims level broke below 440,000 for the first time since the beginning of the recession. When coupled with the 151,000 increase in nonfarm payrolls in October, the employment sector finally looks like it is on a stable upward trend.
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05-Nov-10
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GDP Monitor: Nov. 1 - 5, 2010
The first GDP forecast for a quarter usually entails a lot of guess work. Most of the data in the third quarter pointed toward a similar view for the fourth quarter. However, the October employment report offered a new perspective. Private payroll growth may have finally reached an inflection point where future growth is not only expected but assured. As a result, it could generate stronger-than-expected consumption forecasts and drive GDP growth toward 3.0% in the near term.
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05-Nov-10
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Data Detail: Employment Report - October 2010
A large schism has developed between sectors that are still feeling the squeeze from the recession - which explains the stable claims data - and those that are expanding. We can now say with assurance that the expanding subset is outperforming the weaker sectors by a wide margin and should continue to foster growth over the coming months.
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04-Nov-10
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Data Detail: Jobless Claims - Oct. 24 - 30, 2010
The biases from the Columbus Day Holiday were removed this week, and instead of pointing toward a trend of fewer layoffs, initial claims simply returned to the 450,000 - 500,000 range that they have stubbornly stuck between since November 2009. The lack of a downward move leaves little hope for a substantial positive surprise in tomorrow's employment report.
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01-Nov-10
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Data Detail: PCE (Sep-10) Construction (Sep-10) ISM (Oct 10)
The personal income and spending report from the final month of the quarter is typically a redundant report as the data have already been aggregated into the third quarter GDP numbers. As a result, the report normally lacks new information on how the economic recovery is proceeding. However, the September data revealed a new trend in savings that could have a profound effect on long-term economic growth.
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29-Oct-10
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GDP Monitor: Reconciliation with Q3 2010 GDP
GDP growth accelerated in the third quarter, but still remains below the 2.7% - 3.0% needed to foster employment growth. Until GDP reaches this level, households will continue to feel as if the recession has not ended due to elevated unemployment levels, even though economic output has increased for five consecutive quarters. At the same time, the details of the GDP data do not showcase a single sector that could lead the U.S. into that type of a recovery.
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28-Oct-10
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Data Detail: Jobless Claims - Oct. 17 - 23, 2010
The hope that businesses finally decided to refrain from introducing more layoffs was dashed as the strongest initial claims level in over three months was negated by poor seasonal adjustment factors.
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27-Oct-10
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Data Detail: Durable Orders (Sept-10), Home Sales (Sept-10)
The latest durable goods report highlights the fact that the ISM report is an unreliable indicator for the manufacturing sector. While the ISM suggests the manufacturing sector is on unstable footing, the durables report shows production should remain steady for the foreseeable future.
We updated our third quarter GDP forecast for the final time prior to Friday's release. Our forecast was revised up from 1.3% to 1.5% on stronger-than-expected growth in durable goods inventories.
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26-Oct-10
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Data Detail: Consumer Confidence - October 2010
As the Conference Board's Consumer Confidence Index and the University of Michigan Consumer Sentiment Index Confusion diverge, the data suggest that consumers are left in a listless state of confusion.
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22-Oct-10
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GDP Monitor: October 18 - 22, 2010
Finally, the advance estimate for third quarter GDP will be released at the end of next week. After an up-and-down quarter, our GDP forecast ended close to where it started.
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21-Oct-10
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Data Detail: Jobless Claims - Oct. 10 - 16, 2010
The latest jobless claims report continued to reinforce the notion of a jobless recovery. On the surface, the initial claims level posted a moderate weekly decline. However, the level remains bounded between 450,000 and 500,000 as it has since November 2009.
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19-Oct-10
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Data Detail: Housing Starts - September 2010
For the past several months, irrational expectations or possibly delusions of grandeur have led the construction sector into building more homes even though sales and demand have, at best, stalled. The data from September seem to reveal that homebuilders have come back to a more rational approach as future construction looks to be more in-line with consensus sales expectations.
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18-Oct-10
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Data Detail: Industrial Production - September 2010
For the past several months, the ISM manufacturing index has slowly decelerated, finally reaching a point where production growth was hedged solely upon gains in new orders. Due to the volatility in new orders growth, a one-time drop in orders could have a pronounced negative effect on manufacturing production. That seemed to happen in September.
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15-Oct-10
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GDP Monitor: October 11 - 15, 2010
While there was nothing abnormal in the headline inflation data, the details -- specifically the way higher producer food prices were not able to be passed through to consumers -- increased the probability of deflation in 2011.
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15-Oct-10
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Data Detail: Inflation (Sep-10), Retail Sales (Sep-10)
The discrepancy between the producer and consumer inflation data in September only enhances the theory that the U.S. economy is more likely headed toward a deflationary environment than an inflationary one.
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14-Oct-10
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Data Detail: Jobless Claims (Oct. 9), Trade Balance (Aug-10)
Strong demand for imported consumer goods in August put a dent into our theory that a weaker dollar would contribute to a lack of import growth, and with it, a decline in the trade deficit. Instead, firms and consumers alike seem to have discounted currency moves and related price increases when making decisions on where to buy.
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08-Oct-10
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GDP Monitor: October 4 - 8, 2010
While the employment data do not feed directly into our GDP model, the failure of private payroll gains to offset the loss of government jobs is a little disconcerting for our medium-term forecast. The lack of job growth increases the likelihood of a second round of quantitative easing, which has the potential of increasing our short-term outlook before a payback period develops in 2011.
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08-Oct-10
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Data Detail: Employment Report - September 2010
The September employment report revealed the opposing sides to the future of the economic recovery. On the "hands off" side, private payroll growth continued unimpeded, albeit at a slow pace. On the quantitative easing side, chronic mismanagement at the state and local government levels wiped out all of last month's private sector gains. With fiscal stimulus out of the picture until after the midterm elections, the Federal Reserve will have to make a decision on which side is more likely to drive the economy over the next several months.
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07-Oct-10
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Data Detail: Jobless Claims - Sept. 26 - Oct. 2, 2010
After a couple of weeks of near misses, the initial claims level finally broke through the 450,000 barrier for the first time since May and seemingly ended months of malaise in the weekly employment data. However, as much as we would like to break out the champagne and make plans for a ticker-tape parade, the move is largely symbolic and does not necessarily suggest new hiring growth is just around the corner.
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06-Oct-10
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The U.S. Employment Situation: the Good, the Bad, the Ugly
It is easy to listen to the media and think that the employment situation failed to improve following the end of the 2007 recession. Yet, by almost every measure, the recovery in the labor sector following the 2007 recession is moving at a quicker pace than it did following the recoveries after the 1990 and 2001 recessions. Moreover, it is only just slightly weaker by many measures than the recovery after the 1981 recession.
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01-Oct-10
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GDP Monitor: Sept. 27 - Oct. 1, 2010
The personal income, spending and construction data from August showed marked improvement compared to consensus expectations. At first glance, this data would seemingly confirm that the economic recovery was growing faster than anticipated. However, that would be the wrong conclusion. This week's data actually proved that faster growth will be a struggle in future quarters.
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01-Oct-10
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Data Detail: PCE (Aug-10) Construction (Aug-10) ISM (Sep-10)
As much as we would like to believe that the stronger-than-expected growth in income, spending, and construction expenditures in August was the start of an accelerated growth phase, the details of the data confirm that the new found growth only occurred because the government decided to open up the till and hand out money.
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30-Sep-10
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Data Detail: Jobless Claims - September 19 - 25, 2010
After experiencing one week of seemingly unusual volatility, the initial claims level rebounded and returned to the 450,000 claimant level that it had settled at during the first two weeks of September.
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29-Sep-10
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Negative TIPS Yields Are Nothing to Worry About
As the 5-year TIPS yield has been periodically falling below zero, we have been hearing reports that the move is signalling the market's belief that the Fed has lost control over monetary policy and that deflation is imminent. Do not believe those reports.
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28-Sep-10
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Data Detail: Consumer Confidence - September 2010
Just as the character Howard Beale famously said in Network, "I want you to go to the window, open it, stick your head out and yell: ‘I'm as mad as hell, and I'm not going to take this anymore!'," consumers are listening and reacting to the negative political messages being broadcast about the economy.
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24-Sep-10
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GDP Monitor: September 20 - 24, 2010
While business investment and housing data returned from previous lows this week, the overall growth trend has not deviated from our long-term viewpoint. We see a spike in GDP in the third quarter and a return to the sluggishness experienced in Q2 2010 in the fourth quarter.
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24-Sep-10
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Data Detail: Durable Orders (Aug-10), Home Sales (Aug-10)
While the headline durable orders data may seem to suggest a weakening in economic activities, the fact is that the August durable orders report struck another blow against the notion that the economy is headed for a double-dip recession...Seasonal adjustment factors added a bonus to both new and existing home sales level in August, making the monthly growth rate seem stronger than it actually was.
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23-Sep-10
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Data Detail: Jobless Claims - Sept. 12 - 18, 2010
Once the Census Bureau removed all of the temporary workers from the payroll, we expected that the initial claims level would fall below the 450,000 bound due to decreasing layoffs in the private sector. Given the latest data, the evidence now points to census workers having little to no effect on the heightened claims level while the private sector has seen continued layoffs.
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21-Sep-10
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Data Detail: Housing Starts - August 2010
Even though the NAHB sentiment index remains close to its all-time low, signaling poor future growth, homebuilders decided to increase the number of new homes started in August. The seemingly irrational disconnect between homebuilder sentiment and their near-term sales expectations is a perfect example of the confusion that remains in the residential investment sector.
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17-Sep-10
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GDP Monitor: September 13 - 17, 2010
This week's data confirm our viewpoint that a positive shock to both consumption and net exports will cause a strengthening in third quarter GDP. At the same time, though, the data overshadow productivity losses that will cause the weakness that occurred in Q2 2010 to return in the fourth quarter.
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17-Sep-10
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Data Detail: Inflation - August 2010
Analysts and economists were looking for new disinflationary trends in the August inflation reports that would suggest consumers or producers are entering a deflationary cycle. So far, the reports show a weakening in price growth, but there is no evidence as of yet that suggests price will turn negative for an extended period.
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16-Sep-10
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Data Detail: Jobless Claims - Sep. 5 - 11, 2010
We believed that the trend in the initial claims level should have started moving in the downward direction this week, especially after the number of temporary census workers remaining on payroll shrunk to roughly 15,000. However, firms remain overly cautious regarding future consumer demand and layoffs seem to have continued unabated.
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15-Sep-10
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Data Detail: Industrial Production - August 2010
All of the talk regarding the sluggish economic recovery and specifically the doom and gloom in the manufacturing sector took a back seat to another strong and steady data point as manufacturing production continued on its upward trend in August.
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14-Sep-10
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Data Detail: Retail Sales - August 2010
Last month, strong headline consumption data masked a weakening in the core spending base that we expected to drive a consumer-led slowdown in economic growth this fall. However, the data in August countered that viewpoint and revealed a consumer that was much stronger than we had anticipated.
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10-Sep-10
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GDP Monitor: September 6 - 10, 2010
Even though the data this week were impressive regarding third quarter GDP growth, they created some uncertainty about how the economy is going to perform over the next few quarters.
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09-Sep-10
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Data Detail: Jobless Claims (Sep 4), Trade Balance (July-10)
While the initial claims level remains bounded between 450,000 and 500,000, which has been the case since the middle of November 2009, the move toward the lower bound brings added hope that the labor market is finally showing signs of breaking out of its malaise...The paradox of strong GDP growth yet weak economic demand may come to fruition in the third quarter as the net export sector surges ahead.
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03-Sep-10
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GDP Monitor: August 30 - September 3, 2010
The economic data were clearly disappointing last week. Things quickly changed this week, though, as better-than-expected consumption, manufacturing output, and employment data reversed the needles and pointed back toward a stable recovery.
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03-Sep-10
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Data Detail: Employment Report - August 2010
After reading through the details of August's employment report, it is clear that the labor market, while still sluggish, is improving at enough of a clip that it should prevent a double-dip recession.
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02-Sep-10
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Data Detail: Jobless Claims - August 22 - 28, 2010
The labor market continues to run in place as claims remained bounded between 450,000 and 500,000 as they have been since the middle of November. There is nothing in the labor data that suggests substantial job growth is on the horizon, but there is some inkling that new firings may fall in the near future.
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01-Sep-10
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Data Detail: ISM Index (Aug-10), Construction (July-10)
Economists have been so downbeat regarding the economy over the past few months that it seems whenever a piece of economic news surprises to the upside, like today's ISM report, suspicion arises. After looking at the underlying details, those suspicions are unfounded.
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31-Aug-10
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Data Detail: Consumer Confidence - August 2010
Worries about a potential double-dip recession seem to be more of a concern for market analysts and media commentators than the consumer, as the consumers surveyed by the Conference Board strengthened their viewpoint that the future economic outlook is brightening.
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30-Aug-10
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Data Detail: Personal Income and Spending - July 2010
After weeks of tepid economic data, the personal income and spending report offered a nice respite. Unfortunately, the strengthening economic data look to be fleeting, at least for spending.
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27-Aug-10
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GDP Monitor: August 23 - 27, 2010
It is hard to look around the fact that this week's economic data was anything short of lousy, but even though many economists have upped their double-dip recession forecasts, the historical trends point toward a more temporary blip than another leg down in economic activities.
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26-Aug-10
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Data Detail: Jobless Claims - August 15 - 21, 2010
A breakout from the ongoing stagnation in the labor market remains elusive as the initial claims level fell during the week, but remained firmly grounded between 450,000 and 500,000 claimants as it has done just about every week since the middle of November 2009. There has been nothing to suggest that the claims level will suddenly strengthen and fall below the lower bound any time soon.
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25-Aug-10
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Data Detail: Durable Orders (July-10), Home Sales (July-10)
On the surface, the manufacturing numbers provide more evidence that the economic recovery is not only weakening, but is much closer to a turning point that would signal a double-dip recession. However, in order to come to that conclusion one would have to discount the orders trend that has stabilized over the past 10 months and continued in July...After reviewing July's abysmal home sales data, there can only be one conclusion: the payback period following the expiration of the homebuyers' tax credits will not be moderate.
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20-Aug-10
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GDP Monitor: August 16 - 20, 2010
This week's economic data confirm the view that the economic recovery is weakening, but it has not yet reached a point where we would consider the possibility of a double-dip recession. We readjusted our inventory forecast higher for the third quarter due to the gains in producer prices, and now expect GDP to increase 0.9%, up from 0.7%.
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19-Aug-10
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Data Detail: Jobless Benefits - August 8 - 14, 2010
We are left wondering how much of the growth in claims is actually due to a weakening in the labor sector as opposed to the reduction in temporary census workers. After adjusting for the lost census workers, the initial claims level not only broke free of the 450,000 to 500,000 bound, but it deteriorated below 400,000 - a level that normally fosters employment growth.
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17-Aug-10
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Data Detail: Starts (July), Inflation (July), IP (July)
All three economic data reports (housing starts, inflation, and industrial production) contained encouraging headline data. However, the details of each report reveal a lack of sustainability.
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16-Aug-10
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Residential Construction Outlook: Wave of Inventories Ahead
During the first few months of the year, housing starts accelerated as homebuilders took advantage of low inventory levels and what was thought to be increased demand for new homes. That seems to have been a mistake. Using simple calculations, we determined that inventory levels can easily exceed previous highs by the end of the year as sales demand shrinks.
Fortunately, it is very unlikely that a seizure in construction following an inventory spike will be strong enough to pull the U.S. back into a double-dip recession.
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13-Aug-10
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GDP Monitor: August 9 - 13, 2010
The headline growth level in the retail sales report was in-line with our estimates, but the details suggest consumption growth may be slower in the second half of the quarter. As a result, our GDP estimate for Q3 was revised down from 1.0% to 0.7%.
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13-Aug-10
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Data Detail: Retail Sales - July 2010
On the surface, the rise in July's retail sales figure suggests that the consumer is spending again. However, the details point in the opposite direction, one where the consumer remains weak and spending growth may be fleeting.
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12-Aug-10
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Data Detail: Jobless Claims - August 1 - 7, 2010
On the surface, this week's jobless benefits data reveal more of the same. The initial claims level has remained stubbornly bounded between 450,000 and 500,000 since the middle of November 2009. However, the fact that claims have not risen above the 500,000 level over the past few months may be a sign that the labor market is actually stabilizing, if not improving.
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11-Aug-10
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Data Detail: Trade Deficit - June 2010
Under normal circumstances, an increase in the trade deficit would signal a growing need for manufacturing inputs and/or a rise in consumer demand for consumption goods. Yet, in June we already saw data that revealed a slowing manufacturing sector and a weakening consumption base. Therefore, the rise in the trade deficit seems to be more of an anomaly than a sustainable trend.
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06-Aug-10
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GDP Monitor: August 2 - 6, 2010
There was nothing in the detail of the Q2 2010 GDP data that suggested we should alter our view on next quarter's growth. We still believe that consumption will lead the recovery effort along with gains in investment spending. Net exports and government spending growth will drag.
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06-Aug-10
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Data Detail: Employment Report - July 2010
The headline numbers from July's employment situation report leave an uneasy feeling that the labor market malaise will remain for quite some time. Yet, digging through the details provides a sense of modest relief that a double-dip recession is not coming up on the horizon.
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05-Aug-10
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Data Detail: Jobless Claims - July 25 - 31, 2010
It is possible that the jump in initial claims was largely the result of census workers filing for unemployment. The lack of growth above 500,000 may suggest that the private sector is finally entering a period of stability.
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03-Aug-10
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Data Detail: Personal Income and Spending - June 2010
There is not any new information to report following the personal income and spending data release for June. The Bureau of Economic Analysis incorporated the data into the second quarter GDP release.
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02-Aug-10
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Data Detail: ISM (July), Construction Spending (June)
Given the ISM details, we feel the talk of a potential double-dip in manufacturing activities is being overplayed. We would need to see weaker data before we alter our thinking on that point...The construction data were included in last week's GDP data. Accordingly, there really was not any new information to be gleaned about the second quarter from this report.
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30-Jul-10
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GDP Monitor: Reconciliation of Q2 2010 GDP
Since it is not feasible to reconstruct the historical data with the new revisions until after the BEA releases its supplemental detail reports on Tuesday, we cannot determine what our forecasts would have looked like if the revised data were known to us.
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30-Jul-10
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Data Detail: GDP - Q2 2010 - Advance Estimate
The Bureau of Economic Analysis included its annual benchmark revisions in the Q2 2010 GDP forecast, and it lent credence to what many people on Main Street were already thinking: the recession was deeper than originally expected and the recovery effect has been a little slower.
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29-Jul-10
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Data Detail: Jobless Claims - July 18 - 24, 2010
After two weeks of volatility in the initial claims level that were rooted in biases in the seasonal adjustment factors, we are finally receiving our first clear picture of the labor market in July. Unfortunately, the data are painting a picture that looks eerily similar to what the market has been experiencing for the past nine months.
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28-Jul-10
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Data Detail: Durable Goods Orders - June 2010
Looking past the headline value reveals a solid business environment. Growth in both new orders and shipments of nondefense business capital excluding aircraft remained in the black. Even though consumer confidence is slipping, businesses remain unconcerned that a double-dip recession may be brewing in the immediate future.
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27-Jul-10
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Data Detail: Consumer Confidence - July 2010
July is turning into a very scary month for consumers as employment anxieties and fears of a double-dip recession weigh heavily on consumer attitudes. Fortunately, weaker confidence numbers do not necessarily mean a lack of consumption growth. Overall, we continue to expect personal spending to remain steady.
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26-Jul-10
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Data Detail: Home Sales - June 2010
We have received a second month of data regarding the payback period following the homebuyers' tax credits, and the data suggest that the sales numbers may not be as grim as once thought.
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23-Jul-10
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GDP Monitor: July 19 - 23, 2010
Quarterly updates to our import/export pricing models tightened our trade-deficit estimates and subtracted almost a full percentage point from GDP. As a result, our GDP estimate for Q2 was revised down from 4.0% to 3.0%. While the economic news in the housing sector was worse than expected, it had only a minor influence on our GDP forecast.
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22-Jul-10
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Data Detail: Jobless Claims - July 11 - 17, 2010
The discrepancy between today's business activities and a normal business environment has left the seasonal adjustment factors out of synch, suggesting that any changes in claims is more than likely just noise and not the beginning of any new trend.
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20-Jul-10
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Data Detail: Housing Starts - June 2010
Going off of the starts data, one would think that the sector was moving in the wrong direction. However, that is a bit of a misnomer as the data more accurately reveal a sideways trend.
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16-Jul-10
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GDP Monitor: July 12 - 16, 2010
Our Q2 2010 GDP forecast was revised down from 4.4% to 4.0% after the net export deficit widened more than anticipated. While the data this week lowered our economic outlook, it actually showcased a much stronger recovery. A rise in investment will keep our long-term projections on target and possibly improve them if productivity grows faster than we expect.
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16-Jul-10
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Data Detail: Inflation - June 2010
Commodity prices continue to be at the heart of the deflationary moves in the indexes. Oddly, though, the reason for the drop in headline prices was different for both. Energy prices were the main driver in lowering consumer prices while weaker food prices contributed to declining producer prices.
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15-Jul-10
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U.S. Economic Outlook - Q3 2010
There are ample risks associated with today's economic uncertainty. However, we do not envision a double-dip recession materializing. GDP is expected to increase 3.0% in 2010 and 1.7% in 2011. The inventory contribution to GDP is expected to fall from 1.4 percentage points in 2010 to zero points in 2011. The lost inventory contribution makes up the entire difference between our 2010 and 2011 GDP forecast. Economic output should weaken in the second half of 2010 and persist through the middle of 2011 as the inventory cycle winds down, import growth strengthens as dollar volatility induces demand for foreign goods, and consumption weakens after a portion of the Bush tax cuts expires. Led by a return in consumption and investment in equipment and software, growth returns to potential in the second half of 2011.
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15-Jul-10
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Data Detail: Claims (July 10), Ind. Production (Jun-10)
Today's data highlight the necessity to look at the details rather than just the headline number. The entire initial claims decline can be explained by poor seasonal adjustment factors. Likewise, manufacturing production turned negative for the first time since February, but that was due to the moratorium on drilling in the Gulf and weakness in motor vehicle manufacturing.
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14-Jul-10
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Data Detail: Retail Sales - June 2010
After driving GDP growth in the first quarter of the year, the consumer has definitely lost some of its momentum over the past couple of months. While we anticipate that consumption growth will remain positive for the remainder of the year, the strength of its contribution to GDP will be weak unless the private sector opens up its doors and starts to rehire.
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13-Jul-10
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Data Detail: Trade Balance - May 2010
While the growth in the deficit will lower our second quarter GDP forecasts, the details of the data actually reveal a strengthening economic recovery. Imports of core business capital outperformed export growth and the gains in business investment following the strong shipments data for nondefense capital goods excluding aircraft remained intact.
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09-Jul-10
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GDP Monitor: July 5 - 9, 2010
After stronger-than-expected growth in merchant wholesaler inventories our Q2 2010 GDP forecast was revised up from 4.1% to 4.4%. We anticipated that wholesale inventories would follow the downward trend revealed in last week's manufacturers' level. While wholesale petroleum inventories fell 6.0% in May, the remaining sectors more than offset the loss.
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08-Jul-10
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Data Detail: Jobless Claims - June 26 - July 3, 2010
While the jobless report was fairly bland, we are beginning to worry about the lost income from the extended benefits. If extended benefits decline by 3.3 mln by the end of July, we could see a combined 0.2 percentage point drop in income due to the lost benefits over the next several months. This could be a significant hindrance to consumption growth and we may need to revise our third quarter forecasts as a result.
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02-Jul-10
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GDP Monitor: June 28 - July 2, 2010
Weaker-than-expected growth in manufacturers' shipments more than offset stronger-than-expected consumption and construction data as Q2 2010 GDP was revised down from 4.2% to 4.1%. While durable inventory growth remained strong, nondurable manufacturers had the worst-performing month since November 2008 as inventories declined 2.1%. We expect a modest rebound next month.
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02-Jul-10
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Data Detail: Employment Report - June 2010
The drop in hours and wages may be a bigger cause of concern than the sickly payroll numbers. It seems that firms are producing beyond current demand requirements, and, as a result, inventories may be stockpiling too quickly. The weakness in weekly earnings suggests that firms are cutting production and the data lead us to believe that we may be witnessing a precursor to further declines in retail sales over the coming months.
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01-Jul-10
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Data Detail: Claims (Jun-26) Construct (May-10) ISM (Jun-10)
The overall weakness of the economic recovery was evident in the jobless claims, construction spending, and ISM reports. While a double-dip recession remains a low probability, the data underscore that the economy is not growing at rates that most economists predicted at the beginning of the year.
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29-Jun-10
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Data Detail: Consumer Confidence - June 2010
The Conference Board's Consumer Confidence Index tanked in June. In doing so, it fueled concerns about there being a big downturn in consumer spending and a double-dip recession in the U.S. Both concerns are misplaced knowing confidence readings take a distant backseat to income when it comes to spending.
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28-Jun-10
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Data Detail: Personal Income and Spending - May 2010
The personal income and spending report for May provided some encouraging markers for future spending activity. At the same time, it showed inflation remains subdued and that there should not be any undue concern about the FOMC raising the target range for the fed funds rate anytime soon.
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25-Jun-10
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GDP Monitor: June 21 - 25, 2010
A greater-than-expected rebound in business capital shipments along with strong inventory investment pushed our second quarter GDP forecast up to 4.2% from 3.8%. After a lack of shipments in nondefense business capital excluding aircraft in April, we anticipated a moderate rebound in investment spending. Surprisingly, business demand came in at much greater levels than expected and pushed our equipment and software growth forecast up to 19.1%.
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25-Jun-10
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Data Detail: GDP - Q1 2010 - Third Estimate
Even though the negative revision was unexpected, the fact that GDP remained near its potential 2.8% long-term growth rate will not alter our view about the stability of the economic recovery. While economic growth may be subdued, the probability of a double-dip recession continues to be remote.
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24-Jun-10
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Data Detail: Durables (May-10), Jobless Claims (June 19)
More importantly, the growth in domestic business capital came during a time of global weakening and a strengthening dollar. As a result, we expect that a majority of these purchases will remain in the U.S. for domestic use. Therefore, long-term economic growth potential remains strong...Since the middle of November, the initial claims level has stubbornly remained bounded between 450,000 and 500,000 claimants every week. Time and time again we have looked for signs of a breakout, but it keeps eluding us as firms remain willing to cut costs by reducing their labor needs.
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23-Jun-10
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Data Detail: Home Sales - May 2010
If it were up to the reactions by the media and equity markets regarding the housing sales data, a double dip in housing would no longer be considered a possibility but a reality. In truth, the weakness in the data should fuel concern that the housing sector is teetering on edge, but hard conclusions will not be able to be made until at least after the July data are released.
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18-Jun-10
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GDP Monitor: June 14 - 18, 2010
Weaker-than-expected housing starts data caused a dip in our GDP growth forecast for the second quarter from 3.9% to 3.8%. There is no clear answer on why builders shut down on new construction. One conclusion is that it is a simple ease following four strong months of growth. However, it is also possible that builders overshot on their demand estimates and became worried that they may have too much inventory stock in the coming months.
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17-Jun-10
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Data Detail: Jobless Claims (June 12), Inflation (May-10)
As much as analysts would like to discount the claims numbers as an inaccurate reading of the employment situation, the sideways movement provides more evidence that the 218,000 increase in private nonfarm payrolls in April was an outlier. The data suggest that we should expect payroll growth in the 40,000 - 60,000 range instead, and anything above this level would a surprise bonus for the month...The inflation data for May provide further affirmation that the Fed will be on hold for some time yet. Inflation pressures are simply not a problem at this juncture. The trend in both PPI and CPI is clearly one of disinflation, which is apt to stoke commentary about a possible turn to a deflationary environment.
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16-Jun-10
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Data Detail: Housing Starts (May-10); Production (May-10)
Clearly the drop in May's housing starts level was a disappointment. However, it is possible that the drop in starts is a simple easing after three out of four months of growth. Starts increased 14.4% from December to April 2010 and were due for a pullback as the industry gets a better grasp of the housing situation following the tax credit....It should be noted that the moratorium on drilling has had a limited effect on the manufacturing data thus far. Oil well drilling production posted no growth in May, but we anticipate this data point will turn significantly negative over the next couple of months as the suspension is in place. Therefore, a significant drop in production next month due to the oil sector may cause the headline manufacturing number to fall, but it will have no bearing on the stable growth prospects of the rest of the industry.
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11-Jun-10
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GDP Monitor: June 7 - 11, 2010
We raised our forecast for Q2 2010 real GDP this week, increasing it 0.5 percentage points to 3.9%. The change was primarily due to businesses unexpectedly turning to foreign sources for their investment needs.
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11-Jun-10
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Data Detail: Retail Sales - May 2010
The retail sales numbers came in as a negative complete shock. Yet, the details of the report paint a different picture. Instead of pointing toward the beginning of a negative spiral in consumption spending, in essence the premature ending of the super consumer, the report was actually very benign.
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10-Jun-10
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Data Detail: Jobless Claims (June 5), Trade Balance (Apr-10)
The fact is the lack of a significant downward trend in jobless claims is going to make it extremely difficult for stable employment growth. We saw this last month when claims remained at or above their March levels and it resulted in a major disappointment in nonfarm payroll growth....On the surface, a drop in imports of industrial supplies would suggest that manufacturing is overheating and future production may be curtailed until demand for the sector's products catches up. However, imports of core capital goods increased by $1.6 bln, which reveals strong growth in equipment and software investment.
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04-Jun-10
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GDP Monitor: May 31 - June 4, 2010
We raised our expectation for real GDP growth in Q2 2010 due to stronger-than-expected construction data and motor vehicle sales. Currently, we are forecasting a 3.4% increase versus a prior outlook of 3.2%. We anticipated that builders constructing smaller homes would result in slower growth in residential construction expenditures than in the past.
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04-Jun-10
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Data Detail: Employment Report - May 2010
The market may attempt to discount the employment report as an outlier or a possible payback period following last month's strong employment numbers. This view would discount the weakness shown in the claims data and ADP report. In reality, the employment report provides evidence that the U.S. is struggling through a long-term jobless recovery. The outliers may prove to be more like April's data, strong growth in the face of difficult underlying data.
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03-Jun-10
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Data Detail: Jobless Claims - May 23 - 29, 2010
As we look toward tomorrow's nonfarm payrolls release, the latest jobless claims data do nothing to reassure the market that the payroll number is going to be strong. Instead of a strengthening labor market that analysts have been clamoring for, the claims data reveal a labor market that has been stagnate for eight weeks.
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03-Jun-10
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Housing Market: Volume and Price Pressures Remain
As the payback period subsides, we expect total housing sales to return to their pre-tax credit levels, showing a bottom in sales has been reached. However, at this level supply pressures still outweigh demand, and pricing may remain in a deflationary trend.
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01-Jun-10
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Data Detail: Construction (Apr-10), ISM (May-10)
Total construction expenditures rose 2.7% in April, their strongest monthly gain since August 2000. Combined with the gains in March, construction posted its first two-month growth period since late 2007.... At first glance, the ISM Index for May suggests a weaker manufacturing sector than in April. The index fell from 60.4 in April to 59.7 in May and barely beat expectations of a reading of 59.4. However, the details of the data reveal stability at a heightened growth level.
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28-May-10
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GDP Monitor: May 24 - 28, 2010
We lowered our expectation for real GDP growth in Q2 2010 due to weaker-than-expected shipments of nondefense capital goods excluding aircraft. Currently, we are forecasting a 3.2% increase versus a prior outlook of 3.5%.
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28-May-10
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Data Detail: Personal Income and Spending - April 2010
Income rose 0.4%, exactly what the median estimate expected and the same growth rate as in March. However, while March's income growth was primarily due growth in government transfers, April saw a 0.4% rise in wages. Steady growth in wages is needed for sustainable consumption.
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27-May-10
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Data Detail: GDP (Q1-2010), Jobless Claims (May 16 - 22)
The second estimate to first quarter GDP was a bit of a disappointment. The revisions showed output increased by only 3.0%, down from 3.2% in the advance estimate and below the median estimate of 3.3%. The main difference between the actual GDP data and the consensus estimate was due to the consensus overestimating the contribution from inventory investment... Excluding the Easter holiday biases, the initial claims level remains stubbornly above its levels in March and shows no signs of labor growth. Yet, this conclusion goes against the gains revealed in April's employment report, where payrolls increased at their fastest pace since 2006.
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26-May-10
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Data Detail: Durable Orders (Apr-10), Home Sales (Apr-10)
In actuality, the durable goods report was extremely negative and paints a very depressing picture of the manufacturing sector. Excluding the transportation sector, durable goods orders declined 1.0%, well below expectations of a 0.7% increase....With the April 30 first-time and existing homebuyers' tax credit deadline approaching, buyers rushed back into the market in April in order to take advantage of the rebates. The resulting surge in buyers drove both existing and new home sales well above consensus expectations.
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25-May-10
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Data Detail: Consumer Confidence - May 2010
Shockingly, consumer confidence not only beat the median consensus estimate of 58.3 but it also came in higher than the most optimistic economic prediction. This implies the average consumer is more confident about the economy than what any surveyed economist previously believed.
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24-May-10
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GDP Monitor: May 17 - 21, 2010
Our expectation for real GDP growth in Q2 2010 was revised higher due to the implementation of a new inventory model. Currently, we are forecasting a 3.5% increase to second quarter GDP versus a prior outlook of 2.3%.
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20-May-10
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Data Detail: Jobless Claims -- May 9 - 15, 2010
The strengthening of the labor market is a myth, or at least that is what the latest piece of data from the Department of Labor would suggest. The latest jobless claims data revealed the worst initial jobless claims level since the end of January.
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19-May-10
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Data Detail: Inflation -- April 2010
While many analysts have become focused on the "inevitable" rise in prices as a means to offset the ever increasing deficit, current prices have been moving in the complete opposite direction.
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18-May-10
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Data Detail: Housing Starts -- April 2010
The housing sector rebound looks to be in full swing as housing starts rose to 672,000, its highest level since October 2008. However, on the flip side, building permits issuances showed a steep decline as only 606,000 permits were authorized, down almost 80,000 from March 2010.
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14-May-10
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GDP Monitor: May 10 - 14, 2010
Our expectation for real GDP growth in Q2 2010 was revised lower due to weaker than expected retail sales data and a change in our medium-term motor vehicle sales forecast. Currently, we are forecasting a 2.3% increase to second quarter GDP versus a prior outlook of 2.9%.
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14-May-10
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Data Detail: Industrial Production -- April 2010
If we take into account that the median estimate factored in a stronger utilities number than what really occurred, then manufacturing production actually came in much stronger than expected.
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14-May-10
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Data Detail: Retail Sales -- April 2010
The growth in sales was not only a little shaky, but it also seems poised for a downward revision. Unless consumers bought more expensive motor vehicles in April, it seems that the advance retail sales figure overestimated motor vehicle sales growth.
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13-May-10
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Data Detail: Jobless Benefits -- May 2 - 8, 2010
The data imply that the jobless numbers and nonfarm payrolls are in a sizeable conflict. The payrolls numbers suggest a potential V-shaped recovery whereas the claims data paint the opposite picture.
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12-May-10
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Data Detail: Trade Balance -- March 2010
The U.S. trade deficit increased from $39.4 bln to $40.4 bln in March. However, the growth in the trade deficit was actually a reassurance that firms expect consumer demand growth to remain strong.
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07-May-10
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GDP Monitor: May 3 - 7, 2010
Our initial real GDP growth forecast for Q2 2010 is 2.9%, down from 3.2% in the first quarter. The differences between our second quarter forecast and the first quarter actual output are fairly minor with a projected rise in construction spending being the most notable.
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07-May-10
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Data Detail: Employment Report -- April 2010
In just about every area, April's employment report showcased the strongest labor sector since before the recession.
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06-May-10
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Data Detail -- Jobless Claims - April 25 - May 1, 2010
For the first three weeks in April, the claims data suffered from statistical biases due to the Easter holiday. As the biases dissipated, both the initial and continuing claims figures remained at March's level.
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03-May-10
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Dawn of the Super Consumer
The strength of the American consumer through the recession has led us to believe we are entering a new era -- the dawn of the "Super Consumer". Like its superhero namesake, this consumer seems impenetrable, invincible and destined to lead us to prosperity.
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03-May-10
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Data Detail: ISM Index -- April 2010
According to the latest ISM report, the manufacturing sector is not only expanding, but growing at its fastest rate since June 2004.
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03-May-10
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Data Detail: Construction Spending -- March 2010
The consensus viewpoint was developed under the assumption that February's decline of 1.3% would be unchanged, which turned out to be untrue. Taken together, the change in construction expenditures in February and March were actually worse than expected.
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03-May-10
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Data Detail: Personal Income and Spending - March 2010
Both personal income and spending met expectations as the consensus was easily able to back-out March's growth numbers from the quarterly GDP aggregates.
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30-Apr-10
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GDP Monitor – Reconciliation of the Q1 2010 GDP
The advance estimate for Q1 2010 GDP showed output increasing 3.2% q/q annualized. Using all of the available economic data releases, we predicted first quarter growth 1.4 percentage points lower at 1.8%.
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30-Apr-10
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Data Detail: GDP -- Q1 2010 Advance Estimate
While the NBER has not yet officially called the end of the recession, given the continued strength in GDP growth, we feel comfortable stating that it probably ended in the summer of 2009. GDP growth in Q1 2010 represented the third consecutive quarter of positive output gains.
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29-Apr-10
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Data Detail: Jobless Claims -- April 18 - 24, 2010
After three weeks in which the initial claims level suffered from statistical biases, we finally get our first true sense of the labor market. Unfortunately, the data suggest that the market is in the same exact position as it was in March.
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27-Apr-10
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Data Detail: Consumer Confidence -- April 2010
The Conference Board's Consumer Confidence Index climbed another 5.6 points in April to 57.9 and easily exceeded expectations of a rise to 53.5. The index is at its highest point since August 2008, right before the Lehman Bankruptcy.
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23-Apr-10
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GDP Monitor: April 19 - 23, 2010
Our expectation for real GDP growth in Q1 2010 went up this week due to much stronger equipment and software investment and a revision to our IVA estimate. Currently, we are forecasting a 1.8% increase to first quarter GDP versus a prior outlook of 1.1%.
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23-Apr-10
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Data Detail: Home Sales -- March 2010
The mood for home sales drastically changed in March as buyers rushed into the marketplace in order to take advantage of the first-time and existing homebuyers' tax breaks before they expire at the end of April.
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23-Apr-10
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Data Detail: Durable Goods Orders -- March 2010
The entire decline in total orders can be attributed to a shift in aircraft demand as nondefense aircraft orders fell 67.1%. In January and February, these orders increased 212%. A drop to a more normal orders figure was inevitable.
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22-Apr-10
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Data Detail: Inflation -- March 2010
Inflation hawks were disappointed by March's inflation data. We continue to expect limited pass-through from the PPI to the CPI. As a result, there will be pressure on profit margins.
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22-Apr-10
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Data Detail: Initial Claims -- April 11 - 17, 2010
The volatility in claims experienced over the past few weeks is not a clear representation of the labor sector. Given the strength in the ISM and consumer surveys, we anticipate the initial claims level to fall below the March 27 low in next week's data release.
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16-Apr-10
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GDP Monitor: April 12 - 16, 2010
Our expectation for real GDP growth in Q1 2010 moved sharply lower this week due to a much weaker trade balance. Currently, we are forecasting a 1.1% increase versus a prior outlook of 2.9%.
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16-Apr-10
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Data Detail: Housing Starts -- March 2010
The data suggest that the rise in starts is not due to some unknown volatility, but is the start of a steady trend upward. While the steepness of the upward movement is still under investigation, we are confident that starts will remain on this path for at least the next few months.
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15-Apr-10
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Data Detail: Industrial Production -- March 2010
Given the extensive manufacturing production increase, the industrial production report actually showcased one of the best monthly output gains since the recovery began.
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15-Apr-10
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Data Detail: Initial Claims -- April 4 - 10, 2010
For the second week in a row, the initial claims data were hindered by biases in the seasonal adjustment factors following the Easter holiday. The Department of Labor expects the adjustments will remain a problem for at least another week.
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14-Apr-10
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Data Detail: Retail Sales -- March 2010
Retail sales saw its third consecutive month of increased sales growth and signal consumption growth should be a strong contributor to first quarter GDP.
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13-Apr-10
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Data Detail: Trade Balance -- February 2010
While the latest U.S. trade data will end up lowering our first quarter GDP estimate, the details regarding the widening of the trade balance suggest a more sturdy economic recovery.
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09-Apr-10
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GDP Monitor: April 5 - 9, 2010
Our expectation for real GDP growth in Q1 2010 was revised up this week due to better-than-expected wholesale inventories. Currently, we are forecasting a 2.9% increase to first quarter GDP versus a prior outlook of 2.4%.
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08-Apr-10
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Data Detail: Initial Claims -- March 28 - April 3, 2010
The uptick in claims should not be a source of worry and instead is the result of statistical complications. Since Easter is a moving holiday, the typical seasonal adjustment factors often fail and cause discrepancies in the reported numbers.
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05-Apr-10
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Data Detail: Motor Vehicle Sales -- March 2010
After a lackluster February, in which dealers blamed the weather for their poor sales results, manufacturers laid out heavy incentives in order to increase sales traction in March. As a direct result, sales rose to a post-Cash for Clunkers high in March.
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02-Apr-10
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Data Detail: Employment Report - March 2010
The headline number for March nonfarm payrolls came up just shy of the consensus estimate. Looking into the details, though, the March number was actually better than expected.
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01-Apr-10
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GDP Monitor: March 26 - April 1, 2010
Our expectation for real GDP growth in Q1 2010 was revised down this week due to a contraction in construction spending.� Currently, we are forecasting a 2.4% increase to first quarter GDP versus a prior outlook of 2.6%.
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01-Apr-10
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Data Detail: ISM Index -- March 2010
The strength was evident in the ISM subcomponents, where each registered an improvement over February's level except for order backlogs and employment. However, those declines were not enough to start a new contraction cycle.
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01-Apr-10
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Data Detail: Construction Spending -- February 2010
At the time of the housing starts release, many analysts attributed the decline to inclement weather conditions preventing builders from working. However, if weather made construction difficult, the decline in nonresidential construction should have been much worse.
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01-Apr-10
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Data Detail: Initial Claims -- March 21 - 27, 2010
The lack of movement in continuing claims suggests that every person whose unemployment benefits end is immediately refilled by a new claimant. Further, the small decline in claims is most likely due to the expiration of benefits and not job formation.
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31-Mar-10
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Data Detail: Factory Orders -- February 2010
Orders would not have beaten expectations if not for an upward revision to durable goods. The revisions were spread throughout the data and show stronger growth across all sectors.
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30-Mar-10
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Data Detail: Consumer Confidence - March 2010
Typically,�an extreme rise in gasoline prices would have canceled out the positive contributions from the other relationships, but consumers were much more impressed with the wealth effects from higher equity prices than the lost income from increased gasoline spending.
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30-Mar-10
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Data Detail: Case-Shiller Home Price Index - January 2010
Home prices, as determined by the Case-Shiller index, have performed admirably over the past few months even though housing sales have plummeted.
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29-Mar-10
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Data Detail: Personal Consumption -- February 2010
The details of the spending report matched up perfectly with February's retail sales report excluding the motor vehicles data.Nondurable goods consumption rose 0.7% in both the spending and retail sales reports while durable goods demand increased 1.1% in both reports.
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26-Mar-10
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GDP Monitor: March 22-26, 2010
Our expectation for real GDP growth in Q1 2010 was revised up this week due to durable goods shipments. Currently, we are forecasting a 2.6% increase to first quarter GDP versus a prior outlook of 2.4%.
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26-Mar-10
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Data Detail: GDP -- Q4 2009 - Third Estimate
The fourth quarter GDP growth rate was revised down from 5.9% to 5.6% in the third estimate. All GDP sectors faced downward revisions, but the only material revisions were found in the investment sector.
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25-Mar-10
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Data Detail: Initial Claims - March 14-20, 2010
It seems firms are finally satisfied with their labor needs and future layoffs will be due to individual firm-specific difficulties and not by sector-wide problems.
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24-Mar-10
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Data Detail: New Home Sales -- February 2010
While the housing market is clearly going through a payback period following the original November expiration date for the first-time homebuyers' tax credit, it seems to be abating.
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24-Mar-10
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Data Detail: Durable Goods Orders -- February 2010
Business investment (nondefense capital goods excluding aircraft), which looked extremely weak in January, posted a nice 1.1% rebound in February. However, capacity utilization rates are still well below levels that foster investment growth.
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23-Mar-10
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Data Detail: Existing Home Sales -- February 2010
The data are actually encouraging for the housing sector. The lack of a further leg down in sales may signal that potential homebuyers are gearing up toward making new purchases before the�tax breaks expire at the end of April.
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19-Mar-10
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GDP Monitor: March 15-19, 2010
Our expectation for real GDP growth in Q1 2010 was revised up this week due to stronger inventory estimates. Currently, we are forecasting a 2.4% increase to first quarter GDP versus a prior outlook of 1.7%.
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18-Mar-10
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Data Detail: CPI -- February 2010
As with yesterday's PPI data, the notion of runaway inflation continues to ease with each passing inflation report. The CPI data suggest only minor inflationary pressures.
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18-Mar-10
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Data Detail: Initial Claims -- March 7 - 13, 2010
The limited movement in claims over the past three weeks suggests that the labor market has hit a new equilibrium plateau. It could take a few more weeks before it breaks out again in a steep downward trajectory.
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17-Mar-10
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Data Detail: PPI -- February 2010
The preponderance of inflation hawks in the media would suggest that inflation is on the verge of getting out of hand. However, the PPI has shown no clear signs of sustained strong inflation.
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16-Mar-10
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Data Detail: Housing Starts -- February 2010
The decline in starts from 611,000 to 575,000 seems to be normal volatility in the index and not the start of a downturn in construction. The lack of a downward movement makes us wonder if homebuilders believe the stimulus plans will be extended beyond June.
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15-Mar-10
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Data Detail: Industrial Production -- February 2010
The only reason why production showed positive growth over the month was due to an unexpectedly strong increase in mining production, which increased 2.0% in February after rising 1.1% in January.
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12-Mar-10
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GDP Monitor: March 8-12, 2010
Our expectation for real GDP growth in Q1 2010 was revised up this week due to much stronger-than-expected consumption growth. Currently, we are forecasting a 1.7% increase to first quarter GDP versus a prior outlook of 1.3%.
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12-Mar-10
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Data Detail: Business Inventories -- January 2010
The lack of sustainable inventory growth over the last two months should not necessarily lower 2010 GDP forecasts. Inventories move in cycles and growth should return in the next few months as consumer demand stabilizes.
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12-Mar-10
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Data Detail: Retail Sales -- February 2010
This is the third piece of data, after the previously released initial claims figure and employment situation report, to verify that the inclement winter weather in February had no lasting effect on economic growth during the month.
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11-Mar-10
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Data Detail: Trade Balance -- January 2010
The biggest difference between the consensus estimate and the actual data came in the petroleum import sector. January's consumption data showed a surge in gasoline expenditures. However, petroleum imports declined $0.878 bln.
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11-Mar-10
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Data Detail: Initial Claims -- Feb. 28 - March 6, 2010
Since claims held between 460,000 and 470,000 over the last couple of weeks without any external disturbances to the data, it is plausible that this bound is the new equilibrium point.
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05-Mar-10
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GDP Monitor -- Mar. 1-5, 2010
Our expectation for real GDP growth in Q1 2010 was revised up this week due to the revisions to January's personal consumption data. Currently, we are forecasting a 1.3% increase to first quarter GDP versus a prior outlook of 0.7%.
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05-Mar-10
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Data Detail: Employment Report -- February 2010
It seems forecasters, including us, overestimated the effects of the severe winter weather on the payrolls data. The consensus estimate included a decline of 100,000 in payrolls due to inclement weather. The estimate turned out to be bogus and weather conditions played almost no role in moving the payroll numbers.
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04-Mar-10
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Data Detail: Factory Orders -- January 2010
The factory orders report gives a very poor initial reading to business investment in the first quarter. Given the economic backdrop, the decline in investment expenditures in January leads us to believe that businesses are not so sure about the recovery.
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04-Mar-10
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Data Detail: Productivity -- Q4 2009 - Revised
Productivity increased in the fourth quarter because workers were able to boost output back to Q4 2008 levels, while using a workforce on par with Q2 1996 levels.
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04-Mar-10
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Data Detail: Initial Claims -- Feb. 21-27, 2010
We expected a backlog of applications following the inclement weather conditions in the early part of February to push claims even higher. The drop in claims suggests that inclement weather may not have had nearly as much effect on the labor data as initially expected.
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03-Mar-10
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Data Detail: Motor Vehicle Sales -- February 2010
Many analysts attributed the decline in sales to poor weather conditions. Massive snowstorms across the U.S. in February resulted in many consumers being holed up in their homes and unable to purchase a new car. It is expected that sales will resume an upward pace in March.
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01-Mar-10
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Data Detail: Construction Spending -- January 2010
Total construction expenditures declined 0.6% in January, exactly in-line with the consensus expectation. The diversity of declines in nonresidential construction confirms our belief that investment in nonresidential structures still has a long way to go before bottoming out.
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01-Mar-10
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Data Detail: ISM Index -- February 2010
Growth in the manufacturing sector slowed according to the latest ISM report. The ISM index fell from 58.4 in January to 56.5 in February. Inventories look to be on the cusp of breaking through the 50 threshold for the first time since April 2006.
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01-Mar-10
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Data Detail: Personal Income and Spending -- January 2010
January's personal spending and income release came in very mixed. On a high note, personal spending outperformed the consensus expectation by 0.1 percentage points with growth of 0.5%. On the downside, personal income increased only 0.1%, which was 0.3 percentage points less than the consensus forecast.
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26-Feb-10
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GDP Monitor: Feb. 22-26, 2010
Our expectation for real GDP growth in Q1 2010 was revised down this week due to the revisions to the Q4 2009 figure. Currently, we are forecasting a 0.7% increase to first quarter GDP versus a prior outlook of 1.0%.
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26-Feb-10
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Data Detail: Existing Home Sales -- January 2010
Existing home sales declined from 5.440 mln homes to 5.050 mln homes in January. We expect that it will take a few months before the supply of potential homebuyers swells enough to support stronger sales.
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26-Feb-10
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Data Detail: GDP -- Q4 2009 Second Estimate
Real GDP for Q4 2009 was revised up from 5.7% to 5.9% in the second estimate. Even though the total revision was small in magnitude, it was fairly volatile across all sectors.
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25-Feb-10
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Data Detail: Durable Goods Orders -- January 2010
Durable goods orders rose 3.0% in January, but the figure is misleading as transportation orders jumped 15.6% on the back of a 126% increase in orders for nondefense aircraft. In addition, growth in business investment seems to have slowed as orders for nondefense capital goods excluding aircraft fell 2.9% after increasing roughly 3.3% in both November and December.
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25-Feb-10
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Data Detail: Initial Claims -- Feb. 14-20, 2010
The initial claims data for the week ending Feb. 20 showed that the figure increased from 474,000 to 496,000. The consensus expected initial claims to decline to 460,000. Given that inclement weather in many cities may have prevented workers from filing new claims, it is possible the actual claims figure could be closer to 550,000.
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24-Feb-10
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Data Detail: New Home Sales -- January 2010
New home sales continued to fall in January as sales slumped to 309,000 from 348,000 in December. The consensus expected sales to increase to 354,000. Sales will probably remain low for at least one more month as the supply of new homebuyers takes time to restock.
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24-Feb-10
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Data Detail: Case-Shiller Home Price Index -- December 2009
The S&P/Case-Shiller 20-city Home Price Index fell only 3.08% y/y in December after declining 5.34% in November. The index posted its seventh consecutive monthly gain after bottoming in June 2009.
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23-Feb-10
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Data Detail: Consumer Confidence -- February 2010
The Conference Board's Consumer Confidence Index declined from 56.5 in January to 46.0 in February. The consensus expected a much more modest drop to 55.0. The drop in the index comes in the face of falling unemployment, lower gasoline prices, and more positive news about the economy in the media.
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19-Feb-10
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GDP Monitor: Feb. 15-19, 2010
Our forecast for real GDP for Q1 2010 was revised down this week due to stronger-than-expected inflation data. Currently, we are forecasting a 1.0% increase to first quarter GDP versus a prior outlook of 3.0%.
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19-Feb-10
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Data Detail: CPI -- January 2010
To no one's surprise, the energy index, which was up 2.8%, led the 0.2% increase in January CPI. Overall, the headlines for CPI fall to the pleasing side with respect to the inflation outlook.
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18-Feb-10
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Data Detail: Producer Price Index -- January 2010
The PPI jumped 1.4% in January vs. a consensus estimate of 0.8%. While the difference between the consensus estimate and the reported number looks significant, the miss was actually due to changes in the makeup of the PPI index.
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18-Feb-10
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Data Detail: Initial Claims -- Feb. 7-13, 2010
Initial claims for the week ending Feb. 13 climbed to 473,000. The figure represents a significant weakening in the labor market as job creation appears to be at an absolute standstill.
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17-Feb-10
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Data Detail: Industrial Production -- January 2010
The details of the January Industrial Production report, which showed that production grew 0.9%, are encouraging since the manufacturing sector provided the bulk of the increase.
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17-Feb-10
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Economic Monthly -- Strong Indications for a Weak 2010
While it looks like 2010 will start off strong as GDP grows at its potential rate in the first and second quarter, growth in the second half will hinge on how the economy reacts without direct fiscal and monetary stimulus. The housing market will be the biggest question mark.
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17-Feb-10
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Data Detail: Housing Starts -- January 2010
Housing starts exceeded expectations in January. Even more impressive was that December's numbers were revised higher. January's data, along with December's revisions, suggest builders believe demand will remain stable.
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12-Feb-10
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GDP Monitor -- Feb. 8-12, 2010
Our real GDP forecast for Q1 2010 was revised up this week due to stronger-than-expected retail sales. Currently, we are forecasting a 3.3% increase to first quarter GDP versus a prior outlook of 2.7%.
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12-Feb-10
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Data Detail: Retail Sales -- January 2010
Retail sales exceeded expectations in January, rising 0.5% vs. consensus of 0.3%. The report was extremely strong across all sectors. Importantly, core retail sales rose 0.8% in January after declining 0.3% in December. The growth gives hope that consumption growth may be on a more stable path.
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12-Feb-10
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Data Detail: Business Inventories -- December 2009
The consensus disregarded the latest BEA inventories estimate found in the Q4 2009 GDP report. Given that the BEA's estimates for manufacturer and merchant wholesaler inventories were spot on, it made no sense to believe that retailer inventory growth would have exceeded the BEA's estimate by 1.3 percentage points.
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11-Feb-10
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Data Detail: Initial Claims -- Jan. 31-Feb. 6, 2010
The initial claims figure for the week ending Feb. 6 declined by 43,000 to 440,000. With the conclusion of the adminstrative backlog, the Department of Labor said the improvement in claims did not reflect a strengthening of the labor sector, but simply a removal of an external bias from the data. This week's data, which now accurately reflects current economic conditions, was impacted by inclement weather, which may have prohibited some claims from being filed.
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10-Feb-10
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Data Detail: Trade Balance -- December 2009
The trade deficit increased from $36.4 bln in November to $40.2 bln in December, primarily caused by a jump in petroleum imports. The BEA accurately forecasted the figures which means that Q4 2009 GDP will be unaffected.
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05-Feb-10
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GDP Monitor -- Reconciliation of Q4 2009 GDP, Part 2
As we mentioned in last week's GDP monitor, we overestimated the change in inventories growth. We expected inventories to increase by $12 bln whereas the actual data showed a drop of $33.5 bln. The Bureau of Economic Analysis (BEA) released its detailed inventory estimates on Monday, Feb. 1. These details gave a better indication of where our forecast differed from the actual data.
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05-Feb-10
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Data Detail: Employment Report -- January 2010
Nonfarm payrolls declined by 20,000 jobs in January after shedding a revised 150,000 jobs in December. The consensus expected gains of 15,000. At the same time, the unemployment rate fell 0.3 percentage points to 9.7%, its lowest level since August 2009. The discrepancy between the payroll and unemployment data is difficult to discern. Statistical anomalies cannot explain the drop in unemployment.
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04-Feb-10
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Data Detail: Factory Orders -- December 2009
Factory orders data surprised on the upside as orders grew 1.0% in December. The consensus estimate called for orders to increase 0.5%. The data benefited from heavy upward revisions to the advance durable goods orders numbers.
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04-Feb-10
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Data Detail: Nonfarm Productivity -- Q4 2009
While the third quarter increase in productivity was mostly due to a drop in the number of hours, fourth quarter growth saw strength in both output (7.2%) and hours (1.0%).
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04-Feb-10
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Data Detail: Initial Claims -- Jan. 24-30, 2010
For the past few weeks, it was assumed that a backlog in processing applications led to higher initial claims figures. Now, three weeks later, it seems very likely that the weakness in initial claims is due to poor economic conditions.
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03-Feb-10
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Data Detail: ADP National Employment Report -- January 2010
Nonfarm payrolls, as estimated by the ADP National Employment Report, are expected to decline by 22,000 in January. The consensus predicted the ADP employment report would show a payroll decline of 30,000.
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03-Feb-10
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Data Detail: Vehicle Sales -- January 2010
Total vehicle sales fell to their lowest seasonally adjusted level since October 2009 as only 10.80 mln vehicles were sold in January. Seasonally adjusted domestic sales were weak, a bit of a surprise considering the well-publicized Toyota recall.
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01-Feb-10
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Data Detail: Construction Spending -- December 2009
Construction spending fell 1.2% in December after declining a downwardly revised 1.2% in November. The consensus expected construction spending to fall 0.5%.
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01-Feb-10
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Data Detail: Personal Income and Spending -- December 2009
Personal consumption expenditures increased 0.2% in December after increasing 0.7% in November. The consensus estimate called for consumption to increase 0.3%.
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29-Jan-10
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Data Detail: Consumer Sentiment -- January 2009 Revised
The University of Michigan Consumer Sentiment index increased from a preliminary reading of 72.8 to a revised 74.4. The consensus expected the index to increase 0.2 points to 73.0.
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29-Jan-10
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GDP Monitor -- Reconciliation of Q4 2009 GDP
Real GDP for Q4 2009 came in at 5.7%. We expected GDP to grow 6.8%. The majority of the difference between our estimate and the actual GDP growth was in our forecast for inventory adjustment.
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29-Jan-10
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Data Detail: GDP Advance -- Q4 2009
Fourth quarter GDP increased 5.7% after posting a 2.2% increase in the third quarter. The consensus estimate called for GDP to increase 4.7%.
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28-Jan-10
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GDP Monitor -- Jan. 25-28, 2010
Currently, we are forecasting a 6.8% increase to fourth quarter GDP versus a prior outlook of 6.4%.
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28-Jan-10
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Data Detail: Advance Durable Goods Orders -- December 2009
Durable goods orders increased 0.3% in December after falling 0.4% in November. The slight increase in orders was well below the consensus estimate that called for a 2.0% gain in new orders.
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28-Jan-10
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Data Detail: Initial Claims -- Jan. 17-23, 2010
The initial claims figure for the week ending Jan. 23 declined by 8,000 to 470,000 new claims. The consensus projected a much more substantial drop of 28,000 claims.
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27-Jan-10
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Data Detail: New Home Sales -- December 2009
New home sales fell 7.6% in December to 342,000 new homes. The consensus expected sales to increase to 366,000 homes from November's preliminary reading of 355,000.
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26-Jan-10
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Data Detail: Consumer Confidence -- January 2010
The Conference Board's Consumer Confidence Index jumped to its highest level since the Lehman Brothers bankruptcy. At 55.9, the index beat the consensus estimate by 2.4 points.
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25-Jan-10
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Data Detail: Existing Home Sales December 2009
Existing home sales fell 16.7% to 5.450 mln in December. While a drop in sales was expected, the consensus predicted a much more modest decline of 9.8%.
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22-Jan-10
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GDP Monitor -- Jan. 18-22, 2010
Real GDP for Q4 2009 was revised down this week due to weaker-than-expected housing starts data. Currently, we are forecasting a 6.4% increase to fourth quarter GDP versus a prior outlook of 6.5%.
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21-Jan-10
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Data Detail: Initial Claims -- Jan. 10-16, 2010
The initial claims figure jumped to its highest level since the week ending November 13 as claims increased to 482,00 for the week ending January 16. The consensus estimate called for claims to fall 6,000 to 440,000.
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20-Jan-10
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Data Detail: Producer Price Index -- December 2009
The Producer Price Index increased 0.2% in December, a significant slowdown from its 1.8% increase in November.
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20-Jan-10
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Data Detail: Housing Starts -- December 2009
Housing starts declined 4.0% in December as only 557,000 new homes were started. The consensus properly forecasted a decline, but the magnitude was off by 15,000 new homes.
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15-Jan-10
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Data Detail: Initial Claims -- Jan. 3-9, 2010
Initial unemployment claims increased by 11,000 for the week ending January 9. While an increase was expected, the jump exceeded the consensus by 7,000 claims.
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15-Jan-10
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Data Detail: Industrial Production -- December 2009
Industrial production grew 0.6% in December, exactly what the consensus had predicted.
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15-Jan-10
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Data Detail: Consumer Price Index -- December 2009
December's inflation report was very benign. Headline prices increased 0.1%, slightly less than the consensus estimate of 0.2% growth. Core prices increased 0.1%, exactly in line with consensus projections.
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15-Jan-10
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Data Detail: Consumer Sentiment Preliminary -- January 2010
The University of Michigan Consumer Sentiment index strengthened slightly in the January preliminary reading. The index increased from 72.5 to 72.8. The index underperformed the consensus by 1.2 points.
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15-Jan-10
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GDP Monitor -- Jan. 12-15, 2010
Real GDP for Q4 2009 was revised down this week on weaker-than-expected net trade and retail sales. Currently, we are forecasting a 6.5% increase for the fourth quarter GDP versus a prior outlook that was as high as 7.3%.
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14-Jan-10
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Data Detail: Retail Sales -- December 2009
Retail sales came in well below expectations, declining 0.3% in December. The consensus called for a 0.5% increase.
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14-Jan-10
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Data Detail: Business Inventories -- November 2009
Business inventories increased 0.4% in November. The consensus called for inventories to grow only 0.3%.
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12-Jan-10
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Data Detail: Trade Balance -- November 2009
The trade balance weakened in November as the deficit increased from $33.2 bln to $36.4 bln. The consensus anticipated the widening of the trade gap, but at a slightly smaller $34.6 bln.
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08-Jan-10
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GDP Monitor -- Jan. 4-8, 2010
Real GDP for Q4 2009 was revised upward this week on much stronger-than-anticipated wholesale inventories. Currently, we expect fourth quarter GDP to rise 7.3% q/q annualized.
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01-Jan-10
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Economic Monthly -- An Unstable Sustainable Recovery
2010 will start off with a bang as GDP growth exceeds potential by a few percentage points in the first and second quarters. However, much of the growth is due to inventory expansion.
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27-Dec-11
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Data Detail: Consumer Confidence - December 2011
Consumer attitudes about the economy have fully recovered from the malaise experienced during the summer and the economic turmoil surrounding the debt ceiling negotiations. Confidence levels are at their highest point since April.
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23-Dec-11
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GDP Monitor: Dec. 19 - 23, 2011
Weaker business investment data was not enough to keep our fourth quarter GDP forecast from falling below 3.0%. GDP is still on track for its best performance since Q2 2010.
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23-Dec-11
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Data Detail: Durable Goods Orders, PCE (Nov-11)
Business investment demand contracted for the second consecutive month. Worse for fourth quarter GDP, shipments of nondefense capital goods declined for the third consecutive month. Yet, the underlying data suggest the drop in investment demand is just a temporary blip.
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21-Dec-11
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Data Detail: Existing Home Sales - November 2011
The National Association of Realtors announced sweeping downward revisions to the existing home sale data going back to 2007. The revisions, due mostly to double counting, reduced overall sales by an average of 14.3% each month. The housing situation is, undoubtedly, in much worse shape than previously thought.
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20-Dec-11
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Data Detail: Housing Starts - November 2011
A spike in multifamily construction drove housing starts in November to their highest level since April 2010 when the homebuyer tax credit artificially boosted production. Excluding that one-time event, housing starts are at their highest level since October 2008.
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16-Dec-11
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GDP Monitor: Dec. 12 - 16, 2011
As we head into 2012, the U.S. economy is starting to pick up steam. The initial claims level fell to its lowest level since before the Lehman bankruptcy in 2008; manufacturing demand in the Philadelphia and New York regions edged higher; and consumer sentiment is at its highest point since June. The pieces are in place for growth possibly to exceed expectations next year.
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16-Dec-11
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Data Detail: Inflation - November 2011
Inflationary pressures remained soft in November. There was nothing unusual in either the core CPI or core PPI data that suggests inflationary problems may be gaining traction as we head into 2012.
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15-Dec-11
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Data Detail: Industrial Production - November 2011
The manufacturing sector has been running hot for several months. According to the latest Industrial Production report, however, that changed in November as total production, led by a 0.4% drop in manufacturing production, declined 0.2%. A slight pullback in manufacturing production after several strong months is not unusual or a sign of trending weakness. In fact, the first two regional manufacturing surveys for December already showed substantial improvement.
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13-Dec-11
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Data Detail: Retail Sales - November 2011
The November employment report showed that payroll growth was completely offset by declining hourly wages. Aggregate earnings were flat in November. The small retail sales gain in November, therefore, is in-line with the weakness in earnings.
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09-Dec-11
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GDP Monitor: Dec. 5 - 9, 2011
Our GDP forecast for the fourth quarter again topped 3.0% this week. Inventory gains, however, currently account for 1.3 percentage points of fourth quarter GDP growth. Excluding inventories, real final sales are expected to increase 1.9%. That is well below the 3.6% increase in the third quarter, but in-line with our low/moderate growth expectations.
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09-Dec-11
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Data Detail: Trade Balance - October 2011
A stronger dollar, a recessionary environment in Europe, and a slowdown in Asia are all expected to contribute to lower export growth in the medium term. Yet, the drop in exports in October did not come from the usual suspects. Lower prices for gold and other precious metals led to a drop in demand for these goods that was enough to cause overall exports to slip.
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06-Dec-11
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What a Drag: Fiscal Austerity to Reduce 2012 GDP
Congress is currently debating whether to extend emergency unemployment benefits and a 2% payroll tax cut. If Congress fails to pass both extensions, we will be forced to reduce our forecast for 2012 GDP from 2.1% to between 1.1% and 1.7%.
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02-Dec-11
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GDP Monitor: Nov. 28 - Dec. 2, 2011
While retailers are being lauded for strong Black Friday sales levels, we are slightly concerned that sales growth in December and January may not remain up to par. The November employment report revealed no growth in aggregate wages.
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02-Dec-11
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Data Detail: Employment Report - November 2011
While most of the attention regarding the November employment report will be focused on the big drop in the unemployment rate, which fell from 9.0% to 8.6%, the more informative, and in this case concerning, piece of news was that hourly earnings fell 0.1%. That drop completely offset the increase in payrolls, which led to no earnings growth in November.
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01-Dec-11
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Data Detail: Construction Spending (Oct-11), ISM (Nov-11)
A surge in construction spending in October developed from strong gains in the home improvement sector. Unfortunately, this sector is extremely volatile and tends to follow a sawtooth pattern. If spending remains on trend and reverses in November, most of the October construction gains may be wiped away.
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28-Nov-11
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Data Detail: Home Sales - October 2011
Modest growth in home sales in October does not change the realities on the ground. Weak employment and income growth, combined with elevated inventory levels in the existing home sector, will hinder future potential gains over the next several months, if not years.
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28-Nov-11
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GDP Monitor: Nov. 21 - 26, 2011
What a difference a week makes. After seeing our Q4 GDP projection rise above 3.0%, lackluster consumption and investment data quickly lowered our estimate back to around 2.0%. This is not the result of a change in growth trends. As we alluded to last week, the data simply reflect the low/moderate growth path that has been expected.
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23-Nov-11
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Data Detail: PCE, Durable Orders (Oct-11)
After declining precipitously over the past three months, the personal savings rate picked up modestly in October. If the savings rate continues to rise and the labor sector fails to improve substantially over the next two months, consumption growth, which helped push GDP higher in the third quarter, may not be as strong in the fourth quarter.
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18-Nov-11
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GDP Monitor: Nov. 14 - 18, 2011
Our latest GDP forecast for the fourth quarter jumped above 3.0%. While this seemingly goes against our view of low/moderate growth for the next few quarters, the structural problems in the economy remain intact. We do not expect growth to remain at this elevated level.
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17-Nov-11
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Data Detail: Housing Starts - October 2011
For the first time since the end of the housing bubble in 2006, homebuilders increased the number of homes currently under construction for two consecutive months. While it is too early to call a bottom in the residential construction sector, it is an encouraging sign.
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16-Nov-11
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Data Detail: Inflation, Industrial Production (Oct-11)
Both producer and consumer prices saw their first month-over-month decline since June. The drop was not caused by deflationary pressures stemming from the usual suspects of high unemployment and low wage growth. Instead, it was due to the timing of the BLS surveys.
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15-Nov-11
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Data Detail: Retail Sales - October 2011
Lackluster employment and wage gains were not enough to deter consumers in October. Core spending – which matches up best to the consumption growth levels in GDP – increased by its largest amount since March. The economic recovery continues to move ahead unabated.
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11-Nov-11
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GDP Monitor: Nov. 7 - 11, 2011
The economic situation in the U.S. took a back seat this week to turmoil in Europe. Both Greece and Italy saw bond yields spike yet again as fears of a sovereign default escalated. At this time, a potential default in Europe would most likely not lead the U.S. into another recession.
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04-Nov-11
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U.S. Economic Outlook: Welcome, Finally, to the New Normal
With GDP increasing 2.5% in the third quarter, the U.S. economy was nowhere near recession and is not positioned to enter a second recession in the near future. We expect growth to continue at a stable and consistent pace, albeit much slower than we (and most others) would like.
The structural problems in the economy -- overleveraged consumers, excess supply of housing, constrained lending -- that helped create the recession have not been resolved. These overhangs will remain primary drags on the economy and will prevent growth from returning to potential levels (2.7% - 3.0%) through 2012.
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04-Nov-11
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Data Detail: Employment Report - October 2011
The employment situation in October was not materially different from the previous month. The payroll numbers in September were affected by the return of 40,000 workers following a strike at Verizon Communications (VZ). After adjusting for the strike, September employment numbers increased 118,000. The October employment figure was only 38,000 less, within tolerances for normal monthly volatility.
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01-Nov-11
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Data Detail: ISM (Oct-11), Construction Spending (Sep-11)
After a small turnaround in September, the ISM Manufacturing Index again showed weakness in the manufacturing sector in October and is in danger of slipping into a contraction. Yet, the index has not conformed to the performance from the durable goods reports. This suggests that large manufacturing firms remain on steady ground while smaller companies are struggling.
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28-Oct-11
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GDP Monitor: Reconciliation with Q3 2011 GDP
There were no notable surprises to us in the Q3 2011 GDP report. Just about every sector showed modest strength and the data were enough to confirm that growth in the third quarter was much better than feared and that the U.S. is not in any immediate danger of falling back into recession.
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28-Oct-11
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Data Detail: Personal Income and Spending - September 2011
All of the data in the September personal income and spending report were already incorporated into the advance third quarter GDP release. It has no bearing on any future revisions to GDP.
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26-Oct-11
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Data Detail: Durable Goods Orders, Home Sales (Oct-11)
The regional manufacturing surveys could not keep pace with the actual orders data in September. Orders outside of the transportation sector surged, suggesting that large manufacturers are still seeing demand growth while smaller companies are slogging through the recovery.
After the final two economic releases before the advance release of Q3 2011 GDP, our GDP forecast was revised up from 2.0% to 2.1% on stronger-than-expected business investment demand.
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25-Oct-11
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Data Detail: Consumer Confidence - October 2011
Consumer confidence fell in October to its lowest level since March 2009. While the headline is disappointing, it should have no affect on the economic recovery. Economic data have improved substantially since the beginning of the summer and the lack of confidence is a primary result of media reports showcasing perceived pitfalls and not from a deceleration in actual growth.
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21-Oct-11
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GDP Monitor: Oct. 17 - 21, 2011
The first look at third quarter GDP will be released on Thursday. We are currently projecting growth at 2.0% for the quarter. While this is below potential (2.7% - 3.0%) and weaker than our GDP forecast from earlier in the month, it remains within the bounds of a low-growth recovery scenario. There is nothing in the data that suggests a second recession is near.
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19-Oct-11
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Data Detail: Housing Starts, Inflation (Sep-11)
A surge in multi-family construction led to the largest number of new home starts since the home buyer tax credit artificially boosted production in April 2010. The gains, however, are unlikely to be sustainable as multi-family construction should return to its long-term average in October.
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17-Oct-11
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Data Detail: Industrial Production - September 2011
Weak regional manufacturing surveys had no bearing on the national production data as overall manufacturing production saw a healthy gain in September. The discrepancy between the surveys and the national levels suggests that bigger manufacturing companies are experiencing higher demand than the more numerous smaller firms.
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14-Oct-11
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GDP Monitor: Oct. 10 - 14, 2011
The retail sales data put another dent into the recession talk as sales not only beat high expectations, but also increased by their strongest amount since February. That was before the exogenous shocks, such as the Arab Spring and Japanese tsunami, began to adversely affect the U.S. economy. This suggests that economic trends may be returning to where they were expected to be at the end of Q4 2010.
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14-Oct-11
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Data Detail: Retail Sales - September 2011
While many economists discount the consumer’s current ability to lead the U.S. to economic growth, the September retail sales report shows that the strong consumption growth cannot be counted out.
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13-Oct-11
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Data Detail: Trade Balance - August 2011
Even though the July trade deficit level increased from its preliminary reading and the August deficit remained at that elevated level, the average deficit over the past two months is substantially lower the second quarter levels. This will lead to a positive contribution to GDP.
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07-Oct-11
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GDP Monitor: Oct. 3 - 7, 2011
Even as the data strengthens, economists and politicians have increased their rhetoric on the supposed weakness with economy. President Obama continues to stump for support of another stimulus package. However, that may not be needed. The truth is that the economy remains on a stable, but moderate, growth path and a second recession is unlikely. New stimulus may not help as much as economists expect.
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07-Oct-11
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Data Detail: Employment Situation Report - September 2011
While most of the discussion following the September Employment Situation Report revolved around the positive headline surprises in both total and private payrolls, the key to the report was actually the boost in weekly hours and average earnings. These data points not only support strong consumption growth, but also put a dent in the likelihood of an upcoming recession.
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03-Oct-11
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A Preoccupied Consensus View
Over the last few weeks, the consensus economic view dropped precipitously and optimism turned to extreme pessimism. Instead of potential growth, many Wall Street economists now warn about the elevated risks of another recession occurring in the near future.
Our forecast has followed a "low-growth" scenario since the spring. In our view, we do not think the data signal another recession. Instead, we believe the economy will continue to muddle through with sluggish growth like it did in the first half of 2011. Ironically, our expectations now put us in the more optimistic range of forecasters.
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03-Oct-11
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Data Detail: ISM (Sep-11), Construction Spending (Aug-11)
Despite signs of a potential contraction, the ISM Index held its ground and remained above the expansion/contraction threshold in September. Sustained growth, however, looks increasingly unlikely as manufacturers struggle with low demand.
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30-Sep-11
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GDP Monitor: Sep. 26 - 30, 2011
What recession? Our third quarter GDP estimate has quietly increased back into potential growth territory (2.7% - 3.0%). That would be the strongest GDP increase since Q2 2010. The big concern, however, is that these GDP gains are unsustainable and that economic weakness will return next quarter.
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30-Sep-11
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Data Detail: Personal Income and Spending - August 2011
Typically, economists discount the effects expected by shifts in consumer confidence. Confidence in August initially declined to its lowest level since 1980. That severe of a drop justified an expectation that consumers would pull back on spending and increase savings amid uncertain times. The opposite actually occurred.
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28-Sep-11
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Data Detail: Durable Goods Orders - August 2011
A clear divergence in manufacturing demand developed in August. Demand for finished goods surged while input demand contracted. It seems manufacturers do not believe the August gains in finished goods will last.
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27-Sep-11
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Data Detail: Consumer Confidence - September 2011
After falling to its worst level since the end of the Great Recession, consumer confidence came in virtually unchanged in September. Normally, changes in confidence are aligned with changes in employment, gasoline/oil prices, stock market growth, and media reports. The underlying details have not shifted much since August.
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26-Sep-11
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Data Detail: Home Sales - August 2011
Existing home sales unexpectedly increased in August. The growth was not only at odds with both the Pending Home Sales Index and the Mortgage Bankers Association's Mortgage Purchase Index, but also contrasted with the latest new home sales report. Even though the underlying data is expected to continue to weaken, there is some hope that existing home sales will also improve in September.
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23-Sep-11
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GDP Monitor: Sep. 19 - 23, 2011
As expected, the Fed implemented "Operation Twist" on Wednesday as a means to drive down long-term interest rates. While the goal is laudable given the recent downgrades to many economic forecasts, including the ones from the Fed and IMF, the actual economic effect will most likely be minimal.
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20-Sep-11
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Data Detail: Housing Starts - August 2011
The data on homes under construction and permits showcased polar opposite viewpoints in August. On one hand, the lack of growth in the number of homes under construction suggests that builders remain cautious about future inventory levels. On the other hand, the rise in permits suggests construction growth may return in the coming months.
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19-Sep-11
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GDP Monitor: Sep. 12 - 16, 2011
It may seem unusual to be excited about economic data coming in flat, but with the market beginning to price in a potential double-dip recession, no growth is a better outcome than negative growth.
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09-Sep-11
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GDP Monitor: Sep. 06 - 09, 2011
President Obama unveiled a $447 bln joint spending and tax reduction plan aimed at reducing the unemployment rate. The Republican-controlled Congress, however, most likely will only pass a $175 bln package that just includes payroll tax cuts and an extension in unemployment benefits.
Using calculations developed in our Dec. 28, 2010 report: "Unconventional Wisdom: Poking Holes in Rosy 2011 GDP Views," the $175 bln package is expected to add between 0.4% and 0.9% to 2012 GDP growth.
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08-Sep-11
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A Presidential Challenge: Driving Growth through Labor
An interesting question was posed to us on the eve of President Obama's jobs speech:
What would be better for the economy? Getting the 90% of workers with jobs to increase their spending or reducing the unemployment rate from 9% to 6%?
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08-Sep-11
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Data Detail: Trade Balance - July 2011
The U.S. trade deficit narrowed in July to its lowest point since April as exports rallied and imports waned. The growth in exports, however, may not be long-lasting as more austerity and weak growth in Europe could potentially lower demand for U.S. goods. If export demand shrinks in the coming months, the August gain in the trade deficit may be just an outlier.
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02-Sep-11
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GDP Monitor: Aug. 29 - Sep. 02, 2011
The employment report renewed fears that the economy may be headed for another recession. While we do not foresee two consecutive quarters of negative growth, the outlook for the third quarter has softened measurably after the employment report showed negative wage growth in August. A negative third quarter growth rate is not out of the realm of possibilities.
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02-Sep-11
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Data Detail: Employment Report - August 2011
While the media is concentrating on the weak headline payroll numbers, the more concerning aspect of the August employment report was the combined downturn in hours and earnings. Using those data points, aggregate wages fell 0.4% in August and most likely will lead to negative consumption levels that month.
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01-Sep-11
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Data Detail: ISM (Aug-2011), Construction (July-2011)
All of the regional manufacturing surveys except for the Chicago PMI contracted in August. Furthermore, the underlying orders and production indices in the ISM index both contracted. Taken together, the August expansion confirmed by the ISM Index may only be a one-month respite before a contraction officially begins in September.
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30-Aug-11
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Data Detail: Consumer Confidence - August 2011
The deterioration in the Consumer Confidence Index was most likely a reaction to media reports surrounding the debt ceiling negotiations. The reality of the situation is that economic growth prospects are nowhere near as bad as they were in 2008 and 2009.
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29-Aug-11
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Data Detail: Personal Income and Spending - July 2011
Even though real consumption spending increased in July by its largest amount since December 2009, fears of a downtrodden consumer remain intact. Consumer sentiment plunged to historical lows in August. Unless August sales reports tell otherwise, the spike in spending in July was most likely temporary.
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26-Aug-11
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GDP Monitor: Aug. 22 - 26, 2011
All week, media reports centered on the possibility that the Fed was going to tackle the on-going weakness in economic growth with another round of quantitative easing. As we mentioned last week, while softer than most would like, the economic prognosis is still positive and a recession is unlikely. There is no need to implement more monetary easing at this time.
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24-Aug-11
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Data Detail: Durable Goods Orders - July 2011
The headline growth numbers in the July durable goods orders report highlighted a strong manufacturing sector. A look at the details, however, shows that the data were notably skewed by unsustainable surges in aircraft and metals demand. Excluding these sectors, the manufacturing sector contracted at a substantial rate.
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23-Aug-11
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Data Detail: Home Sales - July 2011
The rebound in the housing sector remains off in the distance as demand for new and existing homes slipped in July. For new homes sales, this was the third consecutive monthly decline. For existing homes, sales were at their lowest level since November 2010. Neither of these trends signals incoming strength to the sector.
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19-Aug-11
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GDP Monitor: Aug. 15 - 19, 2011
The equity markets are panicking and the Treasury yield curve has flattened on the anticipation that the U.S. may be on the precipice of entering another recession. The economic data, while weak, remain firmly in positive territory. At this time, we believe the reactions in the marketplace are overblown.
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18-Aug-11
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Data Detail: Inflation - July 2011
Inflation has trended higher for the past several months, but there is no danger of experiencing a stagflation environment. The surge in prices in July can be explained by one-time shocks and poor seasonal adjustment factors. Thus, the increase is not indicative of sustained, accelerating price growth.
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16-Aug-11
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Data Detail: Housing Starts, Industrial Production (July-11)
The number of homes currently under construction increased on a monthly basis in June for the first time since May 2006. That increase turned out to be a part of a weather-induced surge in construction projects and not the start of the recovery we hoped for. The downward trend in construction returned in July as the number of home currently under construction again reached historical lows.
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12-Aug-11
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GDP Monitor: Aug. 8 - 12, 2011
The FOMC statement caused a stir with the acknowledgment that short-term rates are not likely to increase until at least mid-2013. The more significant revelation, though, was that the Fed said temporary factors that had negatively impacted economic growth in the beginning of the year may not be the main problems faced by the economy today.
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12-Aug-11
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Data Detail: Retail Sales - July 2011
While the economic news following the second quarter advance GDP report has been depressing, July retail sales bucked the trend and showed the first solid improvement in economic conditions. Sales met positive expectations in July and, just as importantly, growth in June was revised higher. The consumer is not as weak as once thought.
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11-Aug-11
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Data Detail: Trade Balance - June 2011
With fiscal austerity taking hold across Europe and growth in Asia slowing -- specifically in China -- room for export growth is suddenly shrinking. Even a historically low dollar could not drive excess foreign demand. These conditions are expected to remain for the next few months, which do not bode well for a second half rebound.
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05-Aug-11
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U.S. Economic Outlook: Temporary Pain or Structural Calamity
After muddling through the weakest two consecutive quarters since the recession ended, the big question is if the softness during the first half of the year was due to temporary problems caused by exogenous factors – elevated oil prices following the conflict in the Middle East and North Africa; parts shortages in the aftermath of the earthquake and tsunami in Japan; and uncertainties about new government regulations on banking and other industries – or by structural problems rooted in an over-indebted consumer and the ongoing aftermath of the financial crisis.
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05-Aug-11
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Data Detail: Employment Situation Report - July 2011
The improvement in the employment situation in July is a nice break from all of the poor economic news of late. It does not, however, signal a substantial change in the labor market recovery. The job gains were barely enough to cover labor force growth under normal economic conditions, and the U.S. is not in a normal environment.
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02-Aug-11
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Data Detail: Personal Income and Spending - June 2011
It seems that history is beginning to repeat itself. The lack of confidence in the economic recovery last summer resulted in three months of deteriorating consumer conditions that were highlighted by a spike in savings. That same evidence crept up in the June 2011 data.
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01-Aug-11
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Data Detail: ISM Index (July-11), Construction (June-11)
A contraction in orders -- new and backlog -- led to a sharper-than-expected reduction in the ISM Manufacturing Index in July. Unless things pick up quickly in August, there is a real danger the index will reveal a contraction for the first time in two years. However, the Federal Reserve regional manufacturing surveys, which also show near-term weakness, expect the summer slowdown will be remedied by the end of the year.
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29-Jul-11
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GDP Monitor: Reconciliation with Q2 2011 GDP
The annual revisions to the GDP data made forecasting the second quarter advance report a crapshoot. Still, it is hard to discount the fact that growth over the first half of the year was the slowest since the recession ended. The weakness also transpired during a time period when most economists believed the economy would produce stable, above potential growth for the entire year.
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27-Jul-11
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Data Detail: Durable Goods Orders - June 2011
The durable goods report gives hope that GDP growth will return toward potential in the coming months. Manufacturers are not hunkering down and waiting for the recent weakness in the economy to pass. Instead, they are actively pursuing a business strategy that expects demand to resume in the near future.
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26-Jul-11
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Data Detail: Home Sales (June), Consumer Confidence (July)
Consumer demand for new and existing homes weakened again in June as sales continued to fall. The underlying fundamentals in the economy are still not attractive for home buying. This includes increasing unemployment, declining incomes, and tight credit conditions. None of these bode well for a rebound in construction in the immediate future.
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22-Jul-11
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GDP Monitor: July 18 - 22, 2011
As the second quarter wraps up, there are few signs that the "temporary" conditions blamed for the economic slowdown in the first half of the year will turn next quarter. If anything, the employment data suggest economic growth may be even softer over the next few months.
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19-Jul-11
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Data Detail: Housing Starts - June 2011
Using previous construction reports, project delays following severe weather conditions in April and May could be the main cause for the surge in housing starts in June. If growth was not based on increases in demand, it is likely that starts will not remain at this elevated level in July, and instead will return toward their three-month average of 575,000.
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15-Jul-11
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GDP Monitor: July 11 - 15, 2011
Federal Reserve Chairman Bernanke continues to advocate that the economic weakness seen the last few months is the result of transitory, exogenous shocks. The data, though, have yet to turn in a fashion that would convince the market of the Fed's view. Economic growth may remain weak for another quarter.
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15-Jul-11
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Data Detail: Inflation, Industrial Production (June 2011)
Even though price growth seems to be inching higher, year-over-year inflation rates still remain tame. Core consumer prices remain below the Federal Reserve's target rates. The inflation data do not suggest that the Fed will need to tighten its monetary policy anytime soon. It is a warning, however, that prices are beginning to increase even as the slack in the labor market expands.
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14-Jul-11
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Retail Sales - June 2011
The retail sales level came in surprisingly strong in June and not in-line with the weak underlying data from the motor vehicle sales and employment situation reports. Unfortunately, this may result in negative revisions to the data next month.
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12-Jul-11
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Data Detail: Trade Balance - May 2011
A surge in petroleum demand drove the U.S. trade deficit in May to its highest point since October 2008. Surprisingly, the increase in petroleum demand came at a time when crude prices were falling and manufacturing growth was slowing. Normally, these two scenarios would lead to a decrease in petroleum demand.
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08-Jul-11
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GDP Monitor: July 4 - 8, 2011
Hopes that economic growth will return to potential in the third quarter were dashed after June payroll data showed a second consecutive month of lackluster job gains. Even as elevated oil prices and Japanese supply pressures begin to ease, businesses and consumers remain uncertain about the future and have responded by cutting both costs and consumption. This is not a recipe for strong economic prosperity and could lead to idle growth for the rest of year.
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08-Jul-11
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Data Detail: Employment Situation Report - Juen 2011
The jobless claims data have consistently foretold weak payroll growth for the past three months. Yet, many economists, including those who reacted positively to Thursday’s much stronger-than-expected ADP report, continued to discount the underlying data in the seemingly futile hope that the claims report is overstating the sluggishness in the labor sector. With payrolls adding less than 50,000 jobs for the past two months, obviously that is not the case.
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01-Jul-11
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GDP Monitor: June 27 - July 1, 2011
Inflation, which has not reared its ugly head since 2008, has started to make a comeback. Higher prices have dented personal consumption growth in the second quarter. Fortunately, prices are already starting to subside and weak inflation rates should act as tailwind for growth next quarter.
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01-Jul-11
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Data Detail: ISM (June-11), Construction Spending (May-11)
Manufacturing growth was surprisingly strong in June even though most of the regional manufacturing surveys suggested a deceleration in growth was a possible outcome. The lack of conformity between the national and regional surveys is unusual, and the hard data (industrial production and factory orders) tend to follow more closely with the consensus among regional surveys.
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28-Jun-11
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Data Detail: Consumer Confidence - June 2011
For the second consecutive month, consumer confidence tumbled as concerns about future employment opportunities and elevated gasoline prices weakened future expectations.
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27-Jun-11
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Data Detail: Personal Income and Spending - May 2011
While being delegated to the back burner for much of the post-recession expansion, inflation is beginning to flex its importance as real consumption fell for the second consecutive month. This is the first back-to-back real PCE decline since March and April 2009.
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24-Jun-11
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GDP Monitor: June 20 - 24, 2011
The durable goods data provided more evidence that the recent slowdown in manufacturing is transitory and not widespread. Yet, instead of gearing up for a better second half of the year, businesses continued to cut costs and increased layoffs. At this point, it seems unlikely that payroll gains will top 100,000 in June.
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24-Jun-11
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Data Detail: Durable Goods Orders - May 2011
With the exception of miscellaneous durable goods, orders in every other sector were positive in May and outperformed their levels in April. This type of widespread growth is at odds with the recent slowdown seen in the ISM reports but is in-line with the growth in industrial production. Despite the apparent weakness suggested by the declining ISM levels, the durable orders report suggests demand for manufacturing goods remains firm.
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23-Jun-11
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Data Detail: Home Sales - May 2011
While temporary factors -- including poor weather, high oil prices, and difficult financing conditions -- may have continued to play a role in poor sales levels, the uncertainty surrounding the economic recovery, along with no signs of stabilization in housing prices, are the main focal points for the current weakness in housing sales.
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17-Jun-11
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GDP Monitor: June 13 - 17, 2011
Most economists believe the economic weakness in the first and second quarters is a temporary lull brought about by conservative planning and spending given the uncertainties introduced with the Japanese earthquake, rising gas prices, European sovereign debt problems, China's tightening efforts, questionable U.S. regulation extensions, and the U.S. deficit problem. However, we are concerned that so much blame for the recent economic woes is being placed on exogenous factors that economists are failing to look inwards and realize the problem may be structural instability in the U.S.
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16-Jun-11
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Data Detail: Housing Starts - May 2011
The positive surprise in housing starts in May masks a continued downtrend in the industry. The growth in starts was not enough to offset the level of completions, resulting in a continued downward trend in expected inventory levels over the coming months.
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15-Jun-11
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Data Detail: Industrial Production, Inflation (May 2011)
The weakness perceived in the small gain in May industrial production is a clear case where the headline level is masking strong underlying details. The truth is, manufacturing -- which has looked soft in national and regional surveys -- remains on track for a healthy expansion in the second and third quarters.
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15-Jun-11
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The Fallacy of PIIGS Growth Prospects
We have doubts that the PIIGS can successfully manage greater-than-potential GDP growth given that they have no control over monetary policy and are facing fiscal spending constraints. It is likely that debt-to-GDP levels will be higher than expected.
Future bailouts should take into account that GDP growth may be substantially weaker than official and agency-based estimates. Otherwise, the bailouts will only postpone, not eliminate, an eventual default or restructuring.
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14-Jun-11
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Data Detail: Retail Sales - May 2011
For the first time since June 2010, retail sales fell on a monthly basis. Yet, the drop can be traced directly to elevated energy prices and a shortage in motor vehicle supply. Core sales, which follow a more stable trend, remained in the black for the fifth consecutive month.
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10-Jun-11
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GDP Monitor: June 6 - 10, 2011
The lack of Japanese-made motor vehicles and parts caused import growth to tumble in April, boosting the net export component to second quarter GDP. This is not sustainable growth. As automakers resume production over the coming months, pent-up demand will drive strong import growth. This will act as a significant headwind against GDP growth in the latter half of the year.
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09-Jun-11
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Data Detail: Trade Balance - April 2011
The negative effects of the Japanese earthquake and tsunami took hold in April and were one of the main drivers for the strengthening in the trade balance. The pullback in imports should only have a temporary effect on trade, and we anticipate import growth to surge as Japanese auto manufacturers and suppliers return to production.
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06-Jun-11
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An Analytical Take on Right and Wrongs of the Dismal Science
Using an analytical toolkit, we developed a proprietary Briefing Research Economic Surprise Index that explains when economic forecasting might be suffering from excessive exuberance or panic. This index will give us a way to signal when to expect abrupt changes in economic expectations.
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03-Jun-11
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GDP Monitor: May 30 - June 3, 2011
In our first and second quarter Economic Outlook, we stated that the biggest risk to our medium-term forecast was an abrupt change in the labor market recovery. While we are hesitant to take one month of payroll data and extrapolate a trend, the initial claims level has been outside our "Recovery Zone" for four consecutive weeks and shows no signs of returning. The weakness in the claims data cannot be ignored or discounted any longer.
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03-Jun-11
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Data Detail: Employment Situation Report - May 2011
For the past month, the underlying fundamentals regarding the labor recovery have shown signs of stress. Most economists, including us, discounted poor initial claims readings as normal volatility following seasonal adjustment problems. This obviously was not simple volatility and was a definite precursor toward labor weakness.
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01-Jun-11
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Data Detail: ISM (May 2011), Construction (April 2011)
The latest ISM report confirmed the views from the regional manufacturing surveys that the manufacturing sector expansion has slowed considerably nationwide. It is unknown if the deceleration is due to normal economic trends or if the supply disruptions from the earthquake and tsunami in Japan are to blame.
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31-May-11
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Data Detail: Consumer Confidence - May 2011
After reaching its highest level in three years in February (72.0), the Consumer Confidence Index is now at its lowest point since it reached 57.8 in November 2010. Higher oil prices seem to be the culprit.
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27-May-11
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GDP Monitor: May 23 - 27, 2011
After a relatively strong March, economic growth weakened across most sectors in April. As a result of the slowdown, we cut our second quarter GDP forecast nearly in half from its starting level. If the pullback is simply volatility following a strong March, our conservative forecast should increase over the next two months.
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27-May-11
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Data Detail: Personal Income and Spending - April 2011
Pricing pressures took their toll on consumption for the second consecutive month as higher oil and food prices mitigated just about all of the growth in personal spending in April.
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25-May-11
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Data Detail: Durable Goods Orders - April 2011
The demand for durable goods orders took a significant hit in April as orders from every sector, with the exception of computer and electronic products, declined on a month-to-month basis. Yet, the decline in orders followed a banner month in March. This suggests that the drop is not the start of a new trend but due to typical volatility in the data.
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24-May-11
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Data Detail: Housing Sales - April 2011
Considering the unexpected decline in existing home sales in April, the jump in new home sales was definitely a positive surprise. Yet, continued growth in new home sales may be difficult.
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20-May-11
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GDP Monitor: May 16 - 20, 2011
The first data points in the second quarter from the housing sector were not very encouraging. Both sales and starts were below expectations. Even worse, April is technically the start of the home buying season. The lack of growth during this time is worrisome for both our short and long-term residential investment growth forecast.
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18-May-11
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Credit Check: Small Business Short on Sales, Credit
Small businesses in the U.S. employ about half of all private sector employees and generate more than half of nonfarm private GDP. They require access to credit to survive, but small business lending has yet to rebound following the Great Recession. Nevertheless, the employment sector is rebounding and the U.S. economy has grown for seven consecutive quarters. New risks have arisen that could slow future economic growth, including higher oil/gasoline prices and a host of geopolitical concerns. At the same time, new signs of a rebound in small business lending have materialized.
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17-May-11
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Data Detail: Housing Starts, Ind. Production (April 2011)
Builders continue to do their best at keeping incoming inventory levels at manageable levels by boosting and cutting back on production based upon changes in the number of new completions each month. This back-and-forth has caused a sawtooth pattern to develop in new home starts.
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13-May-11
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GDP Monitor: May 9 - 13, 2011
The first round of economic data from the second quarter was slightly below our expectations. While we tempered our forecast slightly, we believe our outlook remains conservative with a higher likelihood of upward revisions.
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13-May-11
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Data Detail: Inflation - April 2011
While the surge in food and gasoline prices was expected to keep headline inflation growth elevated, core price growth at both the consumer and producer levels was hotter than expected. Some media pundits have jumped on the growth in core prices as a sign of incoming inflationary pressures. Do not believe the hype.
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12-May-11
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Data Detail: Retail Sales - April 2011
For the past several months, gas and food prices have surged while income growth has remained relatively weak. The price/income tug-of-war hit a turning point in April as consumers slashed discretionary spending growth in order to maintain their gas and food purchases.
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11-May-11
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Data Detail: Trade Balance - March 2011
The turmoil in the Middle East and North Africa -- which caused a surge in oil prices -- is directly to blame for the expansion in the trade deficit in March. Net petroleum imports increased from $25.5 bln in February to $31.3 bln in March. Excluding petroleum, the net export deficit actually declined from February levels.
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10-May-11
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U.S. Economic Outlook: A Return to Normalcy
Signs of continued strength in the manufacturing sector combined with strong corporate earnings growth, increased business lending, and improved hiring activity should act as positive turning points for the U.S. economy as the remainder of 2011 unfolds.
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06-May-11
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Data Detail: Employment Situation Report - April 2011
The employment situation improved markedly in April as private businesses added 268,000 jobs during the month, the most since November 2005. At the same, the number of unemployed workers also spiked, causing the unemployment rate to jump back to January levels. Normally these two measures move in lockstep, but the divergence in April adds a little uncertainty to an otherwise solid report.
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05-May-11
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Data Detail: Initial Claims - April 24 - 30, 2011
In our March 3, 2011, report: "Expectations for Initial Claims," we stated that we would not be surprised to see the initial claims level reach 321,000 by the end of April. Instead of moving in a steady downward direction, claims have actually spiked to their highest level since August 2010. This is not the result, however, of a weaker labor market. The move can be completely explained by poor seasonal adjustment factors.
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02-May-11
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Data Detail: ISM Index (Apr-11), Construction (Mar-10)
According to the April ISM report, the manufacturing sector saw a minor slowdown last month. Yet, almost all of the regional Federal Reserve manufacturing surveys pulled back significantly, suggesting a much greater slowdown than reported by the ISM. This discrepancy leads us to believe that the ISM Manufacturing Index may overstate the April industrial production data.
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29-Apr-11
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GDP Monitor: Reconciliation with Q1 2011 GDP
After delving into the details of the first quarter GDP report, it is obvious that the BEA believed the March economic data were significantly stronger than January and February's levels. If the BEA is correct with its assessment, then the lull in economic activity that caused the slowdown in the first quarter has already passed.
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27-Apr-11
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Data Detail: Durable Goods Orders - March 2011
After an originally underwhelming February report, the March Durable Goods Orders report revealed upward revisions to February's data and manufacturing demand posted solid growth in March. These levels easily surpassed expectations and suggest that the manufacturing sector remains on firm ground.
Separately, our first quarter GDP growth outlook improved following the last two economic releases of the quarter. We revised our Q1 2011 GDP growth forecast from 0.1% to 0.5%.
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26-Apr-11
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Data Detail: Consumer Confidence - April 2011
Consumer confidence improved in April as concerns about high gasoline prices, which weighed heavily on the minds of consumers in March, eased slightly. This is not to suggest that high gasoline prices are not worrisome. To the contrary, another sharp uptick in oil prices will probably send confidence tumbling again.
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25-Apr-11
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Data Detail: Home Sales - March 2011
The size of the distressed property market continues to hinder a breakout in new home sales. Even though new home sales rebounded in March, investors scoured the distressed listings in the existing home market. Thus, existing home prices were driven further down and are causing the new home premium to reach historical highs.
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21-Apr-11
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GDP Monitor: April 18 - 21, 2011
The data released this week had little effect on our first quarter real GDP forecast. The economy experienced a significant slowdown in the first quarter, and we are becoming slightly concerned that the sluggishness may carry over into the second quarter.
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20-Apr-11
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A Fool's Mission: Keeping New Home Premiums High
The housing sector has its share of well-documented problems, including oversupply, falling prices, and a lack of credit. Another wrinkle has developed that could potentially cause homebuilders to see a worsening in selling conditions. The new home premium -- the difference in price between a new home and an existing home -- has gotten so far out of line that new homes are in danger of no longer being competitive for a potential home buyer.
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19-Apr-11
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Data Detail: Housing Starts - March 2011
Housing starts have shown significant volatility over the past few months as homebuilders attempt to maintain a low level of inventory growth. Starts continue to be paced by the number of completions, as builders wait for demand to pick up before starting a construction binge.
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15-Apr-11
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GDP Monitor: April 11 - 15, 2011
At the beginning of the quarter, we were confident that GDP would remain above 3.0% for the foreseeable future. Yet, that forecast was deemed weak by the majority of economists in the consensus. Since that time, the economic data has turned sluggish and we have cut our forecast accordingly. So far, the consensus remains unwilling to do the same.
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15-Apr-11
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Data Detail: Industrial Production, Inflation (March-11)
Manufacturing production continued to grow at an accelerated pace in March, but that pace may soften in the coming months. High oil prices and a slowdown in the demand for trucks should cause motor vehicle manufacturers to pull back on production.
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13-Apr-11
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Data Detail: Retail Sales - March 2011
At first glance, the weaker sales growth in March looks worrying, especially in the face of deteriorating consumer confidence and higher gasoline prices. However, the details suggest that sales in March were actually solid and should remain firm for the foreseeable future
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12-Apr-11
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Data Detail: Trade Balance - February 2011
The surge in oil prices in February was not enough to bolster demand for imports as the trade deficit narrowed in February. Unfortunately, the contraction in the deficit does not look to be the start of a new trend. The latest ISM level suggests that manufacturing demand remains strong, and demand for oil products should return in March.
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08-Apr-11
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GDP Monitor: April 4 - 8, 2011
The deceleration in first quarter GDP is a temporary lull in growth. As payrolls continue to expand, aggregate income growth should be enough to push GDP back toward potential (2.7% - 3.0%) next quarter. However, some of the downside risks to our forecast are becoming more probable.
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01-Apr-11
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GDP Monitor: March 28 - April 1, 2011
It seems that every data point released over the last few weeks has regressed from previous levels. This week, it was the construction sector's turn to showcase its continued contraction and the drag that is putting on current economic output. While we still believe the deceleration in first quarter GDP is a temporary lull in growth, incoming data keep confirming a deceleration in activity across multiple sectors.
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01-Apr-11
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Data Detail: Employment, ISM (Mar-11), Construction (Feb-11)
It was hard to find fault with any of the data from the March Employment Situation Report. The labor sector improved in just about every area and the growth in aggregate hours is sufficient to drive consumption growth higher in the near future.
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29-Mar-11
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Data Detail: Consumer Confidence - March 2011
The consumer confidence and sentiment indices both saw substantial declines in March as consumers worried about the negative effects of the recent spike in oil and gasoline prices. Confidence/sentiment should remain weak until gasoline prices fall back to more normal levels.
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28-Mar-11
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Data Detail: Personal Income and Spending - February 2011
Last quarter, personal consumption spending jumped 4.0% and helped lead GDP to an above potential (2.7% - 3.0%) growth rate. We expected consumption spending would continue growing near its fourth quarter rate in the first quarter. After two months of data, that growth projection turned out to be too optimistic.
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25-Mar-11
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GDP Monitor: March 21 - 25, 2011
The growth outlook for Q1 2011 was lowered again this week as the economic numbers have not rebounded following the weakness experienced in January. While growth in the next few quarters should return toward potential, the uneasiness in the data - especially in the housing market - is starting to concern us that our 2011 forecast may be too strong.
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24-Mar-11
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Data Detail: Durable Goods Orders - February 2011
For the first time since Q4 2009, durable goods orders excluding transportation did not post positive growth in the second month of the quarter. While this bears watching to see if a negative trend develops, the drop is likely just noise.
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23-Mar-11
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Data Detail: Home Sales - February 2011
Unfortunately, both the new and existing home sectors saw notable declines in February. The drop in existing home sales is likely a temporary correction after three months of gains as affordability conditions remain near all-time highs. The future in the new home sector, on the other hand, looks grim as prices remain uncompetitive compared to existing homes.
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22-Mar-11
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Where are the Qualified Workers?
Given the sheer size of the unemployment pool, one would think that businesses would have an easy time finding qualified workers. That is not the case. The reality is that firms have been steadily increasing the number of job openings, but have been unable to find qualified workers to fill them.
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18-Mar-11
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GDP Monitor: March 14 - 18, 2011
We cut our GDP growth forecast for the first quarter again this month, yet the revision had more to do with factors other than the economic data itself.
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17-Mar-11
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Data Detail: Inflation, Industrial Production (Feb-11)
While headline inflation growth may seem potentially worrisome, it follows exactly what the Fed has been talking about the past few months. Food and energy prices are spiking on transitory shocks and underlying price growth remains minimal. There is nothing in the data that suggests the Fed will have to change its policy to combat higher inflation.
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16-Mar-11
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Data Detail: Housing Starts - February 2011
Poor winter weather, or a strategy to continue to reduce home construction, is being blamed for the worst home starts level since April 2009. Unfortunately for residential construction, the drop is probably the result of a combination of the two.
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11-Mar-11
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GDP Monitor: March 7 - 11, 2011
External events in the MENA region and Europe are set to have a profound impact on our long-term trade outlook. It is not possible to know exactly how these two shocks will play out, but in the near-term, the net export deficit has switched from being a strong positive contributor to growth in Q4 2010 to an equally strong negative contributor in Q1 2011.
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11-Mar-11
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Data Detail: Retail Sales - February 2011
It seems that the snowstorms that were blamed for the weaker-than-expected economic data in January were milder than previously thought. The retail sales report is the latest to show significant upward revisions to January data, confirming that consumer demand is not slowing down.
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10-Mar-11
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Data Detail: Trade Balance - January 2011
The January trade report is a perfect example of why perceiving the widening of the trade deficit as a negative to GDP growth neglects the underlying strength of the U.S. domestic economic engine.
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04-Mar-11
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GDP Monitor: Feb. 28 - March 4, 2011
The snowstorms in January seemed to have a profound effect on economic activities throughout the month. Most of the "lost" growth should return in February. So far this has been confirmed with stronger-than-expected motor vehicle sales and payrolls. We have accounted for conservative rebounds in most sectors and believe 3% growth in the first quarter remains realistic.
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04-Mar-11
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Data Detail - Employment Report - February 2011
The February Employment Situation Report beat consensus expectations with a dip in the unemployment rate and strong nonfarm payroll gains. Yet, wage growth remains flat 20 months into the recovery and could negatively affect consumer spending.
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03-Mar-11
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Expectations for Initial Claims
We expect the initial claims level to move toward 321,000, its average in 2007, at a fairly rapid pace and to follow the trends from the previous expansions. We would not be surprised if initial claims reach this level before the end of April.
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01-Mar-11
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Data Detail: Construction Spending (Jan-11), ISM (Feb-11)
Without strong growth in home improvement projects, total construction spending would have declined 2.6% in January. We do not believe home improvement demand can continue growing at this level. Unless nonresidential construction demand picks up considerably, this means total construction spending will probably fall again in February.
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28-Feb-11
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Data Detail: Personal Income and Spending - January 2011
The January Personal Income and Spending report was a mixed bag. Income growth was higher than expected while spending growth was less than expected. Core inflation remain subdued, up just 0.8% year-over-year and providing the Federal Reserve little reason to take its foot off the QE2 accelerator prematurely. With real disposable income up 0.4% and the personal savings rate increasing from 5.4% to 5.8%, the potential is there for personal spending to pick up further in February.
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25-Feb-11
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GDP Monitor: Feb. 21 - 25, 2011
The economic data released this week tracked closely with our expectations. Furthermore, the negative revisions to Q4 2010 GDP growth had no effect on our outlook. Economic growth should remain slightly above 3% for the remainder of 2011.
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24-Feb-11
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Data Detail: Claims (Feb. 19), Durables, Home Sales (Jan-11)
Since October 2009, durable goods orders excluding transportation have followed an unusual trend where orders fall during the first month of the quarter and then grow and more than make up for the decline during the subsequent two months. This pattern seems to have remained intact in Q1 2011.
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22-Feb-11
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Data Detail: Consumer Confidence - February 2011
The Conference Board's Consumer Confidence Index reached its highest level since February 2008 this month, but continued growth may become strained as unrest in the Middle East and North Africa puts upward pressures on oil prices.
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18-Feb-11
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GDP Monitor: Feb. 14 - 18, 2011
The data released this week gave us our first glimpse of economic growth in first quarter. So far, the data is consistent with our 2011 economic forecast that we released earlier in the week. Led by gains in consumption, GDP should increase slightly above 3.0% for the remainder of the year.
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17-Feb-11
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Data Detail: Jobless Claims (Feb. 12), Inflation (Jan-11)
We believed that snowstorms that affected much of the Midwest and Northeast in the beginning of February may have biased the February 5 data. According to the latest report, however, the snowstorms played no role in the decline. The fall in claims was completely due to normal business layoff behavior.
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16-Feb-11
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Data Detail: Housing Starts, Industrial Production (Jan-11)
At first glance, the housing starts data suggest that homebuilders' confidence returned in January as the number of starts increased to its highest point in four months. However, hidden in the details, homebuilders actually believe demand for new homes remains weak and new starts are simply replacing completed ones.
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15-Feb-11
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U.S. Economic Outlook - Closing the Output Gap
We expect the U.S. economy to expand by 3.1% in 2011, led by a solid increase in consumer spending and a modest pickup in business investment. The second half of the year will be notably stronger than the first half as accounting measures push a small rebound in construction spending into the third and fourth quarter. GDP growth in 2012 is expected to increase to 3.5% as hiring prospects continue to grow and investment demand picks up steam.
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15-Feb-11
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Data Detail: Retail Sales - January 2011
A look at the headline retail sales level would suggest that winter weather conditions played a significant role in reducing consumption in January and, as a result, our consumption outlook for the quarter may look too strong. Those viewpoints, however, discount typical consumer behavior. The sales that were lost in January should come back in February, leaving our consumption forecast intact.
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11-Feb-11
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Data Detail: Trade Balance - December 2010
The expansion in the manufacturing sector was behind the widening of the December trade deficit. It did not widen as much as expected, however, which should result in positive revisions to Q4 2010 GDP. What is more, the expansion in manufacturing should lead to accelerated growth in Q1 2011.
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10-Feb-11
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Data Detail: Jobless Claims - Jan. 29 - Feb. 5, 2011
The initial claims level has now reached its lowest point since July 2008. At first glance, this would suggest the initial claims level does not have much farther to decline before we see a substantial increase in payrolls. However, the drop may be too good to be true. It is possible that the decline is only a temporary reduction from snowstorms that affected much of the Midwest and Northeast in February.
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04-Feb-11
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GDP Monitor: Jan 31 - Feb. 4, 2011
We expect GDP growth of 3.1% in the first quarter, slightly ahead of potential (2.7% - 3.0%), as broad swathes of the economy continue to expand.
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04-Feb-11
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Data Detail: Employment Situation Report - January 2011
Inclement weather conditions and annual population adjustments combined to cause confusion over the January Employment Situation report. The numbers, by themselves, suggested a deteriorating labor sector. However, after factoring out the statistical and seasonal problems, the trend from the labor sector was actually consistent with recent developments.
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03-Feb-11
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Data Detail: Jobless Claims - Jan. 23 - 29, 2011
As expected, the surge in the initial claims level for the week ending January 22 was a one-time event and claims quickly returned to their pre-disruption level. While the problem has already dissipated, it may have some effects on tomorrow's January payroll data.
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01-Feb-11
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Data Detail: ISM (Jan-11), Construction Spending (Dec-10)
Last month, the ISM Manufacturing Index barely increased even though many of the regional Federal Reserve surveys showed activity at the highest level in years. At the time, we believed that the ISM index may be under representing actual manufacturing production. It seems the data reversed in January, and the industrial production and shipments data could be weaker than the ISM level suggests.
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31-Jan-11
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Data Detail: Personal Income and Spending - December 2010
The final monthly personal income and spending report of the quarter is known prior to its release and generally has no new information about how the economy is performing. However, December's report did give us some insight into damages the construction industry may have sustained from snowstorms.
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28-Jan-11
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GDP Monitor - Reconciliation with Q4 2010 GDP
Instead of withering against the brunt of an inventory slowdown, the economy boomed. Real final sales, which exclude inventory changes, jumped 7.1% and saw its fastest quarterly increase since Q2 1984. Growth was widespread and did not rely on any single sector or stimulus measure.
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27-Jan-11
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Data Detail: Durables (Dec-10), Jobless Claims (Jan. 22)
Shipments of nondefense capital goods excluding aircraft and durable goods inventories came in stronger than we expected. As a result, we revised higher our GDP estimate from 3.4% to 3.8%, which is more in-line with consensus expectations.
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26-Jan-11
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Data Detail: Home Sales - December 2010
Sales of both existing and new homes were stronger than expected in December. The key takeaway is that the new home sales report justified the expansion in private residential construction over the past several months.
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25-Jan-11
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Data Detail: Consumer Confidence - January 2011
Last month, we did not describe the unexpected drop in the Consumer Confidence Index as "the start of a new trend" or say "a weakness is developing within the consumer." The January data confirmed our view as the confidence index rebounded back to May 2010 highs.
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21-Jan-11
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GDP Monitor: Jan. 17 - 21, 2011
For the first time in a long time, economic growth in the U.S. was broad-based and lacked any one-off factors that seemed to explain economic growth in pervious quarters. Almost every sector showed positive gains driven by normal economic conditions. Given the strength in the overall data, we feel that growth in excess of 3.0% should be the norm in 2011.
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20-Jan-11
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Data Detail: Jobless Claims - Jan. 9 - 15, 2011
There is no question that the labor sector is recovering. After three weeks of unreliable data, the initial claims level once again settled below the upper bound (410,000) of our "Recovery Zone." This level is conducive of stable payroll gains in excess of 100,000 per month.
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19-Jan-11
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Data Detail: Housing Starts - December 2010
Homebuilders and consumers have been playing a very dangerous game of chicken over the past few months. On one side, builders ramped up production, especially in the single-family sector. On the other, sales demand has steadily but slowly risen from post tax credit lows. Both sides could not continue moving at their current pace without inventory problems causing another price disruption.
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14-Jan-11
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GDP Monitor: Jan. 10 - 14, 2011
Economic data continue to show improvement for the economic recovery. Even though our fourth quarter forecast dipped from 4.0% last week to 3.5% this week, it was due to new inventory data. The final sales numbers continued to strengthen and show broad-based growth.
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14-Jan-11
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Data Detail: Inflation, Retail Sales, Production (Dec-10)
As long as income growth remains subdued, rising commodity prices will have only a limited effect on increasing inflation. What may not be realized is that this is not just a consumer versus producer phenomenon.
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13-Jan-11
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Data Detail: Jobless Claims (Jan 8), Trade Balance (Nov-10)
Even though initial claims rose to their highest level since October, this week's data should not be looked upon as an inflection point where weaker employment numbers become the norm. On the contrary, it is most likely that this was a one-time surge that should dissipate in the very near future.
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10-Jan-11
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GDP Monitor: Jan. 3 - 7, 2011
While we hesitate to utilize business surveys as a forecasting tool, it is hard to deny the substantial strength in both the ISM Manufacturing and Non-Manufacturing indices over the past few months. Yet, these data points are not alone. Many economic data points show the economic recovery is picking up steam.
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07-Jan-11
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Data Detail: Employment Situation - December 2010
The prevailing message in the December employment report is clear and familiar: labor trends are improving, but not at a fast enough pace for the Federal Reserve to take its foot off the quantitative easing pedal.
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03-Jan-11
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Data Detail: ISM (Dec 10), Construction Spending (Nov 10)
While the ISM index barely grew in December, many of the regional Fed surveys showed activity at the highest level in years. Economically-speaking then, the ISM index may be under representing actual manufacturing production, which suggests the industrial production and shipments data could be better than expected.
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24-May-12
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Data Detail: Durable Goods Orders - April 2012
Relative to expectations, the durable goods orders report for April was a mixed bag. Still, the second straight month of declines in orders for nondefense capital goods excluding aircraft -- a proxy for business investment -- will mesh with concerns that the macro uncertainty is driving a slowdown in business investment that could persist.
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23-May-12
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Data Detail: Home Sales - April 2012
A lack of available distressed properties tempered growth of existing home sales for a second consecutive month as investors waited on the sidelines for more bank-owned properties to come to the market. That same lack of inventories, however, bolstered new home sales by reducing the premium paid for a new home versus an existing home.
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18-May-12
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GDP Monitor: May 14 - 18, 2012
After years of negatively contributing toward GDP, we feel comfortable stating that the residential construction sector has bottomed and will help contribute positively to economic output for the foreseeable future. The number of homes under construction has been on a steady upward trend since August 2011 and inventory levels are at all-time lows. Builders will have to continue adding to new production even if sales growth is at a minimum.
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16-May-12
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Data Detail: Housing Starts, Ind. Production - April 2012
There was a lot of talk that recent increases in housing starts were the result of homebuilders taking advantage of warmer-than-normal temperatures. The data suggest, however, that the weather effects were overblown and that construction levels are clearly rising. Residential construction will be a positive influence on GDP after many years of dragging down overall economic growth.
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15-May-12
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Data Detail: Retail Sales, Inflation - April 2012
Most of the weakness in April retail sales growth was due to pullbacks in spending that came from temporary distortions in spending patterns caused by warmer-than-normal temperatures during the winter (building material and supply dealers fell 1.8% after rising 2.7% in March) and a decline in gasoline prices (gasoline stations spending declined 0.3% after increasing 1.0% in March).
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11-May-12
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GDP Monitor: May 7 - 11, 2012
Fears that consumption growth was poised for a pullback have been alleviated somewhat as the softening in payroll growth looks to be due to volatility. Initial claims returned to their pre-Easter level. This suggests payroll growth in May should exceed the mediocre April gain and result in stronger future income growth.
Please join us for the Briefing Research quarterly conference call on the economy with our Chief Economist, Jeff Rosen Ph.D., Director of Research, Kimberly DuBord, and Chief Market Analyst, Patrick J. O’Hare, on Tuesday, May 15, at 1:00 p.m. CT (2:00 p.m. ET). Space is limited, so register now.
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10-May-12
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Data Detail: Trade Balance - March 2012
The February trade deficit was affected by the Chinese New Year holiday, which fell earlier in the calendar than normal. Shipments that normally came during February were either pulled forward into January or delayed into March. After factoring out the volatility for the holiday, real net export growth was relatively flat for the past several months.
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04-May-12
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U.S. Economic Outlook: Bowed but Not Broken
Recent developments, including a deceleration in payroll growth and a slight pullback in home construction, combined with long-run uncertainties from Europe and the U.S. fiscal cliff that will appear in January 2013 have raised alarms and have caused many economists to return to their pessimistic views.
We do not think the economic situation has changed enough to warrant such pessimism.
Conference Call – Briefing Research Q2 2012 Economic Outlook: Bowed but Not Broken
Please join us for the Briefing Research quarterly conference call on the economy with our Chief Economist, Jeff Rosen Ph.D., Director of Research, Kimberly DuBord, and Chief Market Analyst, Patrick J. O’Hare, on Tuesday, May 15, at 1:00 p.m. CT (2:00 p.m. ET). Space is limited, so register now.
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04-May-12
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Data Detail: Employment Situation Report - April 2012
Questions still surround whether the warmer-than-normal temperatures experienced during the winter added some upward bias to the payroll figures for those months. The data, however, do not support this. Employment sectors where the jobs are primarily outside – such as construction, mining, or landscaping – did not show enough improvement during the winter to warrant the weather-related bias. That means that jobs growth has definitely slowed after strong winter gains.
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01-May-12
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Data Detail: ISM (Apr-12), Construction Spending (Mar-12)
We have strongly advocated in the past to not rely on the ISM Index as an accurate indicator of the manufacturing sector. The April reading is one of those months where the index may not be providing an accurate picture.
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30-Apr-12
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Data Detail: Personal Income and Spending - March 2012
The personal income and spending data were already incorporated into first quarter GDP. The weaker-than-expected spending level in March is simply a function of upward revisions to both January and February consumption gains.
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27-Apr-12
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GDP Monitor: Reconciliation with Q1 2012 GDP
First quarter GDP was not too far below expectations, although we saw another strong gain in inventories as a contributing growth factor. The bulk of the first quarter growth, however, came from a pickup in personal consumption.
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25-Apr-12
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Data Detail: Durable Goods Orders - March 2012
Durable goods orders contracted in just about every sector in March. While this could be a sign of impending weakness left over from the December expiration of the accelerated depreciation tax credit, it is more likely normal volatility following better-than-expected demand in February.
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24-Apr-12
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Data Detail: Home Sales (Mar-12), Confidence (Apr-12)
The decline in home sales was surprising considering the Mortgage Bankers Association’s Mortgage Purchasing Applications Index was up 10.2% in March. That might mean that potential buyers are facing more credit rejections, requiring them to fill out more applications in order to obtain a mortgage.
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20-Apr-12
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GDP Monitor: April 16 - 20, 2012
Weak income numbers from March did not deter consumer spending, as consumers dipped into savings to meet their needs. They did so presumably with a sense of confidence that they will be able to replenish their savings at a later time. This is normal consumer behavior during recovery periods, but it is not something that has been seen in the data since the Great Recession ended.
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17-Apr-12
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Data Detail: Housing Starts, Indust. Production (Mar-2012)
Housing starts tumbled for the second consecutive month after reaching a three-year high in January. The new trend adds credence to the belief that the rise to January’s peak was the result of warmer-than-normal temperatures pushing production forward, rather than an acceleration in the housing recovery.
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16-Apr-12
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Tax Increases Will Not Solve the Debt Problems
With the fear that debt-to-GDP levels are widely becoming unsustainable across the developed world, many governments are reacting by instituting or debating sizable austerity measures. New research shows that tax increases will not have a sizable effect on lowering debt levels. The bulk of austerity must come from spending cuts if debt levels are to be lowered.
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16-Apr-12
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Data Detail: Retail Sales - March 2012
Weakness in the labor sector and a decline in the number of motor vehicle units sold had no effect on consumer demand in March as retail sales easily beat expectations. This is a strong signal that volatility in monthly income is not changing consumer attitudes that the economy is improving.
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13-Apr-12
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GDP Monitor: April 9 - 13, 2012
The outlook for the first quarter brightened a bit when the February trade data came in much better than expected. What is good news today, however, may be foreshadowing weakness down the road. Large cutbacks in imports could be a sign that manufacturers, wholesalers, and retailers are preparing for a drop in consumer demand over the next few months. That would mean that our expectations for stronger growth in the second quarter are unwarranted.
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13-Apr-12
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Data Detail: Inflation - March 2012
A quirk in the seasonal adjustment calculations in the energy index caused consumer prices to outgain producer prices in March. The overall trend in the annual data remains downward, however, as both inflation measures have fallen for six consecutive months.
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12-Apr-12
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Data Detail: Trade Balance - February 2012
The trade deficit narrowed substantially in February, adding hope for better first quarter GDP growth. Looking at the details, however, the drop in imports could be an early sign that manufacturers, wholesalers, and retailers are readying themselves to face potentially weaker consumer demand.
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09-Apr-12
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GDP Monitor: April 2 - 6, 2012
With the March employment data seemingly confirming Fed Chairman Bernanke’s concerns about the sustainability of labor sector strength, economists quickly clamped down on talk of above potential growth in the near term. That, however, may be reading too much into one month of data.
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06-Apr-12
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Data Detail: Employment Report - March 2012
There was talk among economists prior to the report that warmer-than-normal weather conditions added to the payrolls in December, January, and February. Thus, a pullback in March was expected. In our view, weather did not play a role the payroll numbers. That makes these job numbers even more disappointing. Still, there is little reason to believe that the job sector will not rebound strongly in April.
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02-Apr-12
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Data Detail: Construction (Feb-12), ISM (March-12)
The quick rebound in the demand for business investment gave hope that the rebound from the accelerated depreciation tax credit would be equally as fast in the construction sector. That was not the case, unfortunately, as nonresidential construction spending fell 1.6% in February on top of the 2.3% decline in January.
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30-Mar-12
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GDP Monitor: March 26 - 30, 2012
Newly revised data from the DOL show that initial claims have not bounced back as strongly as originally thought. Instead of falling to nearly 350,000, the four-week average has only declined to 365,000. The downward trend, however, remains the same and improvements in the labor situation cannot be denied. The data still support the notion that the economy is on the verge of accelerating back toward potential.
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30-Mar-12
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Data Detail: Personal Income and Spending - February 2012
Strong gains in the auto sector and higher gasoline prices helped consumption growth easily outperform expectations in February.
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28-Mar-12
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Data Detail: Durable Goods Orders - February 2012
Pullbacks following one-time incentives, such as the December expiration of the accelerated depreciation tax credit, typically result in multiple months of abnormal growth. It is likely the tax credit played a key role in the rebound in demand for durable goods in February.
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27-Mar-12
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Data Detail: Consumer Confidence - March 2012
Concerns about the effect rising gasoline prices could have on economic growth weighed heavily on consumers’ minds in March, driving both consumer sentiment and consumer confidence lower this month.
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23-Mar-12
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GDP Monitor: March 19 - 23, 2012
The housing data in February, for both sales and construction, were disappointing compared to January levels. Nevertheless, that does not change our view that the housing sector has bottomed and will provide a positive contribution to GDP growth through the rest of 2012.
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23-Mar-12
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Data Detail: Home Sales - February 2012
Both new and existing home sales declined modestly in February, but the moves were most likely the result of month-to-month noise rather than a shift in demand for housing.
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22-Mar-12
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Water Battles Intensify: The Fight over Inflation
There are some worries among market participants that Federal Reserve actions during the Great Recession will ultimately lead to a severe inflation shock that could potentially result in hyperinflation. We believe these fears are overblown and inflation is likely not going to be a problem in the near future.
The economy has been mired in a liquidity trap. That means past and future monetary policy actions, through quantitative easing and other measures directed at increasing the money supply, have had very little effect on both output and inflation.
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20-Mar-12
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Data Detail: Housing Starts - February 2012
Housing starts did not detour from their previous three-month average in February. On the surface, that suggests housing starts remain on a clearly improving trend. The underlying details, however, paint a more worrisome picture that the strong gains in December and January may simply have been aberrations.
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16-Mar-12
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GDP Monitor: March 12 - 16, 2012
Even though the first quarter is still tracking below even moderate “new normal” growth rates, the underlying data are still pointing toward a solid rebound through the remainder of the year. This week, it was strong retail sales and jobless claims reports that highlighted the improving economic dynamic.
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16-Mar-12
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Data Detail: Inflation, Industrial Production (Feb-12)
Inflation levels turned higher in February as the recent run-up in gasoline prices was finally accounted for in both the CPI and the PPI. Outside of the energy sector, however, price growth remained tame.
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13-Mar-12
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Data Detail: Retail Sales - February 2012
Last month’s unexpected drop in motor vehicle sales gave way to a solid rebound in February, which led to a modest upside surprise in the retail sales data. That bodes well for first quarter consumption levels.
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09-Mar-12
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GDP Monitor: March 5 - 9, 2012
Many economists and pundits in the media are skeptical that the recent improvements in the economy will last. They point toward similar undercurrents at the beginning of 2011, which ultimately failed to gain traction. This time, however, payrolls have grown on average by nearly 100,000 more per month than they did last year, businesses are stockpiled with cash, and consumer debt is more manageable.
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09-Mar-12
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Data Detail: Employment Report (Feb-12), Trade (Jan-12)
Nonfarm payrolls, over the past three months, have increased at their fastest rate since early 2006. Furthermore, layoff activities have diminished greatly as the initial claims level has stabilized at roughly 355,000. There is no doubt that the labor sector is picking up momentum and the economy is beginning to show signs of a pending acceleration.
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08-Mar-12
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Are Small Businesses Missing the Recovery?
Newly-published data from the BLS show that large businesses have been leaders in labor market growth following the end of the Great Recession. That observation is in direct contrast with common economic thought, backed up with data provided by ADP, which shows small businesses are the primary source of the post-recessionary employment gains. The conflicting data adds another wrinkle into understanding why employment growth has been unexpectedly weak over the last few years.
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02-Mar-12
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GDP Monitor: Feb. 27 - March 2, 2012
Another week, another downward revision to our GDP forecast, and yet more evidence surfaces that supports the notion that an accelerated turnaround is near.
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01-Mar-12
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Data Detail: ISM (Feb-12), Construction, PCE (Jan-12)
All month long, the regional manufacturing surveys showed solid improvement in both manufacturing demand and production. Yet, that failed to translate into a positive national ISM reading. The discrepancy leads us to believe the manufacturers surveyed by the ISM in February were not a true representation of the entire industry.
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28-Feb-12
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Data Detail: Durables (Jan-12), Consumer Confidence (Feb-12)
A large drop in business investment demand in January made for an ugly headline. Fortunately, the pullback is likely the result of a one-time event – the end of the 2011 accelerated depreciation tax credit – and not the start of a new downward moving investment trend.
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24-Feb-12
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GDP Monitor: Feb. 20 - 24, 2012
While this was a slow week with few economic reports to evaluate, recent moves in both the initial claims level and consumer sentiment point toward a recovery that is itching to accelerate.
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24-Feb-12
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Data Detail: Home Sales - January 2012
While the increase in existing home sales in January follows the trend of improving housing market conditions, the data from the National Association of Realtors (NAR) continue to suffer from large negative revisions. Given that the pending home sales index and the Mortgage Bankers Association Mortgage Purchase Index both contracted for January, it would not be surprising if the January sales number was overstated and is revised lower next month.
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17-Feb-12
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GDP Monitor: Feb. 13 - 17, 2012
The economic data over the past several weeks has largely surprised on the upside, especially labor market data. Nonetheless, our economic forecast for the first quarter was revised down.
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17-Feb-12
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Data Detail: Inflation - January 2012
Inflation worries intensified somewhat in January as core prices for both producers and consumers increased more than expected. Consumer prices, in particular, saw their largest increase since September 2008, pushing closer to the 2.5% upper bound in the Federal Reserve’s implied CPI target window.
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16-Feb-12
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Data Detail: Housing Starts - January 2012
A strong gain in starts, combined with an acceleration in the number of homes currently under construction, suggests the residential construction sector is finally on a steady, upward trend. Residential construction is poised to be a positive contributor to 2012 GDP.
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15-Feb-12
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Data Detail: Industrial Production - January 2012
For the second time in two days, a weaker-than-expected headline figure for a key economic metric masked solid underlying trends. In the case of today’s industrial production data, warmer-than-usual temperatures, which lowered demand for heating, combined with a slight pullback in mining activities completely offset gains in the manufacturing sector.
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14-Feb-12
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Data Detail: Retail Sales - January 2012
Aggregate retail sales growth came in below expectations for the second consecutive month. Under normal circumstances, this would call into question our forecast for a consumption-led recovery in 2012. The details, however, suggest that the weakness in January sales is likely statistical or survey related and not an indicator of a slumping consumer.
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10-Feb-12
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GDP Monitor: Feb. 6 - 10, 2012
Using hard data from the fourth quarter, our economic model continues to forecast a relatively weak economy as we head further into 2012. Recent gains in the labor market, however, point toward more solid consumption growth than the hard data implies. A more complete intuitive analysis points to the prospect of real GDP growing at nearly 3.0% in the first quarter. Using the latest statistics, that is a sizable, but plausible, uptick from the model output.
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10-Feb-12
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Data Detail: Trade Deficit - December 2011
The trade deficit widened in December, but was in-line with the estimates used by the Bureau of Economic Analysis in the advance Q4 2011 GDP. The trade numbers should not have a substantial effect on the second estimate of fourth quarter growth.
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09-Feb-12
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U.S. Economic Outlook Conference Call: Q1 2012
Weak domestic production in Q4 2011 and uncertainties throughout Europe suggest GDP growth will remain below trend (2.7-3.0%) in the near term. Pessimism is currently running deep for most economic forecasters.
It is no surprise to see most forecasts project roughly 2.0% growth over the next couple of years. Yet, for all of the weakness that is expected to play out through 2013, we see more upside potential than downside risk over the course of the outlook.
Click here for the presentation.
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09-Feb-12
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State of the U.S. Motor Vehicle Industry: 2012
For the past several years, the recession and the economic uncertainty in the immediate aftermath caused motor vehicle sales to fall to their lowest point since data became available in 1976. The lack of sales growth caused a structural shift in the underlying fundamentals lining the motor vehicle market. Used car prices, scrappage rates, vehicle ages, and the number of cars per driver are all outside historic equilibrium levels, suggesting high pent-up demand. This reality, coupled with a stable and improving U.S. economy, sets up the potential for auto sales to exceed forecasts in 2012.
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03-Feb-12
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U.S. Economic Outlook: Growth Prospects, Full Speed Ahead
Pessimism is currently running deep for most economic forecasters. It is no surprise to see most forecasts, including this one, project roughly 2.0% growth over the next couple of years.
Yet, for all of the weakness that is expected to play out through 2013, we see more upside potential than downside risk over the course of the outlook.
Conference Call – Briefing Research Q1 2012 Economic Outlook: Growth Prospects, Full Speed Ahead
Join us for the Briefing Research quarterly conference call on the economy with our Economist, Jeff Rosen Ph.D., Director of Research, Kimberly DuBord, and Chief Market Analyst, Patrick J. O’Hare, on Wednesday, February 8, at 10:00 a.m. CT (11:00 a.m. ET). Space is limited, so register now.
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03-Feb-12
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Employment Report: January 2012
There have been numerous discussions among media pundits Friday morning trying to explain that the January employment report is not as strong as it seems. Quite simply, they are wrong.
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01-Feb-12
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Data Detail: ISM (Jan-12), Construction Spending (Dec-11)
Strong gains in new orders and backlogs drove manufacturing activities higher for the fourth consecutive month. The gain in backlogs, specifically, should be enough to keep production moving ahead in the near term.
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31-Jan-12
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Data Detail: Consumer Confidence - January 2012
Given the substantial strengthening in the labor sector over the last few weeks – initial claims fell to a three-year low – and the upward trend in equity prices, one would expect consumer confidence to increase in similar fashion to consumer sentiment. The fact that confidence instead declined could mean consumers do not believe the recent economic gains are long lasting.
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30-Jan-12
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GDP Monitor: Reconciliation with Q4 GDP
Although fourth quarter GDP missed expectations, growth levels looked healthy on the surface. As we expected, though, most of the gain came from highly volatile inventory changes. Real final sales, which exclude inventories, eroded dramatically from third quarter levels and increased at the slowest pace since Q1 2011.
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30-Jan-12
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Data Detail: Personal Income and Spending - December 2011
Strong employment and earnings growth in December led to a healthy increase in personal income. That gain, however, did not translate into consumption growth as consumers instead decided to forgo spending for saving.
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27-Jan-12
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Data Detail: Fourth Quarter GDP 2011
The advance estimate for fourth quarter real GDP showed economic output increased at an annual rate of 2.8%. That was the strongest rate of growth since the second quarter of 2010. Still, the growth was not all that market participants had hoped it would be. Real final sales, which exclude the change in inventories, were up just 0.8%.
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26-Jan-12
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Data Detail: Jobless Claims - January 21, 2012
Initial claims for the week ending January 21 increased by 21,000 to 377,000. Granted that is the wrong move directionally, yet the uptick was not a material deviation that some might have feared would be seen given the Department of Labor’s admission that problems with seasonal adjustment factors may have influenced the readings in recent weeks.
Importantly, the uptick in initial claims did not alter the improving trend in the 4-week moving average, which decreased by 2,500 to 377,500 and has returned to levels seen in the summer of 2008.
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26-Jan-12
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Data Detail: Durable Goods Orders - December 2011
The Durable Goods Orders report for December fit the mold of presenting better-than-expected data for the fourth quarter. More importantly, though, it fit the mold of a growing economy.
Total orders increased 3.0% on top of an upwardly revised 4.3% increase in November. Orders were up 2.1%, excluding transportation; meanwhile, new orders and shipments of nondefense capital goods excluding aircraft both increased 2.9%.
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20-Jan-12
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GDP Monitor: Jan. 16 - 20, 2012
While there was a lot of economic data to digest this week, the bulk of the data either met expectations or failed to produce much change in our fourth quarter GDP forecast. This has been going on for the past several weeks as the monthly volatility in each economic growth sector has notably slowed.
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19-Jan-12
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Data Detail: Housing Starts, Inflation (Dec-11)
After averaging 572,000 starts from May 2010 through August 2011, new housing construction has ratcheted higher and averaged 654,000 starts over the last four months through December. The recent gain has led many economists to believe that the housing sector will be a growth sector for the economy in 2012. We are still unsure that the recent gains are stable.
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18-Jan-12
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Data Detail: Industrial Production - December 2011
As expected, the decline in manufacturing production in November was not the start of a new trend. In fact, production spiked in December to its highest level since August 2008, and new data from the Federal Reserve Bank of New York’s Empire State Manufacturing Survey suggest production should continue to gain ground in January.
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13-Jan-12
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GDP Monitor: Jan. 9 - 13, 2012
As a whole, the economic data this week came in far below expectations. The underlying trend, however, suggests that the recent weakness is likely the result of normal volatility following three months of relatively strong growth. Our fourth quarter GDP forecast had assumed a temporary pullback was coming and, as a result, the data had little impact on our current forecast. We are confident that GDP will remain above trend for this quarter.
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13-Jan-12
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Data Detail: Trade Balance - November 2011
For the second consecutive month, export demand deteriorated. However, the recent declines are not the result of a global slowdown caused by the European debt crisis or weakness in Asia. The bulk of both declines came from an unusual drop-off in demand for nonmonetary gold.
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12-Jan-12
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Data Detail: Retail Sales - December 2011
While it is too early to call a prolonged downturn in consumption following one month of negative data, it is concerning that sales weakened at the same time that aggregate earnings jumped 0.7%. It seems consumers increased their savings rate in December, which implies that consumer debt remains a hindrance to current consumption.
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06-Jan-12
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GDP Monitor: Jan. 2 - 6, 2012
The important takeaway with the December employment report is that it shows the labor market is improving. That trend dynamic cannot -- and should not -- be understated. An improvement in the labor market is an essential component for restoring confidence to consumers and businesses alike which, in turn, can precipitate positive economic surprises in 2012.
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06-Jan-12
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Data Detail: Employment Report - December 2011
The employment situation in the U.S. can be resolutely described as improving. The December employment report was the latest reminder of that important point. This trend dynamic cannot — and should not — be understated. An improvement in the labor market is an essential component for restoring confidence to consumers and businesses alike that, in turn, can precipitate a positive feedback loop.
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03-Jan-12
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Data Detail: ISM (Dec-11), Construction Spending (Nov-11)
After being on the verge of falling into a contraction phase for most of the summer and fall months, the manufacturing sector is back on steady ground and moving in an upward direction.
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