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222 matches for " businesses":
You could be forgiven for being alarmed at the 1.5% decline in the stock of outstanding bank commercial and industrial lending in the fourth quarter, the first dip since the second quarter of 2017.
Economic activity in Chile in the first half of the year is now a write-off, due to Covid-19. The country is in a deep recession, and the impact of lockdowns on labour markets and businesses will cause long-lasting economic damage, which will hold back the recovery.
We have been puzzled in recent weeks to see clear indications of softening economic activity--falling restaurant diner numbers, fewer small firms open for business and falling employment, and reduced footfall at businesses--while data from the travel business continued to improve.
The stock of bank lending to businesses is on course to fall in June, after a modest increase in May and huge jumps in March and April.
The surge in the broad money supply in March, as the U.K.'s lockdown began, suggests that businesses are in relatively good shape to survive a multi-month period of greatly depressed demand.
The limited data available on the state of the labour market, since the government forced businesses to close two weeks ago, paint a disconcerting picture.
May's money and credit data show that Covid-19 has not pushed many businesses immediately over the edge.
Here's the bottom line: U.S. businesses appear to have over-reacted to the impact of the trade war in their responses to most surveys, pointing to a serious downturn in economic growth which has not materialized.
Our current base-case forecast for the second quarter is a 30% annualized drop in GDP, based on our assessment of the hit to discretionary spending by both businesses and consumers.
The monthly survey of small businesses conducted by the National Federation of Independent Business is quite sensitive to short-term movements in the stock market, so we're expecting an increase in the November reading, due today.
It's just not possible to forecast the reaction of businesses and consumers to the coronavirus outbreak.
Before last November's election, movements in the headline NFIB index of activity and sentiment among small businesses could be predicted quite reliably from shifts in the key labor market components, which are released in advance of the main survey.
Chief U.S. Economist Ian Shepherdson on the latest NFIB data
Chief U.K. Economist Samuel Tombs discussing U.K. Consumer Confidence
Market-based measures of uncertainty and volatility remain elevated, but if we look beyond the headlines, two overall assumptions still inform forecasters' analysis of the economy and Covid-19.
Q1 is not over yet, and we still await a lot of important data.
The extent to which the Covid wave in the South and West--plus a few states in other regions--will constrain the recovery is unknowable at this point.
Investors think it more likely that the MPC will cut Bank Rate in the first half of next year, following Friday's release of the flash Markit/CIPS PMIs for November.
LatAm governments and central banks have been busy implementing additional measures to contain the spread of the virus, and acting rapidly to ease the effect on the economy.
The weaker is the economy over the next few months, the more likely it is that Mr. Trump blinks and removes some--perhaps even all--the tariffs on Chinese imports.
The consensus for today's first post-apocalypse jobless claims number, 1,500K, looks much too low.
The gaps in the third quarter GDP data are still quite large, with no numbers yet for September international trade or the public sector, but we're now thinking that growth likely was less than 11⁄2%.
The Redbook chainstore sales survey today is likely to give the superficial impression that the peak holiday shopping season got off to a robust start last week.
Yesterday's State Council meeting significantly expanded support to the economy, through a number of channels.
We learned yesterday that the patchy but widespread reopening of the economy is triggering the first wavelet of rehiring.
House Democrats and Senate Republicans are so far apart on both the structure and the size of the next Coronavirus relief package that it's hard to see a bill passing Congress in less than a couple weeks or so, and it could easily take longer.
Tracking the consumer services sector has become more important since Covid-19, as it was flattened by the lockdown in Q2 and it might prove to be an incubator of new infections, if it becomes too busy.
Beyond the immediate wild swings in prices for food, clothing, hotel rooms and airline fares, the medium-term impact of the Covid outbreak on U.S. inflation will depend substantially on the impact on the pace of wage growth.
The extent of shut downs within China is now reaching extreme levels, going far beyond services and threatening demand for commodities, as well as posing a severe risk to the nascent upturn in the tech cycle.
Core durable goods orders in recent months have been much less terrible than implied by both the ISM and Markit manufacturing surveys.
As the situation with the coronavirus develops, and we gain more information on the authorities' response, it's becoming clear that the damage to Q1 GDP is going to be nasty.
The speculation is over: 3.283 million people filed a new claim for unemployment benefits last week, nearly double the 1.7M consensus forecast, which looked much too low.
Japan's all-industry activity index dropped by 3.8% month-on-month in March, worse than the 0.7% slip in February.
The BoK surprised markets and commentators by keeping rates unchanged at 1.25% yesterday, rather than cutting to 1.0%.
Even the record-breaking slump in Markit's composite PMI probably understates the hit to economic activity from Covid-19 and the emergency measures to slow its spread.
Data released on Friday in Mexico strengthened the case for further interest rate cuts in Q3. The monthly IGAE economic indicator for April, a proxy for GDP, plunged 19.9% year-over-year, a record drop since the series started in 1993, and down from -2.3% in March.
U.K. equities are falling ever further out of favour.
Prospects for further rate cuts in Brazil, due to the sluggishness of the economic recovery and low inflation, have played against the BRL in recent weeks.
The annual National People's Congress meeting of China's legislature will get underway at the end of this week, after delay due to the Covid outbreak.
Just as we turned more positive on the labor market, following three straight months of payroll gains outstripping the message from an array of surveys, the Labor Department's JOLTS report shows that the number of job openings plunged in November.
Core machine orders in Japan held up surprisingly well in March, slipping by just 0.4% month-on-month, erasing only part of the 2.3% increase in February.
Investor sentiment data still indicate that EZ PMIs are set for a significant rebound at start of the year.
Fed Chair Powell broke no new ground in his Senate Testimony alongside--virtually--Treasury Secretary Mnuchin yesterday, maintaining the cautious tone of his recent public statements.
Economic and financial conditions continue to deteriorate sharply in LatAm.
High frequency data are all the rage, given the speed and severity of the Covid-19 shock. GDP data are published with a lag of about six weeks, too long for investors to wait.
We understand the desire of investors and individuals to see the economy re-opening as soon as possible, but the data right now support only a limited opening in some parts of the country and, hence, a limited late spring/summer rebound in the economy.
Just over four weeks after Mike Pence's spectacularly badly-timed Wall Street Journal Op-ed, entitled "There Isn't a Coronavirus Second Wave", the U.S. recorded 465K new cases in the week ended Saturday, easily the worst week of the pandemic to date.
In about 100 days, the LatAm economy and financial markets will face a defining moment in the face of uncertainty, namely, the outcome of the U.S. presidential election.
Brace yourselves; GDP growth forecasts are being slashed left and right, as our colleagues take stock of the economic damage Covid-19 likely will inflict in the U.S. and across Europe, where outbreaks and containment measures have escalated significantly.
Complacency and wishful thinking seem to be creeping back into the government's approach to containing Covid-19.
The coronavirus pandemic is wreaking havoc in Brazil.
China's manufacturing PMIs put in a better performance in November, with the official gauge ticking up to 50.2 in November, from 49.3 in October, and the Caixin measure little changed, at 51.8, up from 51.7.
The drop in the flash composite PMI in March will be one for the record books, unfortunately. We look for an unprecedented drop to 43.0, from 53.3 in February, which would undershoot the 45.0 consensus and signal clearly that a deep recession is underway.
Both business surveys and unconventional activity indicators suggest that the recovery from the Covid-19 shock has sped up in June, after a shaky start in May.
Mexican policymakers likely will stick to the script tomorrow and vote by a majority to cut the main rate by 50bp to 5.00%, which would be its lowest level since late 2016.
Yesterday's stock market bloodbath stands in contrast to the U.S. economic data, most of which so far show no impact from the Covid-19 outbreak.
The rate of growth of new coronavirus infections across Europe slowed yesterday, in some cases quite markedly. We can quibble about the reliability of the data in individual countries, given variations in testing regimes, but the picture is strikingly uniform.
Japan's flash Jibun Bank PMIs for July showed continued improvement, but only just.
We're placing less weight than usual on conventional business surveys at the moment, as they are ill-suited to charting the economy's turnaround from the Covid-19 slump.
Back-to-back elevated weekly jobless claims numbers prove nothing, but they have grabbed our attention.
After the strong Philly Fed survey was released last week, we argued that the regional economy likely was outperforming because of its relatively low dependence on exports, making it less vulnerable to the trade war.
Further evidence that the general election has transformed business confidence emerged yesterday, in the form of January's CBI Industrial Trends survey.
Yesterday's March PMIs confirmed that governments' actions to contain the Covid-19 outbreak dealt a hammer blow to the economy at the end of Q1.
The massive hit from low oil prices, Covid-19 and President AMLO's willingness to call snap referendums on projects already under construction is putting pressure on Mexico's sovereign credit fundamentals and ratings.
Judging by interactions with readers in the past few weeks, fiscal policy is one of the most important topics for EZ investors as we move into the final stretch of the year.
Emerging evidence suggests that the economy has passed the period of peak Covid-19 pain.
Productivity growth reached the dizzy heights of 1.8% year-over-year in the second quarter, following a couple of hefty quarter-on-quarter increases, averaging 2.9%.
The rally in U.K. equities immediately after the general election has done little to reverse the prolonged period of underperformance relative to overseas markets since the E.U. referendum in June 2016.
Nobody knows the damage China's virus- containment efforts will have on GDP, and we probably never will, for sure, given the opacity of the statistics.
The post-election run of upbeat business surveys was extended yesterday, with the release of the final Markit/CIPS services PMI for January.
The U.K. services sector has vanished overnight, following the introduction of tough restrictions on everyday life to stem the spread of Covid-19.
We set out the reasoning behind the big upward revision to our payroll forecast yesterday, in the wake of the much better-than-expected ADP report.
The Fed's unscheduled 50bp cut on Tuesday opens up some space for Asian central banks to follow suit.
The recent March economic activity reports for Chile have been terrible, showing the first signs of the Covid-19 shock, and worse is to come.
China is facing a nasty mix of spiking CPI inflation and ongoing PPI deflation.
The jump in oil prices over the past two trading days eventually will lift retail gasoline prices by about 35 cents per gallon, or 131⁄2%.
The short answer to the question posed by our title is: We don't know. But that's the point, because we shouldn't be needing to ask the question at all.
April's GDP report probably will be the worst any of us will see in our lifetime.
Resistance is futile.
The coronavirus outbreak has pushed inflation lower in the Andean economies as the shock drives them into the deepest recession on record.
A third wave of Covid-19 outbreaks is now underway. The first, in China, is now under control, and the rate of increase of cases in South Korea has dropped sharply. The other second wave countries, Italy and Iran, are still struggling.
The Chancellor's Summer Statement contained a targeted package of measures aiming to sustain employment and support the ailing hospitality sector. In total, these measures could inject up to £30B into the economy, depending on take-up by households and firms.
The reported drop in mortgage applications over the holidays is now reversing, not that it ever mattered.
Recent economic indicators in Mexico have been terrible. The worst of the recession seems to be over, but recent hard data have underscored the severity of the shock and made it clear that the recovery has a long way to go.
In the wake of Wednesday's ADP report, showing a mere 27K increase in private payrolls, we cut our payroll forecast to 100K.
Economic conditions remain challenging in Mexico, despite a modest improvement in leading indicators. The usual surveys currently are not well-suited to capture the economy's upturn from the Covid-19 collapse.
The single most surprising U.S. economic report ever published likely is explained very simply: We know a great deal about the numbers of people losing jobs, but not much about people finding jobs.
Our judgement that April was the low point for economic activity was challenged yesterday by the publication of results of the fifth wave of the Business Impact of COVID-19 Survey, conducted by the ONS between May 4 and 17.
Wednesday's industrial production report in Brazil was terrible, despite overshooting market expectations.
Brazil's industrial production rose 0.8% month- to-month in August, well above our call, and the consensus, for a trivial increase.
The U.S. coronavirus outbreak is not slowing. The curve is not bending much, if at all. Confirmed cases continue to increase at a steady rate, averaging 23% per day over the past three days.
Industrial profits in China collapsed by 38.3% year- over-year in the first two months of 2020, making December's 6.3% fall look like a minor blip.
The economic downturn and the Chancellor's unprecedented fiscal measures mean that public borrowing likely will be about four times higher, in the forthcoming fiscal year, than anticipated in the Budget just over two weeks ago.
June's money and credit data show that firms have accumulated a large cash pile since the start of the Covid-19 outbreak, despite sales falling through the floor.
The recovery of consumer confidence in Korea remains undeterred by the lingering risk of a second wave.
We're expecting ADP today to report a 10M drop in private payrolls in May, but investors should be braced for surprises, in either direction, because ADP's methodology is not clear.
April's money and credit figures show that relatively few firms suffered from a lack of liquidity at the beginning of the Covid-19 crisis.
It has been a nasty start to the year for LatAm as markets have been hit by renewed volatility in China, triggered by the coronavirus.
Last week we made a big call and further downgraded our China GDP forecasts for Q1; daily data and survey evidence suggested that our initial take, though grim, had not been grim enough.
It's a myth that the 10-ye ar decline in the unemployment rate has not driven up the pace of wage growth.
Yesterday's first estimate of Q2 GDP in Mexico confirmed that the economy has been under severe stress in recent months.
The unexpectedly robust 128K increase in October payrolls--about 175K when the GM strikers are added back in--and the 98K aggregate upward revision to August and September change our picture of the labor market in the late summer and early fall.
Yesterday's data provided further evidence of the rising costs of supporting the EZ economy through the Covid-19 shock.
The advance indicators of July payrolls are wildly contradictory, so you should be prepared for anything from a consensus-busting jump to a renewed outright drop, in both Friday's official numbers and today's ADP report.
We've previously highlighted the pro-cyclical elements of the BoJ's framework, but it's worth repeating, when an economic shock comes along.
This week's March economic activity reports in Chile have been relatively strong, with the industrial sector expanding briskly and retail sales solid.
We aren't in the business of trying to divine the explanation for every twist and turn in the stock market at the best of times, and these are not the best of times.
We remain concerned that huge job losses are imminent, slowing the economic recovery after a mid-summer spurt.
A pair of closely-watched reports today will confirm that business and consumer confidence is tanking in the face of the coronavirus outbreak.
Yesterday's final EZ manufacturing PMIs for July extended the run of gains since the nadir during lockdown.
Under normal circumstances, sustained ISM manufacturing readings around the July level, 54.2, would be consistent with GDP growth of about 2% year-over-year.
The release today of the final reading of the composite PMI for June will provoke further debate over its usefulness in charting the economy's recovery from the Covid-19 shock.
We're reasonably happy with the idea that business sentiment is stabilizing, albeit at a low level, but that does not mean that all the downside risk to economic growth is over.
China's money and credit data for February were reassuring, at least when compared with the doomsday scenario painted, so far, by other key indicators for last month.
Chancellor Sunak's "temporary, timely and targeted" fiscal response to the Covid-19 outbreak, and the BoE's accompanying stimulus measures, won't prevent GDP from falling over the next couple of months.
The Q1 GDP figures, released on Wednesday, likely will show that the quarter-on-quarter decline in economic activity eclipsed the biggest decline in the 2008-to-09 recession--2.1% in Q4 2008--even though the U.K. went into lockdown towards the very end of the quarter.
Chair Powell broke no new ground in his semi-annual Monetary Policy Testimony yesterday, repeating the Fed's new core view that the current stance of policy is "appropriate".
The FOMC did mostly what was expected yesterday, though we were a bit surprised that the single rate hike previously expected for next year has been abandoned.
China's October foreign trade headlines beat expectations, but the year-over-year numbers remain grim, with imports falling 6.4%, only a modest improvement from the 8.5% tumble in September.
The undershoot in the September core CPI does not change our view that the trend in core inflation is rising, and is likely to surprise substantially to the upside over the next six-to-12 months.
The 0.1% dip in the core CPI in March was the first outright decline in three years, but we expect another-- and bigger--decline in today's April numbers.
India's shocking PMIs for April leave little doubt that the second quarter will be bad enough to result in a full-year contraction in 2020 GDP, even if economic activity recovers strongly in the second half.
Quarter-on-quarter GDP growth last year was buffeted by the accumulation, and subsequent depletion, of inventories, around the two Brexit deadlines in March and October.
The record 0.4% drop in the core CPI in April would have looked even worse had it not been for favorable rounding; it was just 0.002% away from printing at -0.5%.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
We've been consistent in saying that Japanese capex would roll over this year, after strength in the first three quarters was seen by the authorities and many commentators as a sign of resilience.
If the Phase One trade deal with China is completed, and is accompanied by a significant tariff roll-back, we'll revise up our growth forecasts, but we'll probably lower our near-term inflation forecasts, assuming that the tariff reductions are focused on consumer goods.
The key piece of evidence supporting our view that housing market activity has peaked for this cycle is the softening trend--until recently--in applications for new mortgages to finance house purchase.
Hideous though the official April payroll numbers were, the chances are that they'll be revised down.
We expect the Budget today to underwhelm investors who are eager to see a quick and powerful government response to the coronavirus outbreak.
We expect to see a 70K increase in October payrolls today.
The reported 225K jump in payrolls in January was even bigger than we expected, but it is not sustainable. The extraordinarily warm weather last month most obviously boosted job gains in construction, where the 44K increase was the biggest in a year
Data released in recent days have started to reveal a story of horror and misery in the Brazilian economy.
Today brings a raft of data with the potential to move markets, but we're far from convinced that the two most closely-watched reports--ADP employment and the ISM manufacturing survey--will tell us much about the future.
The Q4 national accounts show that the economy lost further momentum at the end of last year, in the face of unprecedented levels of political uncertainty.
Yesterday's March labour market data in Germany were surprisingly strong
Our forecast of a solid 190K increase in headline December payrolls ignores our composite employment indicator, which usually leads by about three months and points to a print of just 50K or so.
We expect May's GDP report, released on Tuesday, to provide an early blow to hopes that the economy will embark on a V-shaped recovery this year.
The People's Bank of China likely will be more than content with the latest money and credit data, to the point where it probably won't see the need to cut interest rates further anytime soon.
Collapsing oil prices add fresh deflationary pressure on China.
Markets rightly placed little weight on October's below-consensus GDP report yesterday, and still think that the chances of the MPC cutting Bank Rate within the next six months are below 50%.
Japan's labour data threw another January curve ball this year--last year it was wages--with a change in the standards for job openings.
Private consumption in Japan will take time to recover, even if some semblance of normality returns from this month.
We would be surprised, but not astonished, if the Fed were to announce a shift to explicit yield curve control at today's meeting.
We argued a couple of weeks ago that the stock market could suffer a relapse, on the grounds that valuations hadn't fallen far enough from their peak to reflect the extent of the hit to the economy; that hopes for an early re-opening were likely to prove forlorn; and that investors were likely to be spooked by the incoming coronavirus data.
China's trade balance flipped to an unadjusted deficit of $7.1B in the first two months of the year, from a $47.2B surplus in December.
We lack an adjective sufficiently strong to describe China's February activity data.
Yesterday's final CPI data for May confirmed that the EZ economy is within touching distance of headline deflation.
Signs that the economy has been crippled by people's response to the Covid-19 outbreak continued to emerge yesterday.
Incoming data continue to highlight the severe hit from the pandemic on the real economies of the region, but some surveys and leading indicators are already pointing to a gradual upturn from June onwards.
Headline retail sales in June were just 1% below their January peak, and about 3% below the level they would have reached if the pre-Covid trend had continued.
The Labour Force Survey continues to understate massively the damage caused by Covid-19.
China's data on Monday were beyond dire, leading to a dramatic downward revision of our already grim Q1 GDP forecasts for the country.
We keep hearing that the surge in Covid-19 infections in the South is not a big deal, because the number of cases and the subsequent hospitalizations are still very low when compared to the nightmare suffered in New York and other states, which had thousands of deaths.
While were out over the holidays, the single biggest surprise in the data was yet another drop in imports, reported in the advance trade numbers for November.
We're doing a wrap-up of the data that were released last week while we were away, and the Chinese numbers were both a hit and a miss.
Within the space of two months, investors have gone from wondering whether the slowdown in manufacturing would spill-over into the rest of the EZ economy, to the realisation that the crunch in services is now driving the overall story on the economy.
Chancellor Sunak announced further emergency support measures for the economy on Tuesday and pledged to do more soon.
The BoE has lived up to its reputation again as one of the most unpredictable central banks.
Japan's February trade data were a shocker, but not for the reasons we expected, given the signal from the Chinese numbers.
Brazil's consumer resilience in Q3 continued to November, but retail sales undershot market expectations, suggesting that the sector is not yet accelerating and that downside risks remain.
The labour market was pretty robust before the coronavirus crisis.
Mexico's industrial recession deepened in April, though some leading indicators suggest that the worst is over as the economy gradually reopens. But downside risks have increased dramatically in recent weeks, as the pandemic seems to be gathering renewed strength.
The two biggest economies in the region have taken divergent paths in recent months, with the economic recovery strengthening in Brazil, but slowing sharply in Mexico.
We aren't much bothered by the one-tenth overshoot in the June core CPI, reported yesterday.
Brazil's recession carried over into the middle of Q2, but with diminishing intensity in some economic sectors.
The Johns Hopkins database shows a mixed coronavirus picture in the Andes, with the trend in new cases still rising in Argentina and Colombia, but relatively flat for about the past two weeks in Peru.
The hard economic data in Brazil were relatively solid while we were off last week, supporting our view that the economy was experiencing a good spell at the start of the year just before the coronavirus hit.
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
China's main activity data for October disappointed across the board, strengthening our conviction that the PBoC probably isn't quite done with easing this year.
Economic activity remains under severe strain in the Andes.
The sharply increased virus spread outside China has lead to a serious downgrade in the global GDP growth outlook.
The weekly initial jobless claims numbers have been a useful proxy for the real-time performance of the economy since Covid-19 struck.
We still expect CPI inflation to decline a little further in the second half of this year, despite its surprise increase to 0.6% in June, from 0.5% in May.
The New York Times called the China trade agreement reached Friday "half a deal", but that's absurdly generous.
The "Phase One" China trade deal announced late last week is a step in the right direction, but a small one. With no official text available as we reach our deadline, we're relying on media reporting, but the outline of the agreement is clear.
The coronavirus outbreak and its associated movements in asset prices have radically changed the outlook for CPI inflation, which ultimately the MPC is tasked with targeting.
For some time now, we have puzzled over the softness of small firms' capital spending intentions, as measured by the monthly NFIB survey.
Chile's economy is showing the first reliable signs of improvement, at last. December retail sales rose 1.9% year-over-year, up from 0.4% in November, indicating that household expenditure is starting to revive, in line with a pick-up in consumer confidence and the improving labor market.
Freya Beamish, chief Asia economist at Pantheon Macroeconomics, discusses how policymakers are responding to the coronavirus crisis.
Small businesses remain extremely positive about the economy, but some of the post-election gloss appears to be wearing off. To be clear, the headline composite index of small business sentiment and activity in February, due this morning, will be much higher than immediately before the election, but a modest correction seems likely after January's 12- year high.
The key labor market numbers from today's August NFIB survey of small businesses have already been released--they appear a day or two before the employment report--but they will be reported as though they are news. The headline hiring intentions reading dipped to nine from 12, leaving it near the bottom of the range of the past couple of years.
The minutes of the September 19/20 FOMC meeting record that "...it was noted that the National Federation of Independent Business reported that greater optimism among small businesses had contributed to a sharp increase in the proportion of small firms planning increases in their capital expenditures."
It is very difficult to be positive about the Brazilian economy in the short term, with every indicator of confidence at historic lows. The industrial business confidence index fell 9.2% month-to-month in March alone. Capacity use dropped to 79.7% from 81.5% in February, the lowest level in six years, and inventories rose, presumably because businesses over-estimated the strength of sales.
The re-opening of businesses in Georgia, South Carolina and Tennessee, starting this week and expanding next week, comes as the rate of increase of confirmed Covid-19 infections in these states remains much faster than in European countries where lockdowns have started to ease.
We have been asked several times in recent days whether a pick-up in stockbuilding, as part of businesses' contingency planning for a no-deal Brexit, could cause the economy to gather some pace in the run-up to Britain's scheduled departure from the EU in March 2019.
The PBoC late on Wednesday announced measures to provide medium-term funding for smaller businesses.
Chinese monetary conditions remain tight. Systemic tightening through higher interest rates last year is playing a role, but intensified and ever- more public regulatory enforcement is becoming the primary driver of tightening credit conditions for businesses.
The key labor market numbers from the monthly NFIB survey of small businesses are released ahead of the main report, due today.
The key labor market numbers from today's February NFIB report on small businesses--hiring intentions and the proportion of firms with unfilled job openings--were released last week, as usual, ahead of the official jobs report.
The headline number in today's NFIB survey of small businesses probably will look soft. The index is sensitive to the swings in the stock market and we'd be surprised to see no response to the volatility of recent weeks. We also know already that the hiring intentions number dropped by four points, reversing December's gain, because the key labor market numbers are released in advance, the day before the official payroll report.
Nowhere is the gap between sentiment and activity wider than in the NFIB survey of small businesses. The economic expectations component leaped by an astonishing 57 points between October and December, but the capex intentions index rose by only two points over the same period, and it has since slipped back. In February, the capex intentions index stood at 26, compared to an average of 27.3 in the three months to October.
A classic indicator of impending recession is the emergence of excessive levels of inventory across the economy. The pace of businesses inventory accumulation typically lags sales growth, so when activity slows, usually in response to higher interest rates, firms are left with unsold goods.
If you had only the NFIB survey of small businesses as your guide to the state of the business sector, you'd be blissfully unaware that the economic commentariat right now is obsessed with the potential hit from the trade tariffs, actual and threatened.
The August NFIB survey of activity and sentiment at small businesses was soft, but it could have been worse.
On the face of it, small business have taken quite a hit over the past few months. The headline index from the NFIB survey of small businesses has dropped to a nine-month low of 95.2 in March from 100.4 in December. As a result, the gap between the NFIB and the ISM manufacturing indexes, which had been narrowing, has widened again.
The underlying trend in payroll growth ought to be running at 250K-plus, based on an array of indicators of the pace of both hiring and firing. The past few months' numbers have fallen far short of this pace, though, for reasons which are not yet clear. We are inclined to blame a shortage of suitably qualified staff, not least because that appears to be the message from the NFIB survey, which shows that the proportion of small businesses with unfilled positions is now close to the highs seen in previous cycles. If we're right, payroll growth won't return to the 254K average recorded in 2014 until the next cyclical upturn, but quite what to expect instead is anyone's guess.
The Fed's statement yesterday was unsurprising, acknowledging a "sharp" decline in economic activity and a significant tightening of financial conditions, which has "impaired the flow of credit to U.S. households and businesses."
China is set to ease reserve requirements for banks lending to small businesses. In a statement after the State Council meeting yesterday, Premier Li Keqiang said that commercial banks would receive a cut in their RRR , from 17% currently, based on how much they lend to businesses run by individuals.
News that the U.K.'s departure from the E.U. has been delayed by six months, unless MPs ratify the existing deal sooner, appears to have done little to revive confidence among businesses.
We're expecting a substantial inventory hit in the fourth quarter, subtracting about 1¼ percentage points from headline GDP growth. Businesses very likely added to their inventories in Q4, in real terms, but the we reckon the increase was only about $30B, annualized, compared to the $85.5B jump in the third quarter. Remember, the contribution to GDP growth is the change in the pace of inventory-building between quarters.
The NFIB survey of small businesses today will show that July hiring intentions jumped by four points to +19, the highest level since November 2006. The NFIB survey has been running since 1973, and the hiring intentions index has never been sustained above 20.
The point when businesses and households can breathe a sigh of relief about Brexit looks set to be delayed again this week.
While businesses--and farmers--fret over the damage already wrought by the trade war with China and the further pain to come, consumers are remarkably happy.
If our composite index of businesses' hiring plans could speak, it would say: "Told you payrolls were going to go nuts at the end of the year."
The high and rising proportion of small businesses reporting difficulty in filling job openings is perhaps the biggest reason to worry that the pace of wage increases could accelerate quickly. If they pick up too far, the Fed's intention to raise rates at a "gradual" pace will be upended. The NFIB survey of small businesses--mostly very small--shows employers are having as much trouble recruiting staff as at the peak of the boom in 2006.
We argued in the Monitor yesterday that the very low and declining level of jobless claims is a good indicator that businesses were not much bothered by the slowdown in the pace of economic growth in the first quarter. The numbers also help illustrate another key point when thinking about the current state of the economy and, in particular, the rollover in the oil business.
The IFO did its part to alleviate the stock market gloom yesterday, with the business climate index rising slightly to 108.3 in August from 108.0 in July. The August reading doesn't reflect the panic in equities, though, and we need to wait until next month to gauge the real hit to business sentiment. The increase in the headline index was driven by businesses assessment of current output, with the key expectations index falling trivially to 102.2 from a revised 102.3 in July. This survey currently points to a stable trend in real GDP growth of about 0.4% quarter-on-quarter, consistent with our expectation of full year growth of about 1.5%.
Friday's PMIs were supposed to provide the first reliable piece of evidence of the coronavirus on euro area businesses, but they didn't. Instead, they left economists dazed, confused and scrambling for a suitable narrative.
The decline in China's unofficial PMI, which has dropped to a six-year low, signals increasing troubles ahead for U.S. manufacturers selling into China, and U.S. businesses operating in China. This does not mean, though, that the U.S. ISM will immediately fall as low as the Caixin/Markit China index appears to suggest in the next couple of months. Our first chart shows that in recent years the U.S. manufacturing ISM has tended hugely to outperform China's PMI from late spring to late fall, thanks to flawed seasonals.
This morning's second estimate of Q1 GDP likely will restate the preliminary estimate of a 0.4% quarter-on-quarter rise, confirming that the economic recovery has lost momentum since last year. Meanwhile, the new expenditure breakdown is set to show that growth remained extremely dependent on households and will bring more evidence that businesses held back from investing, ostensibly due to Brexit concerns.
Economic sentiment in the Eurozone's largest economy stayed solid at the start of the fourth quarter, despite subdued manufacturing and poor investor sentiment. The headline IFO business climate index fell slightly to 108.2 in October from 108.5 in September, due to a fall in the current assessment index. The expectations index rose, though, to 103.8 from 103.5 last month pointing to a resilient outlook for businesses and solid GDP growth in coming quarters.
Chief U.K. Economist Samuel Tombs on U.K. GDP
Are there any signs that the U.S. tax cuts and/or regulatory relaxation are stimulating increased non-residential fixed investment?
Chief U.K. Economist Samuel Tombs on Consumer Price Index, June
Chief U.K. Economist Samuel Tombs on U.K. GDP
Claus Vistesen on Eurozone Business Lending
Chief U.K. Economist Samuel Tombs on U.K Manufacturing in May
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