Search Results: 63
Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.
Sorry, but our website is best viewed on a device with a screen width greater than 320px. You can contact us at: firstname.lastname@example.org.
63 matches for " household spending":
The further depreciation of sterling yesterday, to its lowest level against the dollar and euro since March 2017 and September 2017, respectively, signified deepening pessimism among investors about the chances of a no-deal Brexit.
Recent retail surveys have indicated that consumers are not suffering yet from Brexit blues. The BRC reported that year-over-year growth in total sales values picked up to 1.9% in July, from 0.2% in June. After adjusting for falling prices, this measure suggests that year-over-year growth in official retail sales volumes held steady at about 4% last month.
Whether the economy enters recession will hinge more on corporate behaviour than on consumers. Household spending accounts for about two thirds of GDP, but it is a relatively stable component of demand. By contrast, business investment and inventories--which are often overlooked--are prone to wild swings.
Today's preliminary estimate of Q4 GDP likely will show that the Brexit vote has not caused the economy to slow yet. But growth at the end of last year appears to have relied excessively on household spending, which has been increasingly financed by debt. GDP growth likely will slow decisively in Q1 as the squeeze on households' real incomes intensifies.
The tone of today's FOMC statement likely will be different to the gloomy April missive, which began with a list of bad news: "...economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated... underutilization of labor resources was little changed. Growth in household spending declined... Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined."
Household spending has been the sole source of growth in the economy so far this year, amid worsening investment and net trade. Today's official retail sales figures, however, look set to show that consumers suffered the Brexit blues in June.
The consumer in Brazil was off to a strong start to the first quarter, and we expect household spending will continue to boost GDP growth in the near term.
Data on industrial production and trade released last week have fanned hopes that the U.K.'s growth model is moving away from its excessive reliance on household spending, and towards production and exports. But a close look at the underlying drivers of the strong headline figures suggests that it is too soon to hope that the economy is undergoing a major rebalancing.
Today's labour market figures likely will cast doubt over the sustainability of strong growth in household spending. Growth in the three-month average level of employment likely weakened in August, from July's impressive 1.9% year-over-year rate.
The national accounts for the fourth quarter showed that the economy relied on households slashing their saving rate to a record low in order to spend more. Now, growth in consumer spending will have to fall back in line with real incomes, which will increasingly be impaired by rising inflation.
The FTSE 100 has dropped by 7% since the end of September--leaving it on course for its worst month since May 2012--and now is 12% below its May peak.
The outlook for French consumers' spending improved this month, at the margin. The headline consumer sentiment index was unchanged at 98 in November, but most forward-looking indicators rose. Consumers' spending in was flat in Q2 and Q3, following a 1.1% jump in the first quarter.
The proportion of households' annual incomes absorbed by servicing debt has declined steadily this decade, providing a powerful boost to spending. Indeed, the proportion of annual incomes accounted for by interest payments--mainly on mortgages--edged down a record low of 4.6% in Q1, less than half the share in 2008.
The risk posed by consumer borrowing was once again the focus of the Financial Policy Committee's discussion last week.
Last week's second estimate of GDP reaffirmed that quarter-on-quarter growth declined to 0.1% in Q1--the lowest rate since Q4 2012--from 0.4% in Q4.
Japan's flash PMI numbers for August were a mixed bag.
If the economy is to enter recession, falling business investment probably will have to be the main driver. Growth in consumer spending likely will slow sharply over the next year as firms become more cautious about hiring new workers and inflation begins to exceed wage growth again.
The MPC's unanimous decision to keep Bank Rate at 0.75% and the minutes of its meeting left little impression on markets, which still see a higher chance of the MPC cutting Bank Rate within the next 12 months than raising it.
We expect the official estimate of quarter-on-quarter GDP growth in Q4 to be revised up to 0.7% today, from last month's preliminary estimate of 0.6%. The consensus forecast is for no revision, so the data likely will boost interest rate expectations and sterling, if we're right.
We expect China's quarterly real GDP growth in the second quarter to edge down from Q1, but only because Q1 growth was unsustainable. The official data shows real GDP growth at 1.3% quarter-onquarter in Q1.
Taken at face value, the GDP data continue to suggest that the Brexit vote has had no adverse consequences for the economy. The official estimate of quarter-on-quarter GDP growth in Q4 was revised up yesterday to 0.7%, from 0.6%. The revision had been flagged earlier this month by stronger industrial production and construction output figures.
U.K. activity data have consistently surprised to the downside over the last month.
The slowdown in quarter-on-quarter growth in households' real spending to 0.4% in Q1--just half 2016's average rate--was driven entirely by a 0.1% fall in purchases of goods. Households' spending on services, by contrast, continued to grow briskly. Indeed, the 0.8% quarter-on-quarter rise in households' real spending on services exceeded 2016's average 0.5% rate.
China's FX reserves data pointed to an about-turn in net capital flows in May, with capital leaving the country again after two months of net inflows, and a current account deficit in Q1.
The downturn in car sales is showing no sign of abating. Data released yesterday by the Society of Motor Manufacturers and Traders showed that private registrations fell 10.1% year-over-year in October, much worse than the 6.6% average drop in the previous 12 months.
The process of refinancing existing mortgages at ever-lower interest rates has been a boon for the economy in recent years.
Evidence that households are not benefiting much from the Monetary Policy Committee's easing measures mounted yesterday, after the release of August data on advertised borrowing rates. Our first chart shows the drop in swap rates and average quoted mortgage rates since the end of last year.
China's manufacturing PMIs suggest the private sector is recovering ahead of SoEs. China's non-manufacturing PMI again masks construction/services cross currents. Japan's industrial production continues to languish. OK so now Japanese households are front-loading spending. Korean IP corrects from the bumper July; the momentum from the Q2 recovery is waning.
Korea's final GDP report for Q4 was little changed, in the end.
October's Markit/CIPS services survey added to evidence that the economy has started Q4 on a very weak footing.
Japan's headline jobless rate edged up to 2.8% in December, from 2.7% in November, but the increase was negligible, with the rate moving to 2.76% from 2.74%.
December's money and credit figures suggest that households are in no fit state to step up and drive the economy forwards this year.
The national accounts look set to show that GDP growth in the fourth quarter was even stronger than previously estimated. Earlier this month, quarter-on-quarter growth in construction output in Q4 was revised up to 1.2%, from 0.2%. As a result, construction's contribution to GDP growth will rise by 0.07 percentage points.
Households' decision to reduce their saving rate sharply was the main reason why economic growth exceeded forecasters' expectations in the aftermath of the Brexit vote.
On the face of it, June's retail sales figures suggest that households have splurged in Q2, re-energising GDP growth after its slowdown in Q1. Sales volumes rose by 0.6% month-to-month in June, completing a 1.5% quarter-on-quarter jump in Q2.
October's money and credit report indicates that the economy had little momentum at the start of the fourth quarter.
China's real GDP growth was unchanged at 6.4% year-over-year in Q1, above the consensus for a slowdown to 6.3%.
We have been rigorous in using the word nascent whenever referring to Japan's wage-price spiral.
Japan's Tankan survey continues to paint a picture of a contracting economy.
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.
Brazil's GDP growth slowed to just 0.1% quarter- on-quarter in Q4, from a downwardly-revised 0.5% in Q3.
April's money and credit figures suggest that GDP growth has remained sluggish in Q2. Households' broad money holdings increased by just 0.3% month-to-month in April.
Markets were on the right side of the argument with economists about the outlook for monetary policy in 2015, but we doubt history will repeat itself this year. The consensus among economists a year ago was for interest rates to rise to 0.75% from 0.5% by the end of 2015, in contrast to the markets' view that an increase was unlikely.
The latest money and credit data highlight that the financial fortunes of firms and households have begun to differ markedly. Private non- financial corporations--PNFCs--are enjoying strong growth in their broad money holdings. The 1.2% month-to-month increase in PNFC's M4 was the largest rise since August 2016, and it lifted the year- over-year growth rate to 9.3%, from 9.0% in May.
It's probably safe to assume that Q1's 0.5% quarter-on-quarter increase in GDP will be as good as it gets this year.
GDP growth in Japan surprised to the upside in the second quarter, although the preliminary headline arguably flattered the economy's actual performance.
Q2's GDP figures create a terrible first impression, but a closer look suggests that the risk of a recession remains very low.
Momentum in the EZ auto sector rebounded at the end of the second quarter.
The worst phase of the squeeze on real wages is nearly over; CPI inflation looks set to peak at slightly above 3% in October, before falling back steadily to about 2% by the end of 2018.
January's money and credit data provided another warning sign that the economy has started 2017 on a weak footing. For a start, the three-month annualised growth rate of M4, excluding intermediate other financial corporations--the Bank's preferred measure of the broad money supply-- declined to 1.8% in January, from 3.1% in December.
Japan's economic data have been very volatile in the last 18 months.
The French presidential election campaign remains chaotic. Republican candidate François Fillon had to defend himself again yesterday as investigations into his potential misuse of public funds deepened. Mr. Fillon and his wife have now been summoned to court to explain themselves. Markets expected Mr. Fillon to resign as the Republican front-runner. Instead, he used his unscheduled media address to defiantly declare that he is staying in the race.
We expect the run of downbeat news on the U.K. economy to be punctuated today by January's retail sales figures.
July's retail sales figures--the first official data for Q3--provided a reassuring signal that consumers can be counted on to drive the economy as the Brexit deadline nears.
Colombia's economy defied rising political uncertainty at the start of the year. Retail sales growth jumped to plus 6.2% year-over-year in January, up from -3.8% in December and -1.8% in Q4.
Korea's business survey index rose for a second straight month in March, to 75 from 73 in February, on our adjustment.
Mexico's economy continues to bring good news, despite the tough external environment for all EM economies. According to the economic activity index, a monthly proxy for GDP, growth gained further momentum in Q4. Activity rose 2.7% year-over-year in November, supported by stronger services activities, which expanded 0.3% month-to-month. The services sector has been the main driver of the current cycle, growing 3.8% year-over-year in November, bolstering our optimism about the domestic economy in the near-term.
On the face of it, recent retail spending surveys have been puzzlingly weak in light of the pick-up in employment growth, still-robust real wage gains and renewed momentum in the housing market. We think those surveys are a genuine signal that retail sales growth is slowing, and expect today's official figures to surprise to the downside. But retail sales account for just one-third of household spending, and, in contrast to the early stages of the economic recovery, consumers now are prioritising spending on services rather than goods.
GDP data today will probably show that the Eurozone economy accelerated to 0.3% quarter-on-quarter in Q4, up from 0.2% a quarter earlier. Industrial production came in disappointingly at 0.0% month-to-month in December, but this is not enough to change our forecast in the light of solid data on household spending.
The national accounts for the third quarter, released on Wednesday, are likely to show that households are saving a very small proportion of their incomes. Low unemployment, subdued inflation and the healthier condition of households' balance sheets suggests that very low saving is more sustainable than in the past. Nonetheless, the low rate underlines that household spending can't grow at a faster rate than incomes for a sustained period again.
The steady decline in mortgage rates since the financial crisis has helped to underpin strong growth in household spending. Existing borrowers have been able to refinance loans at ever-lower interest rates, while the proportion of first-time buyers' incomes absorbed by interest and capital payments has declined to a record low. As a result, the proportion of annual household incomes taken up by interest payments has fallen to 4.6%, from a peak of 10% in 2008.
The economic recovery would have lost more momentum last year had consumers not delved so deeply into their pockets. Real household spending increased by 0.7% and 0.8% quarter-on-quarter in Q3 and Q4 respectively, in contrast to investment and exports, which fell in both quarters.
Yesterday's FOMC statement was a bit more upbeat on growth than we expected, with Janet Yellen's final missive describing everything -- economic growth, employment, household spending, and business investment -- as "solid".
pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent analysis, independent macroeconomic research, independent, analysis, research, economic intelligence, economy, economic, economics, economists, , Ian Shepherdson, financial market, macro research, independent macro research