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173 matches for " tax cuts":
The passage of the House tax cut bill does not guarantee that the Senate will follow suit with its own bill, still less that both chambers will then be able to agree on a single bill which can then b e signed into law. As
The first estimate of retail sales growth in August was weaker than implied by the Redbook chainstore sales survey, but our first chart shows that the difference between the numbers was well within the usual margin of error.
The tax plan released by the administration yesterday was so thoroughly leaked that it contained no real surprises. The border adjustment tax is dead -- not that we thought it would have passed the Senate in any event -- and the centerpiece is a proposed cut in the corporate income tax rate to 15% from 35%.
China's government overshot its deficit target last year, and probably will overshoot it by at least as much this year
The release yesterday of the weekly Redbook chainstore sales report for the week ended Saturday August 4 means that we now have a complete picture of July sales.
It's not our job to pontificate on the merits, or otherwise, of the tax cut bill from a political perspective.
The headline retail sales numbers for October looked good, but the details were less comforting.
India's Finance Minister Nirmala Sitharaman finally brought out the big guns on September 20, announcing significant cuts to corporate tax rates.
The Chinese authorities have been out in force in the last few days, aiming to reassure markets and the populace that they are ready and able to support the economy, after abysmal trade data on Monday.
The CBO reckons that the April budget surplus jumped to about $179B, some $72B more than in the same month last year. This looks great, but alas all the apparent improvement reflects calendar distortions on the spending side of the accounts.
The plunge in oil prices in recent weeks is not a threat to the overall U.S. economic growth story in the near term--we have always expected growth to slow, but remain decent, once the boost from the tax cuts fades--but it will make a difference, at the margin.
Our hopes that tax cuts and lower energy inflation would lift French household consumption in Q4 were badly dented by yesterday's consumer sentiment report.
As far as we can tell, most forecasters expect the impact of fiscal stimulus this year to be gradual, with perhaps most of the boost to growth coming next year. At this point, with no concrete proposals either from the new administration or Congress, anything can happen, and we can't rule out the idea of a slow roll-out of tax cuts and spending increases.
The main story to emerge from China's Economic Work Report is the extent of tax cuts, which on our calculations will leave a large funding hole.
Chief U.S. Economist Ian Shepherdson speaking about Donald Trump's plans for sweeping tax cuts
Chief U.S. Economist Ian Shepherdson on Corporate Tax Cuts
The failure of House Republicans to support Speaker Ryan's healthcare bill has laid bare the splits within the Republican party. The fissures weren't hard to see even before last week's debacle but the equity market has appeared determined since November to believe that all the earnings-friendly elements of Mr. Trump's and Mr. Ryan's agendas would be implemented with the minimum of fuss.
Bond yields in the Eurozone took another leg lower yesterday.
Fourth quarter GDP growth is likely to be revised down today.
The end of the government shutdown--for three weeks, at least-- means that the data backlog will start to clear this week.
Today is a busy day in the Eurozone economic calendar, but we suspect that markets mainly will focus on the details of Italy's 2019 budget.
The Fed is on course to hike again in December, with 12 of the 16 FOMC forecasters expecting rates to end the year 25bp higher than the current 2-to-21⁄4%; back in June, just eight expected four or more hikes for the year.
China's abysmal industrial profits data for October underscore why the chances of less- timid monetary easing are rising rapidly.
China's finance minister Liu Kun provided his report on China's current fiscal situation to the legislature last Friday.
We expect to learn today that the economy expanded at a 2.1% annualized rate in the fourth quarter, slowing from 3.4% in the third.
The stock market loved Fed Chair Powell's remarks on the economy yesterday, specifically, his comment that rates are now "just below" neutral.
Industrial profits in China dropped 3.7% year-over- year in April, after surging 13.9% in March, according to the officially reported data.
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.
Guo Shuqing, head of the newly formed China Banking and Insurance Regulatory Commission, has been named as Party Secretary for the PBoC.
Our base case forecast has core PCE inflation at 1.9% from November 2018 through July this year.
The advance international trade data for December were due for publication today, but the report probably won't appear.
Recent export performance has been poor, but the export orders index in the ISM manufacturing survey-- the most reliable short-term leading indicator--strongly suggests that it will be terrible in the fourth quarter.
It seems reasonable to think that manufacturing should be doing better in the U.S. than other major economies.
The definition of "yesbutism": Noun, meaning the practice of dismissing or seeking to diminish the importance of data on the grounds that the next iteration will tell the opposite story.
French consumers remained in great spirits midway through the fourth quarter. The headline INSEE consumer confidence index jumped to a 28-month high in November, from 104 in October, extending its v-shaped recovery from last year's plunge on the back of the yellow vest protests.
After many years in which the phrase "twin deficits" was never mentioned, suddenly it is the explanation of choice for the weakening of the dollar and the sudden increase in real Treasury yields since the turn of the year, shortly after the tax cut bill passed Congress.
The apparent softness of business capex is worrying the Fed.
A shutdown of the federal government, which could happen as early as this weekend, is a political event rather than a macroeconomic shock. But if it happens--if Congress cannot agree on even a shortterm stop-gap spending measure in order to keep the lights on after the 28th--it would demonstrate yet again that the splits in the House mean that the prospects of a substantial near-term loosening of fiscal policy are now very slim.
New home sales surprised to the upside in May, rising 6.7% to 689K, a six-month high.
The levelling-off in the industrial surveys in recent months is reflected in the consumer sentiment numbers. Anything can happen in any given month, but we'd now be surprised to see sustained further gains in any of the regular monthly surveys.
The prospect of fiscal stimulus in the euro area-- ostensibly to "help" the ECB reach its inflation target-- remains a hot topic for investors and economists.
The White House budget proposals, which Roll Call says will be released in limited form on March 14, will include forecasts of sustained real GDP growth in a 3-to-3.5% range, according to an array of recent press reports.
Back on May 14, we argued--see here--that the stars were aligned to generate very strong second quarter GDP growth, perhaps even reaching 5%.
As we reach our deadline--4pm eastern time--media reports indicate that a debt ceiling agreement is close.
We're expecting to learn today that the economy expanded at a 2.6% annualized rate in the first quarter, rather better than we expected at the turn of the year--our initial assumption was 1-to-2%--and above the consensus, 2.3%.
We aren't convinced by the idea that consumers' confidence will be depressed as a direct result of the rollover in most of the regular surveys of business sentiment and activity.
Yesterday's consumer sentiment data in the two major euro area economies were mixed, but they still support our view that a rebound in EZ consumption growth is underway.
China's annual "two sessions" conference is due to start on Sunday, with the economic targets for this year set to be made official over the course of the meetings.
Yesterday's consumer sentiment data provided further evidence of a strengthening French economy, amid signs of cracks in the otherwise solid German economy.
We have tweaked our third quarter GDP forecast in the wake of the September advance international trade and inventory data; we now expect today's first estimate to show that the economy expanded at a 4.0% annualized rate.
We were terrified by the plunge in the ISM manufacturing export orders index in August and September, which appeared to point to a 2008-style meltdown in trade flows.
President Trump made official his plan to impose tariffs on up to $60B of annual imports from China, as well as limitations on Chinese investments in the U.S.
When Fed Chair Powell said last week that the "surprise" weakness in the official retail sales numbers is "inconsistent with a significant amount of other data", we're guessing that he had in mind a couple of reports which will be updated today.
In this Monitor, befitting these uncertain times, we set out the decision tree facing Chinese policymakers.
French consumer confidence and consumption have been among the main bright spots in the euro area economy so far this year.
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.
We read the same polls, newspapers, and political websites as everyone else, and we're not claiming any special insight into the outcome of the midterm elections today.
Labor demand appears to have remained strong through August, so we expect to see a robust ADP report today.
China's National People's Congress yesterday laid out its main goals for this year, on the first day of its annual meeting.
Chancellor Sunak faces a tough first gig on Wednesday, when he delivers the long-awaited Budget.
Fed Chair Powell yesterday said about as little as he could without appearing to ignore the turmoil in markets since the President announced his intention to apply tariffs to imports from Mexico: "We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2 percent objective."
The simultaneous weakening of the ISM manufacturing and non-manufacturing surveys in recent months is one of the more disconcerting shifts in the recent macro data.
The pushback from within the President's own party against the proposed tariffs on Mexican imports has been strong; perhaps strong enough either to prevent the tariffs via Congressional action, or by persuading Mr. Trump that the idea is a losing proposition.
...The Fed did nothing, surprising no-one; the labor market tightened further; the housing market tracked sideways; survey data mostly slipped a bit; and oil prices jumped nearly $4, briefly nudging above $50 for the first time since May.
We're sticking to our 220K forecast for today's official payroll number, despite the slightly smaller-than- expected 179K increase in the ADP measure of private employment.
The budget sequestration process, which cut discretionary government spending by a total of $114B in fiscal 2013 and fiscal 2014, was one of the dumbest things Congress has done in recent years.
We already know that the month-to-month movements in the key labor market components of the December NFIB small business survey were mixed; the data were released last week, ahead the official employment report, as usual.
Andean inflation remains under control, due to subpar growth, modest pressures on prices for nontradeables, and broadly stable currencies.
The recovery in small business sentiment since the fourth quarter rollover has been extremely modest, so far.
The 62K jump in jobless claims for the week ended September 2 is a hint of what's to come. Claims usually don't surge until the second week after major hurricanes, because people have better things to do in the immediate aftermath, so we are braced for a further big increase next week.
The flow of data pointing to strength in the labor market has continued this week, on the heels of last week's report of a 250K jump in October payrolls.
The two big surprises in the September employment report--the drop in the unemployment rate and the flat hourly earnings number--were inconsequential, when set against the sharp and clear slowdown in payroll growth, which has further to run.
If you need more evidence that the U.S. economy is bifurcating, look at the spread between the ISM non- manufacturing and manufacturing indexes, which has risen to 3.5 points, the widest gap since September 2016.
We don't believe that payrolls rose only 138K in May. History strongly suggests that when the May payroll survey is conducted relatively early in the month, payroll growth falls short of the prior trend.
We expect to see a 160K increase in June payrolls today, though uncertainty over the extent of the rebound after June's modest 75K increase means that all payroll forecasts should be viewed with even more skepticism than usual.
The trade war with China is not big enough or bad enough alone to push the U.S. economy into recession.
The stage is set for the Fed to ease by 25bp today, but to signal that further reductions in the funds rate would require a meaningful deterioration in the outlook for growth or unexpected downward pressure on inflation.
The New York Fed tweeted yesterday that "Housing market fundamentals appear strong.
The risk of a snap general election has jumped following Theresa May's resignation and the widespread opposition within the Conservative party to the compromises she proposed last week, which might have paved the way to a soft Brexit.
The 0.18% increase in the core PCE deflator in December was at the lower end of the range implied by the core CPI. It left the year-over-year rate at just 1.5%.
French finance minister Bruno Le Maire had bad news for his compatriots yesterday.
Modern Money Theory has come up at two consecutive BoJ press conferences.
Yesterday's economic reports in the euro area were mixed.
Today's October ADP measure of private payrolls likely will overshoot Friday's official number.
At the start of the year, #euroboom was the moniker used in financial media to describe the EZ economy.
Last week's strong ISM manufacturing survey for November likely will be followed by robust data for the non-manufacturing sector today, but the headline index, like its industrial counterpart, likely will dip a bit.
The violent protests in France claimed their first victims over the weekend, providing sombre evidence of the severity of the situation for the government.
We very much doubt that Fed Chair Powell dramatically changed his position last week because President Trump repeatedly, and publicly, berated him and the idea of further increases in interest rates.
Over the summer, both Chancellor Javid and PM Johnson appeared to be repositioning the Conservatives, claiming that the era of austerity was over and that higher levels of spending and investment were justified.
India's headline GDP print for the third quarter was damning, with growth slowing further, to 4.5% year- over-year, from 5.0% in Q2.
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.
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.
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.
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.
The first wave of domestic third quarter data crashes ashore this morning.
Japan's 0.3% quarter-on quarter increase in Q4 GDP was disappointing, on the face of it, after a downwardly-revised 0.7% fall in Q3.
We can't remember the last time a single economic report was as surprising as the December retail sales numbers, released yesterday.
No matter how you choose to slice-and-dice the recent retail sales numbers, the core data for the past couple of months have been disappointing. Our favorite measure--total sales less autos, gasoline, food and building materials--rose by just 0.1% month-to- month in May but then reversed this minimal gain in June.
Markets are beginning to grasp that President-elect Trump's economic plans, if implemented in full--or anything like it--will constitute substantial inflationary shock to the U.S.
The French manufacturing data delivered another upside surprise last week, following the solid numbers in Germany; see here. French industrial production rose slightly in November, by 0.3% month-to-month, extending the gains from an upwardly-revised 0.5% rise in October.
Turkey has all the problems you don't want to see in an emerging market when the U.S. is raising interest rates.
The wave of May data due for release today likely will go some way to countering the market narrative of a seriously slowing economy, a story which gained further momentum last week after the release of the May employment report.
In our Monitor of January 10, we argued that the market turmoil in Q4 was largely driven by the U.S.- China trade war, and that a resolution--which we expect by the spring, at the latest--would trigger a substantial easing of financial conditions.
Treasury Secretary Mnuchin's five-line letter to House Speaker Pelosi on last Friday--copied to other Congressional leaders--which said that "there is a scenario in which we run out of cash in early September, before Congress reconvenes", introduces a new element of uncertainty to the debt ceiling story.
Yesterday's wave of data suggested that a good part of the strength in final demand in the second quarter was sustained into the first month of this quarter, and perhaps the second too.
In yesterday's Monitor, we argued that if the upside risk in an array of core CPI components crystallised in January, the month-to-month gain would print at 0.3%, for the first time since August. That's exactly what happened, though we couldn't justify it as our base forecast. A combination of rebounding airline fares, apparel prices, new vehicle prices, and education costs conspired to generate a 0.31% gain, lifting the year-over-year rate back to the 2.3% cycle high, first reached in February last year.
We've had pushback from readers over our take on the likelihood of a trade deal with China in the near future.
"Is EZ fiscal stimulus on the way?" is a question that we receive a lot these days.
The New York Times called the China trade agreement reached Friday "half a deal", but that's absurdly generous.
The headline May retail sales numbers were flattered by a 2.4% leap in the wildly volatile building materials component and a price-driven 2.0% surge in gasoline sales.
Manufacturing is not in recession, yet, despite the reams of gloomy analysis of the sector, including our own.
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.
Our argument that rates could rise as soon as March has always been contingent on two factors, namely, robust labor market data and a degree of clarity on the extent of fiscal easing likely to emerge from Congress. On the first of these issues, the latest evidence is mixed.
On the face of it, the upturn in initial jobless claims since late September appears to signal a softening in the economy.
The likely dip in the headline NFIB index of small business sentiment and activity today will tell us that business owners are unhappy and nervous about the potential impact of the latest China tariffs on their sales and profits.
First things first: Payroll growth likely will be sustained at or close to November's pace.
On the face of it, the slowdown in bank loan growth to commercial and industrial companies over the past two years looks alarming. In the year to November, the stock of loans outstanding rose by 8.0%, the smallest gain since January 2014. A further decline in the year-over-year rate, taking it below the rate of growth of nominal GDP--we expect 4.7% in the first quarter--for the first time in six years, is now a fair bet. The three- and six-month annualized growth rates of C&I lending in November were just 6.2% and 4.7% respectively, and still falling.
Note: This updates our initial post-election thoughts, adding more detail to the fiscal policy discussion. Apologies for the density of the text, but there's a lot to say. Our core conclusions have not changed since the election result emerged. The biggest single economic policy change, by far, will be on the fiscal front.
The latest batch of FOMC speakers yesterday, together with the December minutes--participants said "the committee could afford to be patient about further policy firming"--offered nothing to challenge the idea, now firmly embedded in markets, that the next rate hike will come no sooner than June, if it comes at all.
Bond investors in Italy voted with their feet on Friday with news that the government has agreed a 2019 budget deficit of 2.4%.
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.
The softening in payroll growth in November appears mostly to be a story about short-term noise, rather than a sign that tariffs are hurting or that the broader economy is slowing.
Yesterday's price data for China showed continued declines in both CPI and PPI inflation.
The month-to-month core CPI numbers in March were consistent, in aggregate, with the underlying trend.
Whatever happened to consumers' sentiment in March, the level of University of Michigan's index will be very high, relative to its long-term average.
Political uncertainty is never far away in the Eurozone, though the most recent outbreak could easily swing in favour of markets.
Today's rate hike will be accompanied by a new round of Fed forecasts, which will have to reflect the faster growth and lower unemployment than expected back in September.
The reported rebound in January retail sales was welcome, but the overshoot to consensus was matched, more or less, by the unexpected downward revisions to the December numbers.
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 Mexican industrial sector is struggling. December industrial output fell 0.4% month-to-month, the third consecutive drop, driven mainly by a similar decline in mining/oil output.
We're very interested in the detail of today's January NFIB survey; the headline index, not so much.
We can see no hard evidence, yet, that the expanding trade war with China and other U.S. trading partners is hitting business investment.
The most important retail sales report of the year, for December, won't be published today, unless some overnight miracle means that the government has re-opened.
The odds of a hike this month have increased in recent days, though the chance probably is not as high as the 82% implied by the fed funds future. The arguments against a March hike are that GDP growth seems likely to be very sluggish in Q1, following a sub-2% Q4, and that a hike this month would be seen as a political act.
This week has seen a huge wave of data releases for both January and February, but the calendar today is empty save for the final Michigan consumer sentiment numbers; the preliminary index rose to a very strong 99.9 from 95.7, and we expect no significant change in the final reading.
Last month was sobering month for equity investors in the Eurozone, and indeed in the global economy as a whole.
Markets now think the Fed is done.
Bond yields in Italy remain elevated, but volatility has declined recently; two-year yields have halved to 0.7% and 10-year yields have dipped below 3%.
It might seem odd to describe a meeting at which the Fed raised rates for only the third time since 2006 as a holding operation, but that just about sums up yesterday's actions. The 25bp rate hike was fully anticipated; the forecasts for growth, inflation and interest rates were barely changed from December; and the Fed still expects a total of three hikes this year.
Chancellor Sunak announced further emergency support measures for the economy on Tuesday and pledged to do more soon.
Italian bond yields have remained elevated this week, following the release of the government's detailed draft budget for 2019.
Halfway through the third quarter, we have no objection to the idea that GDP growth likely will exceed 2% for the third straight quarter.
The two key planks of the argument that a substantial easing of fiscal policy won't be inflationary are that labor participation will be dragged higher, limiting the decline in the unemployment rate, while productivity growth will rebound, so unit labor costs will remain under control.
We expect the Fed today to shift its dotplot to forecast one rate hike this year, down from two in December and three in September.
We have been puzzled in recent months by the sudden and substantial divergence between the Redbook chainstore sales numbers and the official data.
The media and markets are waking up to the idea that the housing market has peaked in the face of higher mortgage rates and slightly--so far--tighter lending standards.
We would be astonished if the FOMC meeting starting today does not end with a 25bp rate hike.
The White House Budget for fiscal 2018, released last week, has no chance of becoming law in anything like its current form, so we don't propose to spend much time dissecting it. But we do need to set out our view on what might actually happen to fiscal policy over the next few months, because it potentially could make a material difference to the pace, and ultimate extent, of Fed tightening.
China's current account surplus grew further in the final quarter of 2018, more than doubling to $54.6B, from $23.3B in Q3.
The tone of Fed Chair Powell's opening comments at the press conference yesterday was much more dovish than the statement, which did little more than most analysts expected.
June's retail sales figures provided a timely reminder that consumers aren't being haunted by the warnings of the damage that a no -deal Brexit would entail.
The Fed will leave rates unchanged today.
The sovereign debt crisis in the euro area was a macroeconomic horror story
The rate of growth of real personal incomes is under sustained downward pressure, slowing to 2.1% year-over-year in December from 3.4% in the year to December 2015. In January, we think real income growth will dip below 2%, thanks to the spike in the headline CPI, reported Wednesday. Our first chart shows that the 0.6% increase in the index likely will translate into a 0.5% jump in the PCE deflator, generating the first month-to-month decline in real incomes since January last year.
In the short-term, all the housing data are volatile. But you can be sure that if the recent pace of new home sales is sustained, housing construction will rise.
The softness of the headline September retail sales numbers hid a decent 0.5% increase in the "control" measure, which is the best guide to consumers' spending on non-durable goods.
We are not worried about the reported drop in April manufacturing output, which probably will reverse in May.
Mr. Macron will be in Berlin today with the message that France wants a strong Eurozone and a tight relationship with Germany. Friendly overtures between Paris and Berlin are good news for investors; they reduce political uncertainty while increasing the chance that the economic recovery will continue. But it is too early to get excited about closer fiscal coordination, let alone a common EZ fiscal policy and bond issuance.
Official industrial production growth in China plunged to 5.4% year-over-year in April, from 8.5% in March.
We have revised up our second quarter consumption forecast to a startling 4.0% in the wake of yesterday's strong June retail sales numbers, which were accompanied by upward revisions to prior data.
At the end of last year, U.S. homebuilders were more optimistic than at any time in the previous 18 years, according to the monthly NAHB survey.
The turmoil in Washington has begun to hit markets. We don't know how this will end, but we do know that it isn't going away quickly.
For the record, we think the Fed should raise rates in December, given the long lags in monetary policy and the clear strength in the economy, especially the labor market, evident in the pre-hurricane data.
While we were away, EM growth prospects and risk appetite deteriorated significantly, due mainly to rising geopolitical risks, weaker economic prospects for DM, and, in particular, the most recent chapter of the global trade war.
China's activity data for May were a mixed bag, but they broadly paint a consistent picture of a slowdown in economic growth from the first quarter.
The chainstore sales numbers have been hard to read over the past year.
China's real GDP growth was unchanged at 6.4% year-over-year in Q1, above the consensus for a slowdown to 6.3%.
The median of FOMC members' estimates of longer run nominal r-star--the rate which would maintain full employment and 2% inflation--nudged up by a tenth in September to 3.0%, implying real r-star of 1%.
Evidence in support of our view that the U.S. industrial slowdown is ending continues to mount, though nothing is yet definitive and the re-escalation of the trade war is a threat of uncertain magnitude to the incipient upturn.
In the absence of new economic data today, we want to take the opportunity to expand on the key themes in our latest Chartbook, which was distributed Friday.
The U.S. consumer is back on track, almost. We have argued in recent months that the sharp slowdown in the rate of growth of consumption is mostly a story about a transition from last year's surge, when spending was boosted by the tax cuts and, later, by falling gas prices, to a sustainable pace roughly in line with real after-tax income growth.
Are there any signs that the U.S. tax cuts and/or regulatory relaxation are stimulating increased non-residential fixed investment?
The underlying U.S. consumer story, hidden behind a good deal of recent noise, is that the rate of growth of spending is reverting to the trend in place before last year's tax cuts temporarily boosted people's cashflow.
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