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21 November. 2016 The Inflation Threat from Wages is Rising (Publication Centre)

Last week, the Atlanta Fed updated its median hourly earnings series with new October data, showing wage growth accelerating to an eight-year high of 3.9%. That's a full percentage point higher than the increase in this measure of wages in the year to October 2015, and it follows a spring and summer during which wage growth appeared to be topping-out at just under 3½%.

21 February 2017 Wages Don't Necessarily Lead Inflation, but Unit Labor Costs do (Publication Centre)

Fed Chair Yellen said something which sounded odd, at first, in her Q&A at the Senate Banking Committee last Tuesday. It is "not clear" she argued, that the rate of growth of wages has a "direct impact on inflation".

6 May. 2016 Payrolls Likely On Trend - Watch Out for a Rebound in Wages (Publication Centre)

Barring some sort of out-of-the-blue shock, we are much more interested in the hourly earnings data today than the headline payroll number. The key question is the extent to which wages rebound after being depressed by a persistent calendar quirk in both February and March.

2 May. 2016 ECI Core Wages Tell the Story Hidden by Calendar Quirks in AHE (Publication Centre)

For most of the decade since the whole-economy average hourly earnings numbers were first published, the year-over-year rate of increase has run faster than the ECI measure of private sector wages and salaries, excluding incentive-paid occupations. But in the first quarter of this year, the ECI measure rose 2.5% year-over-year, the fastest increase in six years, while hourly earnings rose 2.3%. That difference might not sound like much, but it matters a good deal when put into context.

10 Mar. 2016 Calendar Distortions Plague the Hours Data, Not Just Wages (Publication Centre)

We've had some correspondence questioning our view on the "weakness" of February hourly earnings, which we firmly believe were depressed by a persistent calendar quirk. Almost nine times in 10 over the past decade, when the 15th of the month has fallen after the week of the 12th--the payroll survey week--the monthly gain in wages has undershot the prior trend.

11 Jan. 2016 Payroll Growth Will Slow in Q1, But Wages Will Accelerate (Publication Centre)

Payroll growth will slow in the first few months of next year, but wages will accelerate. This might seem counter-intuitive after the ballistic December jobs number coupled with sluggish-looking hourly earnings, but the devil, as always, is in the details. On the face of it, the trend in payroll growth is accelerating at a startling pace, captured in our first chart. But we very much doubt this reflects a real shift in the underlying pace of employment growth, for two reasons. First, payroll growth in recent years has tended to accelerate in the fourth quarter, even when indicators of both labor demand and the pace of layoffs--the two sides of the payroll equation--have been flat, as in Q4.

9 October 2017 Japan's Wages Continue to Grow, the Party of Hope Reveals Policy (Publication Centre)

Japanese average regular wages increased at an annualised rate of 0.6% in the three months to August compared with the previous three months, matching the rate in July.

01 May. 2015 Fed doves on the defensive as wages break to the upside (Publication Centre)

The 0.7% first quarter increase in the ECI measure of private sector wages and salaries raised the year-over-year rate to 2.8%, the highest since late 2008 and significantly stronger than the 2.1% increase in hourly earnings in the year to March.

08 Feb. 2016 If the Fed Focuses on Wages, They'll Hike in March (Publication Centre)

The Fed's decisions over the next few months hinge on the relative importance policymakers place on the apparent slowdown in payroll growth and the unambiguous acceleration in wages. We qualify our verdict on the payroll numbers because the January number was very close to our expectation, which in turn was based largely on an analysis of the seasonals, not the underlying economy.

11 September 2017 The German Trade Surplus is Falling, but Real Wages are Rising (Publication Centre)

The seasonally adjusted trade surplus in Germany slipped to €19.6B in July, from €21.2B in June, its lowest since April, and we are confident that it has peaked for this cycle.

11 July. 2016 Jobs Overstate Economic Volatility, Wages Will Soon Matter More (Publication Centre)

Whatever you might think about the state of the U.S. economy, it is not as volatile as implied by the past few months' payroll numbers. Assuming steady productivity growth in line with the recent trend, the payroll data suggest the economy swung from bust to boom in one month, with not even a pause for breath.

08 Jan. 2016 Expect Robust Jobs Data, but Downside Risk for Wages (Publication Centre)

The underlying trend in payroll growth is running at about 225K-to-250K, perhaps more, and the leading indicators we follow suggest that's a reasonable starting point for our December forecast. The trend in jobless claims is extraordinarily low and stable--the week-to-week volatility is eye-catching, especially over the holidays, but unimportant--and indicators of hiring remain robust. The unusually warm weather in the eastern half of the country between the November and December survey weeks also likely will give payrolls a small nudge upwards, with construction likely the key beneficiary, as in November.

13 Jan. 2016 How Fast Can the Fed Allow Wages to Rise? (Publication Centre)

The leading wage indicators in the December NFIB survey, released in full yesterday--some of the labor market components appears a few days in advance, ahead of the official payroll report--all point to a substantial acceleration over the next six-to-nine months. Our first two charts show the NFIB jobs-hard-to-fill number and expected compensation numbers, respectively, compared to the rate of growth of hourly earnings. The message is extremely clear.

04 Mar. 2016 Downside Risks for Payrolls and Wages, but Trends are Solid (Publication Centre)

The underlying trend in payroll growth probably has not changed significantly from the 228K average monthly gains recorded last year. But the average hides wide variations, some triggered by seasonal adjustment problems and others by one-time weather effects or unavoidable and random sampling error. January's below-trend 151K increase was likely a victim of seasonal problems, because payroll gains in recent years have tended to be soft at the start of the year after outsized fourth quarter increases.

07 October. 2016 Payrolls Likely Unexciting Last Month, But Wages Should Rebound (Publication Centre)

Private sector payroll growth has averaged 190K over the past year, but the six-month average has slowed to 150K. The downshift is consistent with the weakening in survey-based measures of hiring intentions, which began to soften at the turn of the year.

2 Mar. 2015 If Real Wages are Key for the Fed, Policy Will Change Very Soon (Publication Centre)

If recent labor market trends continue, the four employment reports which will be released before the June FOMC meeting will show the economy creating about 1.1M jobs, pushing the unemployment rate down to 5.3%, almost at the bottom of the Fed's estimated Nairu range, 5.2-to-5.5%.

7 August 2017 Japan's Wage Drop not so Damaging as Regular Wages Rise (Publication Centre)

Japanese average cash earnings posted a surprise drop of 0.4% year-over-year in June, down from 0.6% in May and sharply below the consensus for a rise of 0.5%. The decline was driven by a fall in the June bonus, by 1.5%.

8 February 2018 Higher-Paid People Drove up January Wages, but Data are Noisy (Publication Centre)

Given the light flow of data this week we want to go back for a closer look at the market-shattering January hourly earnings data.

9 March 2018 Payrolls Likely Strong Again, All Eyes on Unemployment and Wages (Publication Centre)

We'd be quite surprised if the headline payroll number today turned out to be far from the consensus, 205K, or our forecast, 225K.

30 Mar. 2015 Output Gap Uncertainty Paralysis Keeps the Fed's Focus on Wages (Publication Centre)

Perhaps the biggest single reason for the Fed's reluctance, so far, to move away from monetary policy designed to cope with catastrophe is that no-one knows for sure how much of the damage has been repaired, and how close the economy is to normalizing.

26 Jan. 2015 All Eyes on ECI - Nothing Matters More to the Fed than Wages (Publication Centre)

This week is, potentially, hugely important in determining the Fed's near-term view of the real state of the labor market and its approach to monetary policy over the next few months. The key event is the release of the fourth quarter employment cost index, which could make a material difference to perceptions of the degree of wage pressure.

17 April 2018 The March Drop in Retail Sales will Overshadow Slowly Reviving Wages (Publication Centre)

This week's labour market, inflation and retail sales data--the last before the MPC meets on May 10--will have a major bearing on the Committee's decision.

23 May. 2016 Will Profit Margins in Germany be Squeezed by Higher Wages? (Publication Centre)

Margins for German manufacturing firms remained depressed at the start of the second quarter. The headline PPI rose 0.1% month-to-month in April, pushing the year-over-year rate down marginally to -3.1% from a revised -3.0% in March. Falling energy prices are the key driver of the overall decline in the PPI.

25 January 2018 The MPC Needn't Rush the Next Rate Hike to Keep Wages in Check (Publication Centre)

Yesterday's labour market data brought further signs that wage growth is recovering from its early 2017 dip.

14 June 2017 Fact-checking the ECB on Low Wages and Employment in the EZ (Publication Centre)

Today's employment report in the euro area should extend the run of positive labour market data. We think employment rose 1.4% year-over-year in Q1, accelerating marginally from a 1.2% increase in Q4.

11 September 2017 Hurricane Reconstruction Will Lift Wages, Inflation, and the Deficit (Publication Centre)

As we reach our Sunday afternoon deadline, Hurricane Irma is pounding Florida's west coast with an intensity not seen since Andrew, in 1992.

20 July 2017 Retail Sales Likely Jumped in June, but the Trend Remains Weak (Publication Centre)

Surveys suggest that today's retail sales figures will show that sales volumes increased by around 1% month-to-month in June, significantly exceeding the consensus, 0.4%. But the pickup in June likely will be just a blip; the further intensification of the squeeze on real wages and a tightening of unsecured lending standards will keep retail sales on a flat path in the second half of 2017.

14 Jan. 2016 Does Cost-Push Inflation Give the Fed the Luxury of Time? (Publication Centre)

In yesterday's Monitor we set out the risk that accelerating wages will force the Fed to raise rates more quickly than expected, but we didn't have space to address the underlying premise of this story, namely, the idea that inflation is largely a cost-push phenomenon. From the perspective of fixed income investors, it might not seem to matter whether this is a realistic description of the inflation process, because Fed Chair Yellen believes it wholeheartedly, and her hands are on the levers of monetary policy.

20 October 2017 September's Retail Sales Slump Highlights Consumers' Caution (Publication Centre)

Retail sales fell sharply in September, highlighting that consumers still are spending only cautiously amid high economic uncertainty and falling real wages.

12 February 2018 The Next Round of Data Likely Will Dampen Inflation Fears, For a Time (Publication Centre)

It's hard to know what will stop the correction in the stock market, but we're pretty sure that robust economic data--growth, prices and/or wages--over the next few weeks would make things worse.

1 February 2018 New Wage Data Do Not Meaningfully Re-Write History (Publication Centre)

Experimental figures, released earlier this week, suggest that wages have increased at a faster rate than indicated by the average weekly earnings--AWE--data.

16 February 2017 Slowdown in Wage Growth Further Reduces 2017 Rate Hike Chances (Publication Centre)

Yesterday's labour market data delivered a further blow to hopes that consumers' spending will retain enough momentum for the MPC to press ahead and raise interest rates this year. The most striking development is the decline in year-over-year growth in average weekly wages to just 1.9% in December, from 2.9% in November.

18 July 2018 The Subdued Trend in Wage Growth is Unlikely to Improve Soon (Publication Centre)

The long-awaited decisive upturn in wage growth still hasn't emerged. Year-over-year growth in average weekly wages, excluding bonuses, held steady at 2.6% in May.

23 Nov. 2015 How to Scare Yourself Over the U.S. Inflation Outlook (Publication Centre)

Should you be feeling in the mood to panic over inflation risks--or more positively, benefit from the markets' underpricing of inflation risks--consider the following scenario. First, assume that the uptick in wages reported in October really does mark the start of the long-awaited sustained acceleration promised by a 5% unemployment rate and employers' difficulty in finding people to hire. Second, assume that the rental property market remains extremely tight. Third, assume that the abrupt upturn in medical costs in the October CPI is a harbinger o f things to come. And finally, assume that the Fed hawks are right in their view that the initial increase in interest rates will--to quote the September FOMC minutes--"...spur, rather than restrain economic activity". Under these conditions, what happens to inflation?

07 Mar. 2016 Wage Pressures are Building - Fed Inaction Will Hurt, Later (Publication Centre)

Whatever you do, don't fret over the apparent loss of momentum in the wages numbers; it's a classic statistical head fake, as we pointed out in Friday's Monitor, before the report. When the 15th of the month--payday for people paid semi monthly-- falls after the employment survey week, the BLS fails properly to capture their income, and hourly earnings are under-reported.

7 June. 2016 Atlanta Fed Wage Tracker Hits Seven-Year High - Does it Matter? (Publication Centre)

The headline hourly earnings data for May were dull, showing the year-over-year rate unchanged at 2.5%. That's up from 2.1% in the year to May 2015, but it's not an alarming rate of increase. But the Atlanta Fed's median hourly earnings data, which track the wages of individuals from year-to-year, show wages up 3.4% year-over-year, the fastest rate of increase since February 2009.

29 Feb. 2016 Core PCE Inflation Will Breach the Target This Year, Two Years Early (Publication Centre)

When we argue that the Fed will have to respond to accelerating wages and core prices by raising rates faster than markets expect, a frequent retort is that the Fed has signalled a greater tolerance than in the past for inflation overshoots.

13 October 2017 A Lending Slowdown Will Keep GDP Weak Even as Inflation Fades (Publication Centre)

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.

5 December. 2016 Labor Market Tightening Continues (Publication Centre)

We're pretty sure that the unemployment rate didn't drop by 0.3 percentage points in November. We're pretty sure hourly earnings didn't fall by 0.1%. And we're pretty sure payrolls didn't rise by 178K. All the employment data are unreliable month-to-month, with the wages numbers particularly susceptible to technical quirks.

8 August 2018 Red Hot Japanese Wage Growth will Help the BoJ Unwind (Publication Centre)

We hadn't expected the scorching 3.6% year-over- year growth rate in Japan's June average wages

27 October 2017 Will Future Increases in the National Living Wage Fuel Inflation? (Publication Centre)

The Annual Survey of Hours and Earnings, which contains granular detail on wages and provides a useful cross-check on the regular average weekly wage earnings--AWE--data, was published yesterday.

9 May 2018 Faster Productivity Growth and Higher Inflation will Lift Wage Gains (Publication Centre)

We just can't get away from the deeply vexed question of wages; specifically, why the rate of growth of nominal hourly earnings has risen only to just over 2.5%, even though the historical relationship between wage gains and the tightness of the labor market points to increases of 4%-plus.

BUSINESS INSIDER - Wages for American workers still look like they are about to go higher (Media Centre)

In January, average hourly wages grew 0.5% over the prior month, the biggest month-on-month increase since November 2008......Ian Shepherdson at Pantheon Macro said the outlook for wage growth is still strong

26 January 2017 GDP Growth Remained Brisk in Q4, but Headwinds are Building (Publication Centre)

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.

26 May 2017 Mexican Consumption Will Slow as Tighter Financial Conditions Bite (Publication Centre)

Consumers' spending in Mexico was relatively resilient at the end of Q1, but we think it will slow in the second quarter. Data released this week showed that retail sales rose a strong-looking 6.1% year-over-year in March, well above market expectations, and up from 3.6% in February.

26 September 2017 Is the Most Important Data--Wage Growth--Forecastable? (Publication Centre)

Markets will be hyper-sensitive to U.K. data releases following the MPC's warning that it is on the verge of raising interest rates.

26 Oct. 2015 MPC Can't Wait too Long After the U.S. Fed Raises Rates (Publication Centre)

Markets currently judge that U.K. interest rates will rise about six months after the first Fed hike. But the Bank of England seldom lagged this far behind in the past. Admittedly, the slowdown in the domestic economy that we expect will require the Monetary Policy Committee to be cautious. But wage and exchange rate pressures are likely to mean six months is the maximum period the MPC can wait before following the Fed's lead.

26 Feb. 2016 The Foundations of the U.K. Recovery are Remarkably Fragile (Publication Centre)

The preliminary estimate of a 0.5% quarter-on-quarter rise in GDP in the fourth quarter of 2015 was left unrevised, but that was the only nugge t of good news from yesterday's second GDP release. The expenditure breakdown hardly could have looked more troubling.

26 June 2018 Treat Surveys Pointing to Faster Wage Growth Sceptically (Publication Centre)

This was supposed to be the year that wage growth finally would pick up and signal clearly to the MPC that the economy needs higher interest rates.

26 June 2017 Japan Surprises on the Upside as the Economy Accelerates into Q2 (Publication Centre)

Japanese data continue to come in strongly for the second quarter. The manufacturing PMI points to continued sturdy growth, despite the headline index dipping to 52.0 in June from 53.1 in May. The average for Q2 overall was 52.6, almost unchanged from Q1's 52.8, signalling that manufacturing output growth has maintained its recent rate of growth.

25 January 2018 Japan's Trade Surplus Should Diminish but December was a Blip (Publication Centre)

Chinese New Year effects were very visible in Japan's December trade data. Export growth slowed sharply to 9.3% year-over-year in December, from 16.2% in November.

24 September 2018 Good News on Brazil Inflation, but all Eyes are on the Presidential Race (Publication Centre)

Broad-based inflation pressures in Brazil remain tame despite the sharp BRL depreciation this year, totalling about 7% in the last three months alone.

24 October. 2016 Why are Households Running Such Large Bank Balances? (Publication Centre)

The U.S. household sector carries substantial gross debts, even after the sustained deleveraging since the crash of 2008. The gross debt-to-income ratio stood at 105.3% in the second quarter of this year, down from the 135% peak in late 2007 but still well above the 88% average recorded in the 1990s, which was not a decade of restraint on the part of consumers.

24 October 2017 EZ Consumers' Spending Slowed in Q3, but Should Rebound in Q4 (Publication Centre)

Eurozone consumers' spending jumped in Q2, but we are pretty certain that a slowdown in retail sales constrained growth in Q3.

24 July 2018 GDP Growth in Korea Likely Slipped in Q2, on Cooler Domestic Demand (Publication Centre)

GDP data for Q2 are due July 26; we expect the report to show a marginal dip in growth, to a seasonally adjusted 0.8% quarter-on-quarter, from 1.0% in Q1.

25 April 2017 Mexico's IGAE Confirms a Surprisingly Firm Economy in Q1 (Publication Centre)

Economic activity in Mexico during the past few months has been stronger than most observers expected. Growth has certainly moderated from the relatively strong pace recorded during the second half of last year, but data for January and February show that it is still quite strong.

25 April 2018 Low Public Borrowing is Not a Sign the Economy is Reviving (Publication Centre)

Public borrowing has continued to fall more rapidly than anticipated in the latest official plans.

25 May. 2016 Growth in Mexico Consumers' Spending Remain Resilient (Publication Centre)

Improving consumer fundamentals continue to underpin growth in private spending in Mexico, according to retail sales and inflation reports published this week. March retail sales were much stronger than expected, jumping 3.0% month-to-month, after averaging gains of 0.8% in the preceding three months. And sales for the three months through February were revised up marginally.

25 May 2017 Is it Time to Tell a Less Upbeat Story on the Eurozone Consumer? (Publication Centre)

Markets cheered soaring business surveys in the Eurozone earlier this week, and recent consumer sentiment data also have been cause for celebration. The advance GfK consumer confidence index in Germany rose to a record high of 10.4 in June, from 10.2 in May.

26 September 2017 Japanese Manufacturing Regaining Momentum on External Demand (Publication Centre)

Mr. Abe yesterday called a snap general election, to be held on October 22nd; more on this in tomorrow's Monitor. For now, note that the election comes at a reasonably good stage of the economic cycle, hot on the heels of very rapid GDP growth in Q2, while the PMIs indicate that the economy remained healthy in Q3.

25 August. 2016 Surging Net Exports Prevented a Q2 GDP Contraction in Germany (Publication Centre)

Yesterday's final Q2 GDP report in Germany confirmed the initial data showing that the economy slowed less than we expected last quarter. Real GDP rose 0.4% quarter-on-quarter in Q2, after a 0.7% jump in Q1. The working-day adjusted year-over-year rate fell marginally to 1.8%, from 1.9% in Q1.

26 August. 2016 No Clear Steer Likely From Yellen Today, After the Spring Debacle (Publication Centre)

Chair Yellen's speech at Jackson Hole at 10am Eastern time today has the potential to move markets substantially, but that's not our core expectation. It's more likely, we think, that Dr. Yellen will stick to the core FOMC view, which remains that "only gradual increases" in rates will be required, and that rates are "likely to remain, for some time, below levels that are expected to prevail in the longer run".

28 August 2018 Mexico Struggled at the End of the First Half Will it Rebound (Publication Centre)

The Mexican economy shrank by 0.2% quarter- on-quarter in Q2, according to the final GDP report, a tenth worse than the preliminary reading.

24 January 2018 Existing Home Sales Likely Dropped in December, but the Trend is Rising (Publication Centre)

In November, existing home sales substantially overshot the pace implied by the pending home sales index.

3 August 2018 Does the BoJ Believe in Targeting 2% Inflation Anymore? (Publication Centre)

Why should Japan, the U.S., the Euro Area, the U.K. and Japan all have the same inflation target?

3 Dec. 2015 Yellen Throws Down the Gauntlet, But Gently, Leaving Get-Outs (Publication Centre)

Short of saying "We're going to hike rates in two weeks' time", Dr. Yellen's view of the immediate economic and policy outlook, set out in her speech yesterday, could hardly have been clearer. Yes, she threw in the usual caveats: "...we take account of both the upside and downside risks around our projections when judging the appropriate stance of monetary policy", and saying the FOMC will have to evaluate the data due ahead of this month's meeting, but her underlying message was straightforward.

29 Jan. 2016 Little to Console the Optimists in Fourth Quarter GDP (Publication Centre)

The preliminary estimate of a 0.5% quarter-on-quarter rise in GDP in Q4 slightly exceeded our expectation and the third quarter's growth rate, both 0.4%. Nonetheless, there was little to console the optimists in the figures. The recovery remains unbalanced, with industrial production and construction output falling by 0.2% and 0.1% respectively, while services output rose 0.7% quarter-on-quarter.

29 Jan. 2016 Will Inventories and Government Hold Q4 GDP Close to Zero? (Publication Centre)

We expect to learn today that the economy barely grew at all in the fourth quarter. At least, that's what we think the first estimate of growth, due today, will show. This number will then be revised twice over the next couple of months, then again when revisions for the past three years are released in July. Thereafter, the numbers are subject to further annual revisions indefinitely.

29 November 2017 Unemployment in Mexico Keeps Falling, but Risks Have Increased (Publication Centre)

Yesterday's October labour market data in Mexico showed that the adjusted unemployment rate rose a bit to 3.4%, from 3.3% in September.

29 June 2017 A Single Rate Hike Would Risk a Harmful Rise in Rate Expectations (Publication Centre)

The MPC's hawks are framing the interest rate increase they want as a "withdrawal of part of the stimulus that the Committee had injected in August last year", arguing that monetary policy still would be "very supportive" if rates rose to 0.5%, from 0.25%.

3 April 2017 Eurozone Consumers Likely had a Slow Start to 2017 (Publication Centre)

We fear that private spending in the EZ slowed in Q1, despite rocketing survey data. This fits our view that household consumption will slow in 2017 after sustained above-trend growth in the beginning of this business cycle.

29 Jan. 2016 Data and Copom Minutes Point to no Change in Brazilian Rates (Publication Centre)

Another month, another bleak Brazilian labor market report. The seasonally adjusted unemployment rate increased marginally to 8.3% in December, up from 8.2% in November, much worse than the 5.1% recorded in December 2014.

3 February 2017 MPC Signals Newfound Supply Optimism, no Near-Term Rate Hike (Publication Centre)

The absence of hawkish undertones in the minutes of the MPC's meeting or in the Inflation Report forecasts took markets by surprise yesterday. The dominant view on the Committee remains that the economy will slow over the next couple of years, preventing wage growth from reaching a pace which would put inflation on trac k permanently to exceed the 2% target.

27 June 2017 Japanese Inflation to Hold up as Food Prices Counterbalance Energy (Publication Centre)

Japanese services price inflation edged down in May as the twin upside drivers of commodity price inflation and yen weakness began to lose steam. We expect wage costs to begin edging up in the second half but this will provide only a partial counterbalance.

27 Feb. 2015 M1 growth is sending a very bullish on the Eurozone economy (Publication Centre)

Economic data in the Eurozone are sending an increasingly upbeat message on the economy. Yesterday saw a barrage of numbers, but the most startling of them was the continued acceleration in the money supply.

27 Apr. 2015 Accelerating high-wage job growth to lift hourly earnings? (Publication Centre)

We have argued for some time that the hourly earnings data, which take no account of changes in the mix of employment by industry or occupation, have been depressed over the past year by the relatively rapid growth of low-paid jobs.

27 June 2017 Mexican Economic Growth Will be Sustained over the Second Half (Publication Centre)

Economic activity in Mexico during the past few months has been relatively resilient, as external and domestic threats appear to have diminished.

27 May. 2015 After the Surge - A Positive Trend in EZ Household Consumption? (Publication Centre)

Data today will likely show that consumer sentiment in the Eurozone remains firm. In Germany, we expect a slight dip in the advance headline GFK confidence index to 9.8 in June, from an all-time high of 10.1 in May.

28 July 2017 The Eurozone is in fine form, as we start our summer break (Publication Centre)

This is the final report before your scribe disappears into the Scottish Highlands for a few weeks, and we are leaving you with a Eurozone economy in fine form. The calendar will be relatively light in our absence and will tell us what we already know; namely that the euro area economy maintained its strong momentum in Q2.

3 February 2017 Upside Risk For Payrolls and Hourly Earnings in January Data Today (Publication Centre)

Our payroll model relies heavily on lagged indicators of the pace of hiring, most of which have improved in recent months after a sustained, though modest, softening which began last spring. That's why we expected an above-consensus reading from ADP on Wednesday and from the BLS today.

28 July 2017 The Downturn in Housing Market Activity has Further to Run (Publication Centre)

Equity prices for companies dependent on the U.K.'s residential property market tumbled yesterday as several companies reported poor results for the first half of 2017. Most companies blamed a decline in housing transactions for falling profits.

26 September 2017 Brazil's Labor Market is on the Mend, But Challenges Persist (Publication Centre)

The Brazilian labour market is slowly healing following the severe recession of 2015-16. The latest employment data, released last week, showed that the economy added 35K net jobs in August, compared to a 34K loss in August 2016.

21 Oct. 2015 Are Payrolls Slowing Because the Pool of Labor Has Evaporated? (Publication Centre)

One of the possible explanations for the slowdown in payroll in growth in recent months is that the pool of labor has shrunk to the point where employers can't find the people they want to hire. That's certainly one interpretation of our first chart, which shows that the NFIB survey's measure of jobs-hard-to-fill has risen to near-record levels even as payroll growth has slowed.

21 Mar. 2016 The Periphery is Slowly Regaining Competitiveness in the Eurozone (Publication Centre)

Labour costs growth accelerated modestly last year in the Eurozone. Data on Friday showed that Q4 nominal labour costs in the Eurozone rose 1.3% year-over-year, slightly higher than the 1.1% increase in Q3. The modest acceleration was mainly due to a rise in "non-business" labour costs, which rose 1.6% year-over-year, up from a 0.9% increase in Q3.

21 Mar. 2016 The Fed Either Hopes for a Miracle or Wants Inflation to Overshoot (Publication Centre)

Fed Chair Yellen made it clear in last week's press conference that she is not convinced the increase in core inflation will persist: "I want to warn that there may be some transitory factors that are influencing [the rise in core inflation]... I see some of that is having to do with unusually high inflation readings in categories that tend to be quite volatile without very much significance for inflation over time.

21 June 2018 Core Inflation Below 2% Next Year Won't Rule Out Rate Hikes (Publication Centre)

It is looking increasingly likely that core inflation, which already has fallen to 2.1% in May, from a peak of 2.7% last year, will slip below 2% next year.

21 March 2017 Real Wage Growth in the Eurozone is Being Hit by Higher Inflation (Publication Centre)

One of the key characteristics of this euro area business cycle has been near-zero inflation due to structurally weak domestic demand and depressed prices for globally traded goods and commodities. This has supported real incomes, despite sluggish nominal wage growth.

21 March 2018 Lower CPI Inflation in February Should Give the MPC Doubts (Publication Centre)

February's consumer price figures give the MPC reason to doubt the case for raising interest rates again as soon as May.

21 September 2017 German PPI Inflation Set to Edge Lower into Year-End (Publication Centre)

German producer price inflation rebounded last month. The headline PPI index rose 2.6% year-over-year in August, up from a 2.3% increase in July, driven almost exclusively by a jump in energy inflation.

30 Jan. 2015 Downside Risk for Fourth Quarter GDP Growth - Inventories a Risk (Publication Centre)

We are nervous about the first estimate of fourth quarter GDP growth, due today. The consensus forecast is a decent 3.1%, but we are struggling mightily to get anywhere near that.

21 November 2017 Q4 Growth Shaping up Well, but Holiday Spending Strength is Key (Publication Centre)

It's much too soon to have a very firm view on fourth quarter GDP growth, not least because almost half the quarter hasn't happened yet.

21 July 2017 Don't Bet the Farm on a Major QE Decision in September (Publication Centre)

The ECB pressed the repeat button yesterday. The central bank maintained its refinancing rate at 0.00%, and also kept the deposit and marginal lending facility rate at -0.4% and 0.25 respectively. The pace of QE was held at €60B per month, scheduled to run until the end of December, "or beyond, if necessary."

21 February 2018 Labour Data Won't be Hot Enough to Compel the MPC to Hike in May (Publication Centre)

December's labour market report, released today, won't be a game-changer for the near-term outlook for interest rates; January data will be released before the MPC meets in March, and February data will be available at its key meeting in May.

20 June. 2016 How Can the Fed Escape From the Loop of Endless Inaction? (Publication Centre)

For some time, the Fed has been locked in a loop of endless inaction. Every time the economic data improve and the Fed signals it is preparing to raise rates, either markets--both domestic and global-- react badly, and/or a patch of less good data appear. The nervous, cautious Yellen Fed responds by dialling back the talk of tightening, and markets relax again, until the next time.

20 Jan. 2016 Wage Growth Will Push the "Data Driven" Governor to Hike this Year (Publication Centre)

Bank Governor Mark Carney reiterated in a speech yesterday that he wants to see sustained momentum in GDP growth, domestic cost pressures firm and core inflation rise further towards 2%, before raising interest rates. We doubt he will have long to wait on the last two points, given the tightness of the labour market.

20 Jan. 2015 - Wage Gains Will be Slowed by Low CPI Inflation, but Not by Much (Publication Centre)

We have been hearing a good deal recently about the risk that the plunge in headline inflation will feed back into the labor market, keeping the pace of wage gains lower than they would otherwise have been and, therefore, slowing the pace of Fed tightening.

20 March 2017 The BCCh Leaves Open a Tiny Space for Further Easing (Publication Centre)

Chile's central bank cut the policy rate 25bp last week to 3.0%, in line with consensus, amid easing inflationary pressures. The timing of the rate cut was no surprise; in January, the BCCh cut rates for the first time in more than two years, and kept a dovish bias.

20 November 2017 Low Core Inflation Continues to Provide Cover for Mr. Draghi (Publication Centre)

Mr. Draghi's speech to the European Banking Congress on Friday--see here--was a timely reminder to markets that the ECB is in no hurry to make any changes to its policy setting.

21 Apr. Retail Sales Likely to Disappoint in March Due to Weak Easter Trading (Publication Centre)

Signs that Easter trading was unusually poor lead us to anticipate a downside surprise from today's retail sales data for March. The BRC's Retail Sales Monitor, which surveys companies that account for 60% of total retail sales, was remarkably weak in March.

21 Apr. 2015 Survey evidence signalling faster wage gains is mounting (Publication Centre)

We have argued for some time that the plunge in gasoline prices will constrain core inflation over the course of this year, by reducing production and distribution costs for a broad array of goods.

20 October. 2016 Rising Prices Will Arrest the Strong Trend in Retail Sales Next Year (Publication Centre)

It's hard to have much conviction in any forecast for September retail sales, as the relationship between the official data and the surveys has weakened considerably.

22 Apr. 2015 Sustained job gains are key to Eurozone consumers sentiment (Publication Centre)

Advance April consumer survey data will likely confirm that households remain the standout driver of the cyclical recovery in the euro area. We think the headline EC consumer sentiment index rose to -1.0 in April from -3.7 in March.

22 August 2017 Is the Worst Over for State and Local Government Spending? (Publication Centre)

Consumption and investment spending by state and local government accounts for just over 10% of the U.S. economy, making it more important than exports or consumers' spending on durable goods, and roughly equal to all business investment in equipment and intellectual property.

23 Oct. 2015 BCB Stuck Between Inflation Risks and Deep, Long Recession (Publication Centre)

Brazil economic and political outlook is still opaque, but grim, after a vast array of negative news. Impeachment of President Rousseff remains a possibility; the process of fiscal consolidation is messy and politically bloody; rumors that Finance Minister Levy might leave his post next year have intensified; and the latest data showed that the recession worsened in Q3. As a consequence, the BRL and interest rates have been under pressure and we see no clear signs that the turmoil will ease soon.

23 May 2017 Has the Outlook for Business Investment Brightened? (Publication Centre)

The recent deceleration in households' real spending means that either business investment or net exports will have to pickup if the economy is to avoid a severe slowdown this year.

23 Mar. 2015 Brazil's Inflation Target is Wishful Thinking for 2015 - Maybe in 2016 (Publication Centre)

The bad news just keeps coming for Brazil's economy. The mid-month CPI, the IPCA-15 index, rose 1.2% month-to-month in March. Soaring energy prices remain the key contributor to the inflation story in Brazil, pushing up the housing component by 2.8% in March, after a 2.2% increase in February.

23 Oct. 2015 U.K. Consumer Recovery is Not as Robust as Retail Sales Suggest (Publication Centre)

On the face of it, the surge in retail sales volumes in September suggests that the U.K. consumer is in fine fettle and can prevent the economic recovery from losing momentum as exporters struggle and government spending retrenches. But the underlying picture is less encouraging and consumers won't be able to sustain the recent robust growth in real spending when inflation revives next year.

23 October 2017 Wage Inflation Still Subdued, but a Decisive Turning Point is Coming (Publication Centre)

In the absence of any significant data releases today, we want to take a closer look at the outlook for wage growth, and the implications of an acceleration in hourly earnings for inflation.

24 Feb. 2015 Germany is Growing, But Not as Fast as Implied by the Surge in Q4 (Publication Centre)

Sentiment in Germany has improved slightly this month with the IFO business climate index rising to 106.8 from 106.7 in January, pushed higher by a small increase in the expectations index.

24 April 2017 Past Errors Mean Investors Should Treat the Latest Polls Cautiously (Publication Centre)

Sterling jumped last week to its highest level against the dollar since last October in response to news that a general election will be held on June 8. Markets are betting that the Conservative Government will sharply increase its majority, enabling Theresa May to ignore Eurosceptic backbenchers when she strikes a deal with the EU.

23 September. 2016 How to Read the Split FOMC's Confusing Thought Processes (Publication Centre)

Over the past few days we have written about the difference between the Fed's tactics--signalling rate hikes and then choosing not to act in the face of weaker data--and its strategy, which is to normalize rates in the expectation that inflation will head to 2% in the medium-term.

23 June 2017 Fed Officials Cite "Full Employment" but Worry About Recent CPI Data (Publication Centre)

A couple of Fed speakers this week have described the economy as being at "full employment". Looking at the headline unemployment rate, it's easy to see why they would reach that conclusion.

23 January 2018 Eurozone Households Enter 2018 With Robust Tailwinds (Publication Centre)

Today's data likely will show that EZ households' sentiment remained close to a record high at the start of the year.

22 July. 2016 July Payrolls Won't Excite Markets, but Hourly Earnings Should (Publication Centre)

This is the final Monitor before we hit the beach for two weeks, so want to highlight some of the key data and event risks while we're out. First, we're expecting little more from the FOMC statement than an acknowledgment that the labor market data improved in June. After the May jobs report, the FOMC remarked that "...the pace of improvement in the labor market has slowed".

22 August. 2016 Will Inflation be the Dog That Doesn't Bark, Again? (Publication Centre)

The period of surprisingly low inflation following sterling's plunge when the UK left the Exchange Rate Mechanism in September 1992 appears to challenge our view that inflation will overshoot the MPC's 2% target over the next couple of years. As our first chart shows, CPI inflation averaged just 2.5% in 1993 and 2% in 1994, even though trade-weighted sterling plunged by 15% and import prices surged.

22 August 2017 Tourism is Key to Financial Stability in the Spanish Economy (Publication Centre)

Last week's attacks in Barcelona--one of Spain's most popular tourist spots--struck at the heart of one of the economy's main growth engines.

22 June 2018 Business Capex is Still Set for Rapid Growth, Trade Spats Permitting (Publication Centre)

A round of recent conversations with investors suggests to us that markets remain quite skeptical of the idea that the recent upturn in capital spending will be sustained.

22 March 2017 Greece, the EU and the IMF are Sleepwalking into Crisis... Again (Publication Centre)

Another deadline has come and gone in the negotiations between Greece and its creditors. This week's meeting between EU finance ministers revealed that the creditors have not seen enough commitments unlock the €7B Greece needs to repay in July. Mr. Tsipras has agreed to energy sector privatizations, and to increase the threshold for income tax exemption.

23 April 2018 Don't Shoot the Messenger for Spelling Out What Q1's Data Imply (Publication Centre)

The Governor's comments late last week successfully recalibrated markets, which had concluded that a May rate hike was virtually certain, despite the MPC's deliberately vague guidance.

23 April 2018 Behind the Base-Case Forecast, Risks Abound, in Both Directions (Publication Centre)

For now, we're happy with our base-case forecast that growth will be nearer 3% than 2% this year, and that most of the rise in core inflation this year will come as a result of unfavorable base effects, rather than a serious increase in the month-to-month trend.

22 May 2018 Retail Sales Likely Recovered in April, but the Trend Remains Weak (Publication Centre)

April's retail sales figures, due Thursday, likely will show that spending recovered from snow-induced weakness in March.

24 February 2017 German Economy did Well in Q4, but What Happened to Net Trade? (Publication Centre)

Yesterday's detailed German GDP report raised more questions than it answered. The headline confirmed that growth accelerated to 0.4% quarteron- quarter in Q4, from 0.1% in Q3, leaving the year-over- year rate unchanged at 1.7%.

4 Sept. 2015 Downside Risks for August Payrolls, but the Trend is Solid (Publication Centre)

We have no reason to think the underlying trend in payroll growth has changed--the 235K average for the past three months is as good a guide as any--but the balance of risks points clearly to a rather lower print for August. Two specific factors, neither of which have any bearing on the trend, are likely to have a significant influence on the numbers, and both will work to push the number below the 217K consensus.

7 March 2018 ADP Set to Report Strong Payrolls in February, 200K Seems a Good Bet (Publication Centre)

All the signs are that ADP will today report a solid increase in February private payrolls; our forecast is 200K, but if you twist our arms we'd probably say the mild weather last month across most of the country points to a bit of upside risk.

7 July 2017 Upside Risk for Payroll. Despite Soft ADP. Robust AHE a Decent Bet too (Publication Centre)

ADP's reported 158K increase in private payrolls was very close to our model-based estimate, so it doesn't change our 220K forecast for todays official payroll number, well above the 177K consensus.

7 December. 2016 Durable Goods Orders Plunged Last Month, but the Core is Stabilizing (Publication Centre)

Unless Boeing received a huge aircraft order on November 30, we can now be pretty sure that most of October's 4.6% leap in headline durable goods orders reversed last month. Through November 29, Boeing booked orders for 34 aircraft, compared to 85 in October. Moreover, the bulk of the orders were for relatively low value 737s, whereas the October numbers were boosted by a surge in orders for 787s, whose list price is about three times higher.

7 November. 2016 Wage Gains Will Focus Fed Minds (Publication Centre)

If the Fed needed further encouragement to raise rates next month, it arrived Friday in the form of solid jobs numbers, a new cycle low for the broad unemployment rate, and a new cycle high for wage growth.

7 Oct. 2015 Are Payrolls Slowing Because There's No-one Left to Hire? (Publication Centre)

In the absence of market-moving data today, we want to take a closer look at the labor market, and, specifically, the idea that payroll growth is slowing because firms cannot find staff they consider suitably qualified for the jobs available. Every indicator of labor demand, with the sole exception of manufacturing-specific surveys, is consistent with very rapid payroll growth, well in excess of 200K per month.

8 Dec. 2014 - Falling Unemployment Will Trigger Tightening: Payrolls Will Soar (Publication Centre)

The first thing to ask after a payroll number far from consensus is whether it is supported by other evidence. We are happy to argue that November's blockbuster report is indeed consistent with a range of other numbers, notwithstanding the unfortunate truth that there are no reliable indicators of payrolls on a month-to-month basis.

8 August 2017 Will Mexico's Economy Resilience Continue in the Second Half? (Publication Centre)

The Mexican economy maintained its relatively strong momentum in Q2. The first estimate of Q2 GDP, released last week, confirmed that growth was resilient during the first half of this year, despite the confidence hit caused by domestic and external headwinds.

8 Apr. 2016 How Far Will the Labor Share in GDP Rise? (Publication Centre)

As recently as late 2008, the share of employee compensation in GDP was slightly higher than the average for the previous 20 years. But it would be wrong to argue, therefore, that the squeeze on labor is a phenomenon only of the past few years. It's certainly true that labor's share dropped precipitously from 2009 through 2011, and has risen only marginally since then.

7 Dec. 2015 After the First Hike, Next Week, Wage Gains Will Set the Pace (Publication Centre)

We're guessing Fed Chair Yellen would have preferred to have another acceleration in hourly earnings and a dip in the unemployment rate along side the hefty 211K leap in November payrolls, but no matter. At its October meeting, the Fed wanted to see "some further improvement in the labor market", and by any reasonable standard a 509K total increase in payrolls in two months fits the bill.

7 April 2017 Mixed Signals for March Payrolls, but 200K Seems a Fair Bet (Publication Centre)

Everything but the weather points to a strong headline payroll number for March. Our composite leading payroll indicator has signalled robust job growth since last fall, and the message for March is very clear.

6 June 2018. We Have High Hopes for the Eurozone Consumer in Q2 (Publication Centre)

Eurozone consumers had a slow start to the second quarter. Retail sales increased a modest 0.1% month- to-month in April, but the March headline was revised up by 0.3 percentage points, and the year-over-year rate increased by 0.2pp to 1.7% due to base effects.

6 July. 2015 Labor Market is Still Tightening, Despite June Payroll Miss (Publication Centre)

First, a deep breath: June payrolls, with a margin of error of +/-107K, missed the consensus by 10K. Adding in the -60K revisions and the miss is still statistically insignificant. The story, therefore, is that there is no story. Even relative to our more bullish forecast, the miss was just 37K. Nothing bad happened in June. But we hav e to acknowledge that payroll growth has now undershot the pace implied by the NFIB's hiring intentions number--lagged by five months--in each of the past four months. In June, the survey pointed to a 320K jump in private employment, overshooting the actual print by nearly 100K.

6 July 2017 Chinese Service Sector Downtrend to Continue into the Second Half (Publication Centre)

China's service sector slowed again in June, with the Caixin PMI falling to 51.6 from 52.8 in May. The Q2 average of 52.0 was only minimally lower than the 52.6 in Q1.

6 June. 2016 Mr. Temer Begins Brazil's Fiscal Overhaul, Despite Political Unrest (Publication Centre)

Brazil's interim government has been trying to put the kibosh on the vicious circle of recession, capital outflows, and political pandering that has dogged the country for so long. In his first few weeks at the helm, despite the political turmoil, Mr. Temer has started to tackle Brazil's fiscal mess, the country's biggest headache.

6 Mar. 2015 Decent But Unspectacular Job Gains in February? (Publication Centre)

Our base forecast for today's February payroll number is an unspectacular 220K, though if you twist our arms we'd probably say that we'd be less surprised by a big overshoot to this estimate than an undershoot. The single biggest argument against a big print today is simply that February payrolls have initially been under-reported in each of the past five years and then revised higher.

6 Nov. 2015 Markets Ignore Inflation Report's Hawkish Undertones (Publication Centre)

Markets have interpreted the Monetary Policy Committee's "Super Thursday" releases as an endorsement of their view that interest rates will remain on hold for another year. We think the Committee's communications were more nuanced and believe the door is still open to an interest rate rise in the second quarter of next year.

6 March 2017 Yellen Effectively Promises a March Hike, with Good Reason (Publication Centre)

Fed Chair Yellen's speech Friday was remarkably blunt: "Indeed, at our meeting later this month, the Committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate."

6 March 2017 PMIs Signal Stronger EZ Growth, but Will the Hard Data Follow? (Publication Centre)

Survey data continue to suggest that GDP growth will accelerate in Q1. The final PMI reports on Friday showed that the headline EZ composite index rose to 56.0 in February, from 54.4 in January, in line with the first estimate.

8 Dec. 2015 Small Firms Are Struggling to Recruit, and Price are Nudging Up (Publication Centre)

The release of the NFIB survey at 6.00AM eastern time this morning--really, they need a new PR advisor--doubtless will bring a flurry of headlines about rising wage pressures, with the expected compensation index rising by a startling three points to a new post-crash high. But this is not news, nor is the high, stable level of hiring intentions; these key labor market numbers were released last week in the NFIB Jobs Report, which appears the day before the official employment report. The data are simply extracted from the main NFIB survey.

8 February 2017 German Manufacturing Data Threw a Tantrum in December (Publication Centre)

German manufacturing data are all over the place at the moment. Earlier this week, data showed that new orders jumped toward the end of 2016, but yesterday's industrial production report was a shocker. Output plunged 3.0% month-to-month in December, pushing the year-over-year rate down to -0.7% from a revised +2.3% in November.

9 June 2017 Bank C&I Lending has Levelled-off, Expect a Second-Half Rebound (Publication Centre)

The rollover in bank lending to commercial and industrial companies probably is over. On the face of it, the slowdown has been alarming, with year-over-year growth in the stock of lending slowing to just 2.6% in April, from a sustained peak of more than 10% in the early part of last year.

9 Feb. 2015 Only Brazil Will Have to Hike, Other LatAm Central Banks On Hold (Publication Centre)

Last week's data supported our view that monetary policy across LatAm will continue to diverge in the short term. Brazil will have to prolong its monetary tightening cycle, while economies such as Colombia and Chile will remain on hold despite the recent slowdowns in their economic cycle.

9 Feb. 2015 Labor Data Forcing the Fed Into a Corner - (Publication Centre)

It's always easy to find reasons to doubt single monthly observations of any economic time series, but our first chart makes it very clear that the labor market has strengthened markedly over the past few months. The underlying trend rate of growth in private payrolls is now above 300K for the first time in exactly 20 years, and we seen no reason to expect much change over the next few months.

9 June 2017 The ECB's World: Accelerating GDP Growth and Lower Inflation (Publication Centre)

The headline changes in yesterday's ECB policy announcement were largely as expected. The central bank left its main refinancing and deposit rates unchanged at 0.00% and -0.4% respectively, and maintained the pace of QE at €60B per month. The central bank also delivered the two expected changes to its introductory statement. The reference to "lower levels" was removed from the forward guidance on rates, signalling that the ECB does not expect that rates will be lowered anytime soon.

9 Mar. 2015 Surging Job Gains, and Sub-Nairu Unemployment to Force June Hike (Publication Centre)

In the wake of the February employment report, the implied probability of a June rate hike, measured by the fed funds future, jumped to 89% from 71%. The market now shows the chance of a funds rate at 75bp by the end of the year at just over 60%. That still looks low to us, but it is a big change and we very much doubt it represents the end of the shift in expectations.

9 October 2018 September Payrolls Hit by Florence (Publication Centre)

The dip in payroll growth in September was due to Hurricane Florence. We expect a clear rebound in payrolls in October; our tentative forecast is 250K.

9 Nov. 2015 The Unemployment Rate Is the Key Measure of Labour Market Slack (Publication Centre)

The Monetary Policy Committee continues to assert that it can leave interest rates at rock-bottom levels, even though the unemployment rate has returned to its pre-recession level, because it understates the extent of slack in the labour market. If that hypothesis were correct, however, the relationship between the unemployment rate and wage growth would have weakened. But this clearly has not happened, as our first chart shows.

9 Nov. 2015 Fed Set to Hike in December, and then Faster than Markets Expect (Publication Centre)

At a stroke, the October payroll report returned the short-term trend in payroll growth to the range in place since 2011, pushed the unemployment rate into the lower part of the Fed's Nairu range, and lifted the year-over-year rate of growth of hourly earnings to a six-year high. The FOMC has never quantitatively defined what it means by "some further improvement in the labor market", its condition for increasing rates, but if the October report does not qualify, it's hard to know what might fit the bill. We expect a 25bp increase in December.

9 Dec. 2014 - NFIB Says Wage Pressure is Rising: ECI Data Seem to Agree (Publication Centre)

We argued in the Monitor yesterday that the NFIB survey's hiring intentions number is the best guide to the trend in payroll growth a few months ahead. But today's November NFIB report will bring no new information on job growth because the key labor market elements of the survey have already been released.

9 August. 2016 Further Evidence of Divergence in the Andean Economies (Publication Centre)

Colombia's economy has continued to slow, due mainly to lagged effect of the oil price shock since mid-2014, and stubbornly high inflation, which has triggered painful monetary tightening. Modest fiscal expansion and capital inflows have helped to avoid a hard landing, but the economy is still feeling the pain of weakening domestic demand. And the twin deficits--though improving--remain a threat.

8 May 2017 Fed Hawks Will Focus More on Unemployment than Wage Gains (Publication Centre)

At their March meeting FOMC members' range of forecasts for the unemployment rate in the fourth quarter of this year ranged from 4.4% to 4.7%, with a median of 4.5%. But Friday's report showed that the unemployment rate hit the bottom of the forecast range in April.

8 July. 2016 Muted Headline Inflation in Mexico, but Core has Hit Banxico's Target (Publication Centre)

Favourable inflation conditions in Mexico remain in place with June consumer prices increasing just 0.1% month-to-month, unadjusted, better than expected. A modest gain in core prices was largely offset by falling non-core prices, so year-over-year inflation edged down to 2.5% from 2.6% in May.

8 January 2018 Japan's Services Sector will Pick Up in Q1, Wage Pressure Mounts (Publication Centre)

Japan's services sector PMI last week was disappointing.

8 May 2017 Inflation Report Likely to Reaffirm Slim Chances of a 2017 Rate Hike (Publication Centre)

This week's MPC meeting and Inflation Report likely will support the dominant view in markets that the chances of a 2017 rate hike are remote, even though inflation will rise further above the 2% target over the coming months. Overnight index swap markets currently are pricing-in only a 20% chance of an increase in Bank Rate this year.

8 November. 2016 If Clinton Loses, Most U.S. Forecasting Models Will be Wrong (Publication Centre)

We are not political analysts or psephologists, but we note that each of the nine separate election forecasting models tracked by the New York Times suggests that Hillary Clinton will be president, with odds ranging from 67% to greater than 99%.

9 August 2017 Productivity Growth Might be Turning up, Labor Costs Subdued (Publication Centre)

We are a bit more optimistic than the consensus on the question of second quarter productivity growth, but the data are so unreliable and erratic that the difference between our 1.2% forecast and the 0.7% consensus estimate doesn't mean much.

8 October 2018 Mortgage Refinancing won't be a Tailwind for the Economy Next Year (Publication Centre)

The process of refinancing existing mortgages at ever-lower interest rates has been a boon for the economy in recent years.

8 October 2018 Bright Spots, and Some Warning Signs, in Japan's Wage Data (Publication Centre)

Japan's average monthly labour earnings growth tumbled to 0.9% year-over-year in August, from 1.6% in July. This is not a disaster.

6 February 2017 Soft January Hourly Earnings Will Prove Short-Lived (Publication Centre)

Markets over-reacted to the much smaller-than-expected 0.1% increase in January hourly earnings, in our view. We don't have a full explanation for the shortfall against our 0.5% forecast, but that doesn't make it wise to throw out the baby with the bathwater, making the de facto assumption that wage growth now won't accelerate in the future.

6 Feb. 2015 Payroll Growth Trending at 250K-plus - Expect Strength Today (Publication Centre)

The odds favor a robust January payroll report today. The key leading indicator--the NIFB hiring intentions index from five months ago--points to a 275K increase, while the coincident NFIB actual employment change index suggests 260K.

31 May 2017 Eurozone Core Inflation Likely will Undershoot the Consensus Today (Publication Centre)

Today's advance EZ CPI report likely will show that inflation pressures eased in May. We think inflation slipped to 1.5% year-over-year, from 1.9% in April, as the boost to the core rate from the late Easter faded.

31 July 2018 Employment Costs are Accelerating, but Slowly... For Now (Publication Centre)

The most important number, potentially, in today's wave of economic reports is the Employment Costs Index for second quarter.

31 July 2017 The Inflation Report Likely Won't Boost 2017 Rate Hike Odds (Publication Centre)

The pullback in CPI inflation in June and continued slow GDP growth in Q2 mean that the MPC almost certainly will keep Bank Rate at 0.25% on Thursday.

4 Apr. 2016 While We Were Out... (Publication Centre)

The March employment report didn't tell us what we really want to know. The underlying trend in wage growth remains obscured by the calendar quirk which depresses reported hourly earnings when the 15th of the month--pay day for people paid semi-monthly -- falls after the payroll survey week.

4 Dec. 2015 November Labor Data Will Support Yellen's Case for Hiking (Publication Centre)

We're expecting to see November payrolls up by about 200K this morning, but our forecast takes into account the likelihood that the initial reading will be revised up. In the five years through 2014, the first estimate of November payrolls was revised up by an average of 73K by the time o f the third estimate. Our forecast for today, therefore, is consistent with our view that the underlying trend in payrolls is 250K-plus. That's the message of the very low level of jobless claims, and the strength of all surveys of hiring, with the exception of the depressed ISM manufacturing employment index. Manufacturing accounts for only 9% of payrolls, though, so this just doesn't matter.

4 June 2018 The Labor Market Continues to Tighten, No end in Sight (Publication Centre)

The May employment report was somewhat overshadowed by the furor over the president's tweet, at 7.15AM, hinting--more than hinting--that the numbers would be good.

4 January 2017 Surging EZ Inflation will Comfortably Beat the Consensus Today (Publication Centre)

German inflation surged in December, pointing to an upside surprise in today's advance EZ report. The headline inflation rate rose to a three-year high of 1.7% year-over-year in December, from 0.8% in November. This was the biggest increase in the year- over-year rate since 1993.

4 December 2017 Japan's Labour Market is Already Tight, and Getting Tighter (Publication Centre)

Japan's labour market is already tight, but last week's data suggest it is set to tighten further.

31 July 2017 How Tight Can Japan's Labour Market go? (Publication Centre)

The jobless rate fell back to 2.8% in June after the surprise rise to 3.1% in May. This drop takes us back to where we were in April before voluntary unemployment jumped in May.

31 January 2018 Growth in Households' Spending ending (Publication Centre)

December's money and credit figures suggest that households are in no fit state to step up and drive the economy forwards this year.

30 May 2017 Why Don't Markets Take the Fed's Interest Rate Forecasts Seriously? (Publication Centre)

Markets expect the Fed will fail to follow through on its current intention to raise rates twice more this year and three times next year. Part of this skepticism reflects recent experience.

30 May 2017 Should Investors Start to Fear a Hung Parliament? (Publication Centre)

The Conservatives' opinion poll rating has fallen dramatically over the last 10 days or so, pushing sterling down and forcing investors to confront the possibility that Theresa May might not increase her majority much from the current paltry 17 MPs.

30 July 2018 Mexican Data are Upbeat, Strong Retail Sales and Low Unemployment (Publication Centre)

Economic data in Mexico continue to come in strong.

30 Oct. 2015 Deflation is Yesterday's Story - Get Ready for Higher Inflation (Publication Centre)

Advance data from Germany and Spain indicate that Eurozone inflation rebounded in October. We think inflation rose to 0.2% year-over-year from -0.2%, and German data suggest the main boost will come from both core and food inflation. Inflation in Germany rose to 0.3% year-over-year from 0.0% in September, lifted by an increase in inflation of leisure and entertainment, hotels and durable goods. Food inflation also rose to 1.6% from 1.1% in September, due to surging prices for fresh fruit and vegetables.

30 Oct. 2015 The Third Quarter ECI is Set to Rebound, but How Far? (Publication Centre)

We have been asked by a few readers how much confidence we have in our forecast of a 1% rebound in the third quarter employment costs index, well above the 0.6% consensus and the mere 0.2% second quarter gain. The answer, unfortunately, is not much, though we do think that the balance of risks to the consensus is to the upside.

31 January 2017 Will Faster Wage Growth Finally Trigger An Acceleration in the ECI? (Publication Centre)

The headline employment cost index has been remarkably dull recently, with three straight 0.6% quarterly increases. The consensus forecast for today's report, for the three months to December, is for the same again.

31 August 2018 Did Eurozone Core Inflation Decline Slightly in August (Publication Centre)

Yesterday's advance CPI data in Germany suggest that inflation fell slightly in August.

30 Sept. 2015 Mexico's Labor Market Reflects Its Upbeat Domestic Story (Publication Centre)

Mexico's data over the last few weeks have confirmed our view that private consumption remains the key driver of the current economic cycle. Solid economic fundamentals, thanks to stimulative monetary policy and structural reforms, have supported the domestic economy in recent quarters. Falling inflation has also been a key driver, slowing to 2.5% by mid-September, a record low, from an average of 4% during 2014.

4 May 2017 Strong Q1 GDP Data in the EZ, but the Annualised Trend is not 2% (Publication Centre)

The Eurozone enjoyed a strong start to 2017. Yesterday's advance data showed that real GDP rose 0.5% quarter-on-quarter in Q1, a similar pace to Q4, which was revised up by 0.1 percentage points. The year-over-year rate dipped to 1.7%, from an upwardly revised 1.8% in Q4.

4 November. 2016 October Payrolls Likely Were Good Enough (Publication Centre)

For analysts with a broadly positive view of the U.S. economy, it is tempting to argue that the slowdown in payroll growth this year reflects supply constraints, as the pool of qualified labor dries up.

5 October 2017 ADP Confirms that Hurricanes hit Payrolls (Publication Centre)

The ADP employment report for September showed private payrolls rose by 135K, trivially better than we expected.

5 Nov. 2015 More MPC Hawks Likely to Emerge Today, Despite Services Slowdown (Publication Centre)

The improvement in the Markit/CIPS services PMI in October was pretty limp, supporting our view here that the recovery is shifting into a lower gear. What's more, the poor productivity performance implied by the latest PMIs indicates that wage growth will fuel inflation soon. As a result, the Monetary Policy Committee--MPC--won't be able to wait long next year before raising interest rates. Indeed, we expect the minutes of this month's meeting, released today, to show that one more member of the nine-person MPC has joined Ian McCafferty in voting to hike rates.

5 May 2017 Payrolls Should Rebound to More than 200K, Wage Gains up too? (Publication Centre)

If the underlying trend in payroll growth is about 200K, then a weather-depressed 98K reading needs to be followed by a rebound of about 300K in order fully to reverse the hit. But the consensus for today's April number is only 190K, and our forecast is 225K.

5 October 2017 Japan's Domestic Demand Slowed in Q3 as Consumers Pulled Back (Publication Centre)

Japan's Nikkei services PMI dropped to 51.0 in September from 51.6 in August, continuing the downtrend since June. For Q3 as a whole, the headline averaged 51.5, down from 52.8 in Q2; that's a clear loss of momentum.

5 September 2017 Underlying Trend in Labor Data Unaffected by "Soft" August Report (Publication Centre)

We had hoped that the statistical problems which have plagued the initial estimates of August payrolls in recent years had faded, but Friday's report suggests our judgement was premature.

6 Feb. 2015 Chilean Growth Is Improving, But China's Slowdown Is A Worry (Publication Centre)

Chilean GDP growth hit bottom in August, but activity is now picking up and will gather speed over the coming quarters. The tailwinds from lower oil prices and fiscal stimulus will soon be visible in the activity data.

6 December 2017 Retail Sales in the EZ Plunged in October, but Will Improve Soon (Publication Centre)

Consumers' spending in the Eurozone stalled at the start of Q4. Retail sales slid 1.1% month-to-month in October, pushing the year-over-year rate down to a four-year low of 0.4%, from an upwardly-revised 4.0% jump in September.

6 December 2017 ADP to Report Strong November Jobs, but will Overstate Official Data (Publication Centre)

The ADP measure of private employment hugely overstated the official measure of payrolls in September, in the wake of Hurricane Irma, but then slightly understated the October number.

5 March 2018 Consumers' Spending in Germany Probably will Rebound in Q1 (Publication Centre)

Friday's economic data in Germany suggest that households had a slow start to the year.

5 June 2018. Chile's Recovery Continues, GDP Soared in the First Half of the Year (Publication Centre)

Data released last week confirmed the strength of the economic recovery in Chile, and we expect further good news in the next three-to-six months.

5 April 2017 EZ Retail Sales Snap Back, but Q1 Outlook Still looks Poor (Publication Centre)

Data yesterday showed that consumers in the euro area increased their spending in February, following recent weakness. Retail sales rose 0.7% month-to-month in February, reversing the cumulative 0.4% decline since November. The year-over-year rate was pushed higher to 1.8% from an upwardly revised 1.5% in January.

4 September 2017 Recovery will Continue in H2, but Fiscal Reforms are Key (Publication Centre)

Brazil's economy likely will bounce back during the second half of this year and into 2018, after the second quarter was marred by political risk.

20 April 2018 Weak Retail Sales in Q1 Can't be Attributed Solely to Bad Weather (Publication Centre)

The 1.2% month-to-month fall in retail sales volumes in March undoubtedly was due mostly to the bad weather.

5 July 2018 EZ Services Activity is Solid, Despite Slowing a Bit in H1 2018 (Publication Centre)

Headline Eurozone PMI data have declined steadily since the beginning of the year, but the June numbers stopped the rot.

5 July. 2016 Can We be Sure The Labor Market is Tight Enough to Boost Wage Gains? (Publication Centre)

We have argued consistently for some time that the next year will bring a clear acceleration in U.S. wage growth, because the unemployment rate has fallen below the Nairu and a host of business survey indicators point to clear upward wage pressures. Nominal wage growth has been constrained, in our view, by the unexpected decline in core inflation from 2012 through early 2015, which boosted real wage growth and, hence, eased the pressure from employees for bigger nominal raises.

5 June 2017 The Election Race is Still Tightening, Setting up Sterling for More Volatility (Publication Centre)

The Conservatives' opinion poll lead continued to decline over the last week, suggesting that a landslide victory on Thursday no longer is likely. Indeed, the Tories' average lead over Labour in the 10 most recent opinion polls has fallen to just 6%, down from a peak of nearly 20% a month ago.

5 June 2017 Politics at Centre-Stage in Mexico, Volatility Likely Will Ease, for now (Publication Centre)

Investors in Mexico likely will focus early this week on yesterday's gubernatorial election results in Nayarit, Coahuila and the State of Mexico. The latter is especially important, because it is viewed as a possible guide to the 2018 presidential election.

30 January 2017 Will the Inflation Report Support Markets' 2017 Rate Hike View? (Publication Centre)

Markets' expectations for official interest rates have shifted up over the last fortnight, and the consensus view now is that the MPC will hike rates before the end of this year. As our first chart shows, the implied probability of interest rates breaching 0.25% in December 2017 now slightly exceeds 50%.

19 October 2017 Slower Depletion of Job Market Slack Eases Pressure to Raise Rates (Publication Centre)

The rate that labour market slack is being absorbed has slowed, potentially giving the MPC breathing space to postpone the first rate rise beyond next month.

12 October 2018 Higher Oil Prices are no Threat to Eurozone Consumers, Yet (Publication Centre)

Oil prices remain sticky, poised to hover close to a four-year high for the rest of the year.

12 Nov. 2015 Slight Weakening in Wage Growth Won't Delay the MPC (Publication Centre)

Markets were right to conclude that September's slightly weaker average weekly wage figures will have little impact on the MPC's decision on when to raise official interest rates. Fundamentally, wage pressures are building and likely will contribute to pushing CPI inflation back to its 2% target towards the end of 2016.

12 Nov. 2015 German Inflation Will Rise Faster than the ECB and Market Expect (Publication Centre)

CPI data today in France and Germany will confirm that current inflation rates remain very low in the euro area. Inflation in Germany likely rose to 0.3% year-over-year from 0.0% in September, in line with the consensus and initial estimate. State data indicate that the rise was driven by surging fresh food prices and slightly higher services inflation, principally due to a jump in the volatile recreation and culture sector. Looking ahead, food prices will drop back, but energy inflation will rise rapidly as last year's plunge drops out of the year-over-year comparison, while upward core pressure is now emerging too.

12 September 2017 NFIB Labor Indicators Still Very Strong, Despite August Dips (Publication Centre)

The key labor market numbers from the monthly NFIB survey of small businesses are released ahead of the main report, due today.

13 April 2017 Slowing Labour Income Growth Highlights Consumers' Woes (Publication Centre)

Yesterday's labour market data showed that growth in households' income has slowed significantly in recent months. Firms are both hiring cautiously and restraining wage increases, due to heightened uncertainty about the economic outlook and rising raw material and non-wage labour costs. Consumers' spending, therefore, will support GDP growth to a far smaller extent this year than last.

13 December 2017 Japan's PPI Inflation Will Soon Fall, but Second-Round Effects to Come (Publication Centre)

Japan's PPI inflation edged up further in November to 3.5%, from October's 3.4%. Energy was the main driver, with petroleum and coal contributing 0.8 percentage points to the year-over-year rate, up from a 0.7pp contribution in October.

13 April 2018 Stock Price Hit May Hurt Consumers' Sentiment (Publication Centre)

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.

12 June 2017 China's Policy Choices are all Difficult, can Disaster be Averted? (Publication Centre)

China faces three possible macro outcomes over the next few years. First, the economy could pull off an active transition to consumer-led growth. Second, it could gradually slide into Japan-style growth and inflation, with government debt spiralling up. Third, it could face a full blown debt crisis, where the authorities lose control and China drags the global economy down too

12 June 2017 Can Core PCE Inflation Overtake Core CPI Inflation? (Publication Centre)

For the past six years, the PCE measure of core inflation has undershot the CPI version. The average spread between the two year-over-year rates since January 2011 has been 0.3 percentage points, and as far as we can tell most observers expect it to be little changed for the foreseeable future.

12 Feb. 2016 Collapse in Equity Prices Still Not a Convincing Signal of Recession (Publication Centre)

The downturn in equity prices deepened yesterday, with the FTSE 100 index closing at 5,537, 22% below its April 2015 peak. We remain unconvinced, however, that financial market turmoil is set to push the U.K. economy into a recession. We continue to take comfort from the weakness of the past relationship between equity prices and economic activity.

11 September 2017 China's Trade Surplus Edges Lower with net Trade Contributing Little (Publication Centre)

Chinese exports grew by just 5.5% in dollar terms year-over-year in August, down from 7.2% in July. Export growth continues to trend down, with a rise of just 0.2% in RMB terms in the three months to August compared to the previous three months, significantly slower than the 4.8% jump at the p eak in January.

11 October. 2016 Unemployment has Stopped Falling, For Now (Publication Centre)

The single most startling development in the labor market data in recent months is acceleration in labor force growth. The participation rate has risen only marginally, because employment has continued to climb too, but the absolute size of the labor force is now expanding at its fastest pace in nine years, up 1.9% in the year to September.

12 February 2018 German Labour Costs Are Set to Soar, Does it Matter for the ECB? (Publication Centre)

Apart from a slew of economic data--see here and here--two important things happened in Germany last week.

12 Jan. 2015 - Unemployment Plunging Towards the Nairu - What Will the Fed Do? (Publication Centre)

The strength in payrolls in recent months is real. The three-month moving average increase in private payrolls now stands at 280K, despite adverse seasonal adjustments totalling 91K in the fourth quarter, compared to the same period last year.

12 July 2017 Yellen Will Re-affirm Fed Policy. Expect no Revelations, or Dates (Publication Centre)

Chair Yellen has become quite good at not giving much away at her semi-annual Monetary Policy Testimony.

12 July 2017 Wage Growth Likely will Remain too "Anaemic" for the Governor this Year (Publication Centre)

Mark Carney emphasised in his Mansion House speech last month that he wants wage growth to "begin to firm" from recent "anaemic" rates before voting to raise interest rates.

13 December. 2016 Today's NFIB Labor Data are not New, but they are Important (Publication Centre)

The falling unemployment rate and the threat it poses to the inflation outlook mean that the labor market numbers in the NFIB small business survey attract more attention than the other data in the report.

13 February 2017 What Would it Take to Persuade the Fed to Hike in March? (Publication Centre)

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.

13 September 2017 Labour Market Report to Show no Easing of the Real Wage Squeeze (Publication Centre)

Today's labour market report likely will show that employment continued to grow briskly over the summer, but that wage gains still are lagging well behind inflation.

13 October 2017 Japan's Commodity-Driven PPI Inflation Hits Consumer Goods (Publication Centre)

Japanese PPI inflation continues to be driven mainly by imported metals and energy price inflation. Metals, energy, power and water utilities, and related items, account for nearly 30% of the PPI.

13 October 2017 Brazilian Consumption is Picking Up, Despite August's Poor Data (Publication Centre)

Brazil's retail sales data undershot consensus in August, falling by 0.5% after four straight gains. But we think this merely a temporary softening, following the strong performance in recent months.

14 Dec. 2015 November Data Will Mark the First Step in Inflation's Long March Up (Publication Centre)

November's consumer prices figures, released tomorrow, look set to show that the U.K.'s spell of negative inflation has ended. CPI inflation is set to pick-up decisively over the coming months, even if oil prices continue to drift down. In fact, fuel prices likely will contribute to the pick-up in inflation from October's -0.1% rate. November's 1.5% fall in prices at the pump was smaller than the 2.3% drop in the same month last year, so the year-over-year rate will rise. Fuel's contribution to CPI inflation therefore will pick up, albeit very marginally, to -0.47pp from -0.50pp in October.

14 Jan. 2016 Inflation Outlook Still Could Push MPC to Hike Before the Summer (Publication Centre)

Markets' judgement that the Monetary Policy Committee--which meets today--will wait until 2017 to raise interest rates overestimates the role that the drop in oil prices and slower GDP growth will play in its decision-making. The inflation risks emanating from the increasingly tight labour market still could motivate a tightening before the summer.

14 November. 2016 Higher EZ Inflation and Bond Yields: Story Changing? (Publication Centre)

Friday's detailed October CPI report in Germany confirmed that inflation pressures are steadily rising. Inflation rose to 0.8% year-over-year in October, from 0.7% in September, lifted mostly by a continuing increase in energy prices.

14 July. 2016 Faster Pay Gains for Job-Switchers Forcing Employers to Pay More (Publication Centre)

The details of the substantial pay raises being offered to some 18K JP Morgan employees over the next three years are much less important than the signal sent by the company's response to the tightening labor market. In an economy with 144M people on payrolls, hefty raises for JP Morgan employees won't move the needle in the hourly earnings data.

13 November 2017 Chinese Producer Price Increases Are Finally Slowing (Publication Centre)

Overall, the Chinese October data paint a picture of continued weakness in trade, with PPI inflation still high but the rate of increase finally slowing.

13 Nov. 2015 Will the Drag on the Recovery From Construction Fade? (Publication Centre)

The underlying health of the construction sector isn't as poor as today's official output figures likely will imply. Nonetheless, growth in construction output, which accounts for 6% of GDP, probably won't return to the stellar rates seen in 2013 and 2014, and the sector can't be relied upon to provide much support to overall growth.

13 July 2017 Don't Extrapolate from May's Uptick in Basic Wage Growth (Publication Centre)

Yesterday's labour market data gave sterling a shot in the arm on t wo counts. First, the headline, three-month average, unemployment rate fell to just 4.5% in May, from 4.6% in April.

13 Jan. 2015 - Small Business Sector on the Brink of Normalization (Publication Centre)

Within the next few month, and perhaps as soon as next month, the gap between the headline NFIB and ISM manufacturing indexes, shown in our first chart, will close for the first time since late 2008.

13 February 2018 Unit Labor Costs are Key to Inflation Outlook (Publication Centre)

Jim Bullard, the St. Louis Fed president, said last week that Phillips Curve effects in the U.S. are "weak", and that nominal wage growth is not a good predictor of future inflation.

20 April 2018 Argentina's Fiscal Accounts on the Mend, but Inflation is a Key Concern (Publication Centre)

Argentina's government continues to show signs of reining in fiscal policy, with the primary budget balance improving steadily over the last year.

13 June 2018 Labour Data are Simply too Weak for the MPC to Hike in August (Publication Centre)

April's labour market data show that slack in the job market is no longer declining, while wage growth still isn't recovering. As a result, we no longer think that the MPC will raise Bank Rate in August and now expect the Committee to stand pat until the first half of 2019.

13 March 2017 Will the Labor Data Push the Fed to Hike Again in June? (Publication Centre)

With rates now certain to rise this week, the real importance of the employment picture is what it says about the timing of the next hike. To be clear, we think the Fed will raise rates again in June, and will at that meeting add another dot to the plot, making four hikes this year.

13 Mar. 2015 Q1 GDP outlook is still decent, despite poor Industrial Production (Publication Centre)

Industrial production in the Eurozone fell a disappointing 0.1% month-on-month in January, driven by low output in Italy and Germany, as well as a large drop in Finland. But December production was revised up to 0.3% month-to-month, from the initially estimated 0.0%.

11 June 2018 The Fed will Hike this Week, but Likely will Hold Back the Fourth Dot (Publication Centre)

The Fed will raise rates by 25 basis points on Wednesday, but as usual after a widely-anticipated policy decision, most of our attention will be focused on what policymakers say about their actions, and how their views on the economy have changed.

11 July 2018 Will the Strength of Mexican Capex and Consumption Continue in Q3 (Publication Centre)

Recent economic indicators in Mexico have been relatively positive.

1 June 2018 Payrolls Likely Constrained by Trade- War Talk, AHE Hit by the Calendar? (Publication Centre)

We're expecting a 180K increase in today's May headline payroll number, a bit below the underlying trend--200K or so--for the second straight month.

1 June 2018 Money Data Cast Doubt on Q2 Recovery in Consumers' Spending (Publication Centre)

A rebound in quarter-on-quarter growth in households' spending in Q2, following the slowdown to just 0.2% in Q1, looks less likely following April's money data.

1 June 2017 Dovish EZ CPI Data Take the Sting out of Next Week's ECB Meeting (Publication Centre)

Yesterday's advance EZ CPI report bolstered the ECB doves' case for only marginal adjustments to the language on forward guidance at next week's meeting. Inflation in the euro area fell to 1.4% in May, from 1.9% in April, constrained by almost all the key components.

1 November 2017 Will the Fed Upgrade its View on Growth Today? (Publication Centre)

The Fed will do nothing today, but the FOMC's statement will re-affirm the intention to continue its "gradual" tightening.

1 November. 2016 The Recovery in Mexico is Solid, Hampered By Weak Mining (Publication Centre)

Mexico's economy grew 1.0% quarter-on-quarter in Q3, the fastest pace since 2014, following a 0.2% contraction in Q2, according to the preliminary report published yesterday.

10 August. 2016 When Rates are Close to Zero, Behavior Changes (Publication Centre)

Slowly but surely, it is becoming respectable to argue that central bank policy in the developed world is part of the problem of slow growth, not the solution. We have worried for some time that the signal sent by ZIRP--that the economy is in terrible shape--is more than offsetting the cash-flow gains to borrowers.

10 August. 2015 While We Were Out... (Publication Centre)

...The Fed told investors that it now requires only "some further improvement" in labor market conditions before starting to raise rates-- the "some" is new--but did not set out any specific conditions. With the unemployment rate now just a tenth above the top of the Fed's Nairu range, 5.0-to-5.2%, and very likely to dip into it by the time of the decision on September 17, while payroll growth is trending solidly above 200K per month, rates already would have been raised some time ago in previous cycles.

1 December. 2016 Higher EZ Inflation Won't Prevent the ECB from Extending QE (Publication Centre)

Inflation in the Eurozone rose modestly last month. Yesterday's advance CPI report showed the headline rate rising to 0.6% year-over-year in November, from 0.5% in October, mainly because of a jump in fresh food inflation. Energy prices fell 1.1% year-over-year, slightly more than the 0.9% decline in October, but we expect a sharp increase over the next six months.

1 Dec. 2014 Fed Set to Respond As Unemployment Hits Nairu (Publication Centre)

It has become fashionable to argue that the combination of favorable yield differentials and abundant global liquidity, courtesy of the BoJ and the ECB, will keep Treasury yields very low for the foreseeable future; the 10-year could even establish itself below 2%.

05 Feb. 2016 Downside Jobs Risk as Seasonals, Weather Effects Combine (Publication Centre)

We are pretty bullish about the prospects for the economy this year, but we try not to let our core view interfere with our take on the individual indicators. And our analysis suggests that the odds strongly favor a "disappointing" headline payroll number today; we have revised down our forecast to 160K from our previous 175K estimate.

03 October. 2016 First Signs of Recovery in Brazilian Private Consumption? (Publication Centre)

Brazil's recession has been severe, triggered by the downturn in the commodity cycle, which revealed the underlying structural weaknesses in the economy. This set off an acute shock in domestic demand, but it has bottomed in recent months and we now expect a gradual recovery to emerge.

03 Feb. 2016 Stan Fischer Wants Steady 3% Wage Gains - Good Luck (Publication Centre)

Stanley Fischer said something interesting and potentially very revealing in the Q&A following his speech Tuesday afternoon at the Council on Foreign Relations. The Fed Vice-Chair argued that wage increases of 3% are "where people would like to be", meaning, presumably, that he believes sustained wage gains at this pace are consistent with the Fed's 2% medium-term inflation forecast.

07 May. 2015 How Far Will Yields Rise When the Activity Data Turn Higher? (Publication Centre)

Along with just about every other commentator and market participant, we have been wondering in recent months how longer Treasuries would react to the Fed starting to raise rates at the same time the ECB and BoJ are pumping new money into their economies via QE.

08 Feb. 2016 Complacency Rife About Boost to Prices From National Living Wage (Publication Centre)

The Chancellor announced to great fanfare last July that a new National Living Wage-- NLW--would be introduced in April 2016 at 7.5% above the existing legal minimum for most workers. Companies can and will take a variety of actions to mitigate the impact on their costs.

1 Apr. 2015 Tightening Bias Remains as Chile's Inflation Forecast is Increased (Publication Centre)

Chile's economic sector survey, released on Monday, provides further evidence that the cyclical recovery in the economy continues, albeit at a moderate pace. On the demand side, the rebound is still in place, with retail sales jumping 2.0% month-to-month in February and the underlying trend firm.

09 Feb. 2016 NFIB Survey Components are More Important than the Headline (Publication Centre)

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.

10 Feb. 2016 Yellen to Sound Cautious Today, but Can't Ignore the Labor Market (Publication Centre)

Fed Chair Yellen today needs to strike a balance between addressing investors' concerns over the state of the stock market and the risks posed by slower growth in Asia, and the tightening domestic labor market.

10 January 2018 Mexican Inflation at a 16-Year High. Non-core Prices to Blame (Publication Centre)

Yesterday's CPI report in Mexico showed that inflation remains high, but we are confident that it will start to fall consistently during Q1, thanks chiefly to a favourable base effect.

10 Sept. 2015 Wage Cuts Pay off as Periphery Leads EZ Employment Higher (Publication Centre)

Workers in the euro area remain scarred by the zone's repeated crises, but the strengthening cyclical recovery is slowly starting to spread to the labour market. The unemployment rate fell to a three-year low of 10.9% in July, and employment has edged higher after hitting a low in the middle of 2013. Germany's outperformance is a key story, with employment increasing uninterruptedly since 2009, and the unemployment rate declining to an all-time low of 6.4%. Among the other major economies, the unemployment rate in Spain and Italy remains higher than in France. But employment in Spain has outperformed in the cyclical recovery since 2013.

10 Sept. 2015 Soaring Job Openings Signal Further Labor Market Tightening (Publication Centre)

We expected a modest correction in the number of job openings in July, following the surge over the previous few months, but instead yesterday's JOLTS report revealed that openings jumped by a mind-boggling 8.1% to a new record high. In the three months to July, the number of openings soared at a 35% annualized rate. As a result, the Beveridge Curve, which compares the number of openings to the unemployment rate, is now further than ever from normalizing after shifting out decisively in 2010.

10 October 2017 New Lows for Unemployment will Stiffen Fed Hawks' Resolve (Publication Centre)

Neither the 33K drop in September payrolls nor the 0.5% jump in hourly earnings tells us anything about the underlying state of the labor market.

10 September 2018 The Payroll Blip is Over, Expect Further Labor Market Tightening (Publication Centre)

Normal service appears to have resumed in August, with payrolls rising by 201K, very close to the 196K average over the previous year.

11 Feb. 2015 Chile's Outlook Improving Slowly - Oil Price are a Clear Tailwind (Publication Centre)

The resilience and adaptability that the Chilean economy has shown over previous cycles has been tested repeatedly over the last year. Uncertainty on the political front, falling metal prices, and growing concerns about growth in China have been the key factors behind expectations of slowing GDP growth.

11 Feb. 2016 Markets Still Underestimate the Looming Pick-Up in Inflation (Publication Centre)

Markets' inflation expectations have fallen in recent weeks, maintaining the trend seen over the previous 18 months. The fall in expectations for the next year or so is justified by the sharp fall in oil prices. But expectations for inflation further ahead have drifted down too, even though lower oil prices will have no effect on the annual comparison of prices beyond a year or so from now.

11 Feb. 2015 Soaring Job Openings Suggest Super-Easy Money is Now Risky (Publication Centre)

Back in April 2012, Janet Yellen--then Fed Vice-Chair--spoke in detail about the labor market and monetary policy. The key point of her labor market analysis was that it was impossible to know for sure how much of the increase in unemployment--at the time, the headline rate was 8.2%--was structural, and how much was cyclical.

10 October 2017 China's Services Sector Losing Momentum as Consumers Flag (Publication Centre)

We wrote last month about how the Caixin services PMI appeared to be missing the deterioration in several key services subsectors.

10 November. 2016 How Far Will Trump Loosen Fiscal Policy? And How Will the Fed React? (Publication Centre)

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.

10 July 2017 PBoC and BoJ Choose Divergent Paths in the Second Half (Publication Centre)

The two major central banks of Asia have chosen hugely divergent policies. The BoJ has chosen to fix interest rates, while the PBoC appears set on preventing a meaningful depreciation of the currency.

10 July 2017 Jobs Gains to Push Unemployment Below 4%, the Fed will Hike Further (Publication Centre)

The gratifyingly strong 222K headline June payroll gain, if repeated through the second half of the year, will put unemployment below 4% by December.

10 Mar. 2015 Can the Uptick in New Home Sales be Sustained? (Publication Centre)

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.

10 Mar. 2016 Wage Growth Poised to Revive, Regardless of Immigration (Publication Centre)

Amid the intensifying debate about the pros and cons of E.U. membership, higher immigration from the rest of Europe often is blamed for the disappointing weakness of wage growth over the last couple of years. But we see little evidence to support that hypothesis.

10 May 2018 A Horrible Q1 for Manufacturers in France, but Q2 Will be Better (Publication Centre)

The French manufacturing sector slowed more than we expected in Q1.

10 May 2017 April's Surge in Retail Sales Isn't a Turning Point (Publication Centre)

April's Retail Sales Monitor from the British Chambers of Commerce, released yesterday, provided a powerful signal that households' spending rebounded in April, following a terrible Q1.

15 August 2017 China's Boomlet Causes Volatility for Japan, Second Half to Weaken (Publication Centre)

Japanese real Q2 GDP growth surprised analysts, increasing sharply to a quarterly annualised rate of 4.0%, up from 1.0% in Q1 and much higher than the consensus, 2.5%. But its no coincidence that the jump in Japanese growth follows strong growth in China in Q1.

13 July. 2016 Grim Retail Sales in Brazil Highlight the Painful Stabilization Process (Publication Centre)

Evidence that Brazil's consumption recession has hit bottom seemed to vanish yesterday with the May retail sales report. Sales plunged 1.0% month-to-month, pushing the year-over-rate down to a terrible-looking -9.0%, from a revised -6.9% in April. Adding insult to injury, the month-to-month number for April was revised down by 0.2 percentage points.

19 Jan. 2016 Market Chaos in January Does Not Drive Fed Actions All Year (Publication Centre)

To paraphrase recent correspondence: "How can you possibly believe, given the terrible run of economic data and the turmoil in the markets, that the Fed will raise rates in March/June/at all this year?" Well, to state the obvious, if markets are in anything like their current state at the time of the eight Fed meetings this year, they won't hike. That sort of sustained downward pressure and volatility would itself prevent action at the next couple of meetings, as did the turmoil last summer when the Fed met in September. And if markets were to remain in disarray for an extended period we'd expect significant feedback into the real economy, reducing--perhaps even removing--the need for further tightening.

19 April 2017 Another Political Hand Grenade is Thrown in European Politics (Publication Centre)

Economic news in Europe continues to take a back-seat to volatility in politics. Yesterday's announcement by U.K. Prime Minister Theresa May that she is seeking a snap general election on June 8th cast further doubt over what exactly Brexit will look like.

18 September 2017 How Severely Would a Rate Hike Slow the Economy? (Publication Centre)

The MPC took an unprecedented step last week to pave the way for an interest rate rise.

19 January 2017 Core Inflation Pressure Building Slowly, Headline to Jump Further (Publication Centre)

The solid numbers for December mean that core inflation remains on track to breach 2?-?% this year, though probably not until the summer. Over the next few months, base effects will help to hold the core rate close to the December pace.

15 August 2018 Supply Constraints Still aren't Biting, Despite Low Unemployment (Publication Centre)

The stand-out development in yesterday's labour market report was the drop in the he adline, three-month average, unemployment rate to just 4.0% in June--its lowest rate since February 1975--from 4.2% in May.

19 May 2017 Expect a Hike on June 14 Unless Financial Conditions Tighten, a Lot (Publication Centre)

The probability of a rate hike on June 14, as implied by the fed funds future, has dropped to 90%, from a peak of 99% on May 5.

19 June 2018 The Continuity of Colombia's Free- Market Model is Assured (Publication Centre)

Iván Duque, the conservative candidate for the Democratic Centre Party, won the presidential election held in Colombia on Sunday.

18 September 2017 How it Could all go Wrong for U.S. Markets, and Quickly (Publication Centre)

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.

18 October. 2016 Headline Inflation is Set to Soar, Rendezvous With Core Next Spring (Publication Centre)

In September last year, headline CPI inflation stood at exactly zero. Today, we expect to see a 1.5% print, thanks mostly to the fading impact of falling energy prices.

18 June 2018 Hope Springs Eternal for Higher Core Goods Inflation in the EZ (Publication Centre)

Friday's data in the Eurozone confirmed that inflation rose sharply last month. Headline inflation increased to 1.9%, from 1.2% in April, and core inflation also rose, by 0.4 percentage points to 1.1%.

18 July. 2016 Core Inflation is Grinding Slowly Higher, but Bigger Risks Ahead (Publication Centre)

Trouble is brewing in the core inflation data, despite the benign-looking 0.17% increase in the June report, released Friday. If you annualize that rate indefinitely, core inflation will reach a steady state of 2.1%, so the Fed never needs to raise rates. Alas this only makes sense if you think that single monthly CPI numbers tell the whole truth, and that the fundamental forces acting on inflation are stable. Neither of these propositions is remotely true.

18 July 2018 Powell Says Everything's on Track Gradual Hike to Continue, "for now" (Publication Centre)

Fed Chair Powell delivered no great surprises in his semi-annual Monetary Policy Testimony yesterday, but he did hint, at least, at the idea that interest rates might at some point have to rise more quickly than shown in the current dot plot: "... the FOMC believes that - for now - the best way forward is to keep gradually raising the federal funds rate [our italics]."

18 May 2017 Will Strong Employment Growth Be Sustained? (Publication Centre)

Yesterday's labour market figures revealed that employment growth has picked up this year, despite the shadow cast over the medium-term economic outlook by Brexit. The 122K, or 0.4%, quarter-on-quarter rise in employment in Q1 was the biggest since Q2 2016.

18 May. Falling Airline Fares Mask Higher Services Sector Inflation (Publication Centre)

CPI inflation surprised to the downside in April, falling to 0.3% from 0.5% in March. Both the consensus and ourselves expected the rate to hold steady. Nearly all of the surprise, however, was in airfares and clothing inflation, which were depressed, to a greater extent than we anticipated, by the shift in the timing of Easter and bad weather, respectively.

18 October 2017 Weak Underlying Price Pressures Give the MPC Scope to Wait (Publication Centre)

A November interest rate rise is far from the done deal that markets still anticipate, even though CPI inflation rose to 3.0% in September from 2.9% in August.

18 Nov. 2015 Weak Producer Price Inflation Won't Prevent CPI Rebound (Publication Centre)

CPI inflation held steady at -0.1% in October, matching its lowest rate since March 1960. We had expected the rate to tick down to -0.2%, but the rebound in clothing inflation in October, following a period of discounting in September, was larger than we had anticipated. Looking ahead, we can be fairly confident that CPI inflation will pic k up sharply over the coming months.

19 Oct. 2015 Real Wage Gains Signal the True Tightness of the Labor Market (Publication Centre)

Everyone is familiar by now with the conundrum in the labor market: How come wage gains have barely increased over the past few years even as the unemployment rate has fallen to very low levels, and business surveys scream that employers can't find the people they want? To give just one visual example of the scale of the apparent anomaly, our first chart shows the yawning gap between the headline unemployment rate and the rate of growth of hourly earnings, compared to previous cycles.

19 October 2017 Q3's Slowdown in EZ Construction is no Threat, the Trend is Firm (Publication Centre)

The upturn in the Eurozone construction sector likely paused in Q3. Yesterday's August report showed that output fell 0.2% month-to-month, pushing the year-over-year rate down to +1.6%, from a revised +2.8% in July.

2 May 2017 Can Sterling's Recovery Gather More Momentum? (Publication Centre)

Sterling continued to recover last week, hitting its highest level against the dollar since October, despite a series of data releases indicating that the economy is losing momentum. Indeed, sterling was unscathed by the news on Friday that quarter-on-quarter GDP growth slowed to just 0.3% in Q1, from 0.7% in Q4.

2 March 2017 Is it all over for Mr. Fillon? (Publication Centre)

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.

2 June. 2015 Higher Inflation is the Next Big Macroeconomic Story in the EZ (Publication Centre)

Inflation pressures are slowly, but surely, rising in the Eurozone. Advance data indicate that inflation in Germany rose to 0.7% year-over-year in May, up from 0.5% in April. Reduced drag from the non-core components is the main driver, with energy prices rebounding, and food prices now rising steadily at 1.4% year-over-year.

2 November 2017 No Immediate Change to Rate Forecasts if Powell Nominated  (Publication Centre)

After a slew of media reports in recent days, we have to expect that the president will today announce that Fed governor Jerome Powell is his pick to replace Janet Yellen as Chair.

2 Oct. 2015 Expect Decent September Payrolls, But Sluggish Wage Gains (Publication Centre)

Whatever you think is the underlying tr end in payroll growth, you probably should expect a modest undershoot in today's report, thanks to the persistent tendency for the first estimate of September payrolls to undershoot and then be revised higher. The good news is that the initial September error tends not to be as big as in August--the median revision from the first estimate to the third over the past six years has been 49K, compared to 66K--and it has declined recently. Over the past three years, September revisions have ranged from only 18K to 27K. Still, we can't ignore six straight years of initial undershoots.

20 Apr. Wage Growth is Picking Up, Pressuring the MPC to Act (Publication Centre)

Today's labour market figures likely will show that wage growth is bouncing back from a soft patch in late 2015. As a result, the MPC won't be able to sit on its hands much longer, especially in light of the continued dire news on productivity.

2 October 2017 Japanese CPI Inflation Still led by Food and Energy, for now (Publication Centre)

Japanese CPI inflation jumped to 0.7% in August from 0.4% in July. The ris e in prices over the last year, however, was mainly driven by food and energy.

2 June 2017 May Payrolls Likely Solid, but Calendar Quirk will hit Wage Data (Publication Centre)

The 253K increase in May private payrolls reported by ADP yesterday was some a bit stronger than our 225K forecast. Plugging the difference between these numbers into our payroll model generates our 210K forecast for today's official number.

2 January 2018 The Economy Won't Spring Back to Life in 2018 (Publication Centre)

The economy slowed less than we expected in 2017.

2 August 2017 Inflation to Erode Chinese Demand in the Second Half (Publication Centre)

The Caixin manufacturing PMI rebounded to 51.1 in July from 50.4 in June, soundly beating the consensus for no change. The PMIs are seasonally adjusted but the data are much less volatile on our adjustment model. On our adjustment, the headline has averaged 50.9 so far this year, modestly higher than in the second half of last year.

19 September 2017 Four Reasons Why the MPC Likely Will Procrastinate in November (Publication Centre)

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.

2 August 2018 No Change in the Message from the FOMC Expect Sep. Dec. Hikes (Publication Centre)

The FOMC did nothing yesterday and said nothing significantly different from its June statement, as was universally expected.

2 Dec. 2015 Plunging German Unemployment Will Challenge the ECB Next Year (Publication Centre)

The labour market in the Eurozone continues slowly to improve. The unemployment rate fell to 10.7% in October from 10.8% in September, reaching its lowest level since 2013. The divergence in rates, however, between the major economies remains significant. Unemployment in France, Italy and Spain is still above 10%, but the advance German number continued their record-breaking form in November.

2 February 2018 A Solid Finish to 2017 for Brazil, Pointing to Upside Risks (Publication Centre)

Brazil's December industrial production and labour reports, released this week, confirmed that the recovery remained solidly on track at the end of last year.

2 February 2017 Rising Inflation Expectations to Yield Hawkish Talk from the MPC Today (Publication Centre)

Expectations are running high that the MPC will strike a more hawkish tone today in the minutes of this month's meeting and in the quarterly Inflation Report. Investors are pricing in a 45% chance of the MPC raising interest rates before the end of 2017, up from 30% before the last Report in November.

18 July 2017 The Conundrum of Germany's Huge Current Account Surplus (Publication Centre)

No subject in the EZ economy is a source of more dispute than Germany's ballooning current account surplus. The Economist recently identified he German surplus as a problem for the world economy.

19 June 2017 Colombia's Economy Started Q2 Poorly, Expect a Sluggish Recovery (Publication Centre)

Evidence of slowing economic activity in Colombia continues to mount. Retail sales fell 2.0% year- over-rate in April, down from a revised plus 3.0% in March; and the underlying trend is falling. This year's consumption tax increase, low confidence, tight credit conditions, and rising unemployment continue to put private consumption under pressure.

15 May 2017 The Jump in Q1 German GDP Growth Likely Overstates the Trend (Publication Centre)

The German economy fired on all cylinders at the beginning of the year. Advance data on Friday showed that real GDP rose 0.6% quarter-on-quarter, accelerating from a 0.4% increase in Q4.

15 March 2017 Low Mortgage Arrears Hide Rising Risks as the Economy Slows (Publication Centre)

The slowdown in households' income growth since the referendum has not pushed up mortgage default rates, so far. Employment grew by just 0.2% quarter-on-quarter in Q3 and 0.1% in Q4, well below the 0.5% average rate seen in the three years before the referendum.

15 June. 2016 Good Start to Q2 for Brazil's Retail Sales, but Details Are Less Upbeat (Publication Centre)

Brazil's retail sales improved at the start of the second quarter, increasing 0.5% month-to-month in April, partially reversing the 0.9% contraction in March. But the details were less upbeat than the headline.

15 November. 2016 Inflation Likely Stable in October, but Upward Trend Remains Strong (Publication Centre)

We expect today's consumer price figures to show that CPI inflation remained at 1.0% in October, after jumping in September from 0.6% in August.

15 Oct. 2015 Headline Inflation to Slip Below Zero, but Not For Long (Publication Centre)

The headline CPI inflation rate almost certainly dipped below zero in September, barring a startling and deeply improbable surge in the core. We look for a 0.4% month-to-month headline drop, driven by an 11% plunge in gasoline prices, pushing the year-over-year rate to -0.3%. This is of no real economic significance, not least because hugely unfavorable base effects mean the year-over-year rate almost certainly will rise sharply over the next few months, reaching about 1¾% as soon as January.

16 August. 2016 Core CPI Inflation is Set for New Cycle Highs, but Not Just Yet (Publication Centre)

Core CPI inflation plunged in the aftermath of the crash, reaching a low of 0.6% in October 2010. It then rebounded to a peak of 2.3% in the spring of 2012, before subsiding to a range from 1.6-to-1.9%, held down by slow wage gains and the strengthening dollar, until late last year. Faster increases in services prices and rents lifted core inflation to 2.3% in February, matching the 2012 high, but it has since been unchanged, net.

15 September The MPC Signals Higher Rates Soon, but it is Racked With Doubts (Publication Centre)

The MPC surprised markets, and ourselves, yesterday with the escalation of its hawkish rhetoric in the minutes of its policy meeting.

15 June 2018. Will Private Consumption in Brazil Continue to be the Key Driver in H2 (Publication Centre)

Private consumption remains resilient in Brazil and recent data suggest that growth will continue over the coming months.

15 June 2018 May's Surge in Retail Sales is Just a Weather-Related Blip (Publication Centre)

The trend in retail sales no longer looks quite so flat, following yesterday's May report. The level of sales volumes in April was revised up by 0.3%.

15 December 2016 October's Surprising Labor Data Will Make the MPC Think, not Act (Publication Centre)

The Bank of England won't set markets alight today. We expect another 9-0 vote to leave rates unchanged at 0.25%, and to continue with the £50B of gilt purchases and $10B of corporate bond purchases announced in August. This is not to say, though, that everything is plain sailing for the Monetary Policy Committee.

15 Dec. 2015 Dip in Wage Growth Hasn't Lessened the Pressure on the MPC (Publication Centre)

Investors kicked expectations for the first rise in official interest rates even further into the future when last month's labour market data, revealing a sharp fall in wage growth, were released. But a closer look at the official figures reveals that labour cost pressures have remained robust, cautioning against making a snap reaction if even weaker wage data are released on Wednesday.

15 Dec. 2014 - U.S. Approaching the Monetary Policy Crossing Point (Publication Centre)

All policymaking is about trade-offs; very few government decisions confer only benefits. Someone, or more likely some group, loses. Monetary policy is no exception to the trade-off rule.

18 July 2017 Colombia's Economic Prospects Remain Poor, but they will Improve (Publication Centre)

May's activity data underline the weakness of Colombia's economic growth. Domestic demand still is under pressure due to the lagged effect of the deterioration in the terms of trade and other temporary shocks in 2016, and the VAT increase in January this year.

15 Jan. 2016 Don't Believe Everything You See in Germany's GDP Data (Publication Centre)

Yesterday's preliminary full-year GDP data in Germany tell a cautionary tale of the dangers in taking national accounts at face value. The headline data suggest real GDP growth rose to 1.7% in 2015, up slightly from 1.6% in 2014, but these data are not adjusted for calendar effects. The working-day adjusted measure buried in the press release instead indicates that growth slowed marginally to 1.5% from 1.6% in 2014.

15 June 2017 Yellen to Markets: Core Inflation is Noisy, the Labor Market is the Key (Publication Centre)

The Fed's action, statement, and forecasts, and Chair Yellen's press conference, made it very clear the Fed is torn between the dovish signals from the recent core inflation data, and the much more hawkish message coming from the rapid decline in the unemployment rate.

15 June 2017 The MPC's Minutes Will Sound Balanced, Despite Surging Inflation (Publication Centre)

Today's MPC meeting and minutes are the first opportunity for Committee members to speak out in over a month, now that election "purdah" rules have lifted.

16 Dec. 2015 The Cyclical Rise in Labour Participation Has Run Its Course (Publication Centre)

Rapid growth in labour supply has enabled the U.K. economy to grow quickly over the last three years without generating excessive wage or inflation pressure. The rise in the participation rate--the proportion of those aged over 16 in or looking for work--has been critical to this revival. But the rise in the participation rate largely has reflected cyclical factors rather than a sustainable upward trend, and the downward pressure on participation from demographic factors will build over the coming years.

15 February 2017 Poor Brazilian Retail Sales don't Change the Improving Trend (Publication Centre)

Brazil's consumer spending data yesterday appeared downbeat. Retail sales fell 2.1% month-to-month in December, pushing the year-over-year rate down to 4.9%, from -3.8% in November. This is a poor looking headline, but volatility is normal in these data at this time of the year, and the underlying trend is improving.

18 April 2018 Colombia's Softer Activity Data is Temporary, Expect an Acceleration (Publication Centre)

The February activity report in Colombia showed a modest pick-up in manufacturing activity and strength in the retail sales numbers.

17 May. Wage Growth to Continue to Rise, Despite Jobs Slowdown (Publication Centre)

The 21K rise in the headline, three-month average, unemployment rate between November and February confirmed last month that the U.K.'s period of fantastically strong growth in employment has ended. Timelier indicators, however, suggest unemployment is stabilising, not on the cusp of a major increase.

16 December 2016 Black Friday Sales Boom Likely will be Followed by a Bust (Publication Centre)

The remarkable recent strength in retail sales continued into November, with total sales volumes rising by 0.2% and sales ex-motor fuels up by 0.5%. Those numbers aren't spectacular but they have to be seen in the context of October's huge 1.9% jump in sales ex-motor fuel; usually, after such a big gain we'd expect a correction the following month.

18 August 2017 Japan's Trade Surplus Bounced. Exports to U.S. Strengthen (Publication Centre)

Japan's July adjusted trade surplus rebounded to ¥337.4B from ¥87.3B in June, far above consensus. On our seasonal adjustment, the rebound is slightly smaller but only because we saw less of a drop in June.

18 August 2017 Sluggish Income Growth has Held Back Consumption, that will Change (Publication Centre)

Consumer confidence surveys have risen since the elections to levels consistent with very rapid growth in real spending.

18 December 2017 Tankan Shows this is no Ordinary Japan, Are Animal Spirits Back? (Publication Centre)

The incidence of the phrase "since the early nineties" has increased sharply in our Japan reports this year.

18 December 2017 Has Plunging Healthcare Inflation Held Down Nominal Wage Gains? (Publication Centre)

The shortfall in nominal wage growth, relative to measures of labor market tightness, remains the single biggest mystery of this business cycle.

17 Dec. 2015 The Beginning of "Gradual" or the Start of the Next Big Fed Mistake? (Publication Centre)

The FOMC yesterday did what it had to do, and said what it had to say. The super-doves were kicked into line, with a unanimous vote, though two members' blue dots showed they think rates should not have been raised. In our view, though, Dr. Yellen's avowed intention to raise rates gradually sits uneasily with her--correct--assertion that policy remains very accommodative, bearing in mind that the unemployment rate is now at the Fed's estimate of the Nairu, while evidence of accelerating wage gains is burgeoning.

17 May 2017 CPI Inflation Still has Further to Climb this Year (Publication Centre)

The jump in CPI inflation to 2.7% in April, from 2.3% in March, was only partly to a temporary boost from the later timing of Easter this year. Indeed, inflation likely will rise further over the coming months as food, energy and core goods prices all continue to pick up in response to last year's depreciation of sterling.

16 March 2017 Slowing Wage Gains Support the MPC's Loose Policy Stance (Publication Centre)

Yesterday's labour market data significantly bolster the consensus view on the MPC that interest rates do not need to rise this year to counter the imminent burst of inflation. Granted, the headline, three-month average, unemployment rate fell to 4.7% in January--its lowest rate since August 1975--from 4.8% in December, defying the consensus forecast for no-change.

16 November. 2016 Statistical Quirks Will Flatter September's Jobs Report (Publication Centre)

Today's labour market figures likely will show that the Brexit vote has inflicted only minimal damage on job prospects so far. The unemployment rate likely held steady at 4.9% in the three months to September, and the risk of a renewed fall in unemployment appears to be bigger than for a rise.

16 March 2018 Kuroda Prepares Parliament to Foot the BoJ's Exit Bill (Publication Centre)

Governor Kuroda dropped further hints in speeches earlier this week that interest rates will be going up. He discussed methods of exit, in loose terms.

16 Feb. 2015 Central Banks in LatAm Concerned about Inflation Pass-Through (Publication Centre)

Central banks in Chile, Peru, and Mexico hogged the market spotlight last week. Chile left its main interest rate at 3.0% on Thursday, for the fourth consecutive meeting.

16 Nov. 2015 Ignore the Hysteria if Inflation Eased Further in October (Publication Centre)

October's consumer price figures, to be released tomorrow, look set to show CPI inflation easing to -0.2%, from -0.1%, below the no-change consensus and the lowest rate since March 1960. No doubt this will spark more hyperbolic headlines about the U.K.'s descent into pernicious deflation; ignore them. October's print will almost certainly represent the nadir and we think it will take only a year for CPI inflation to return to the MPC's 2% target.

16 November 2017 Retail Sales to Surprise to the Downside Again in October (Publication Centre)

The consensus view that today's retail sales data will show volumes increased by 0.2% month-to-month in October is too sanguine.

16 November 2017 Core CPI Mean-Reverts, but Base Effects Mean Sub-2% Until March (Publication Centre)

The average month-to-month increase in the core CPI in the past three months is a solid 0.20, much firmer than the 0.05% average over the previous five months, stretching back to the first of the run of downside surprises, in March.

14 June 2017 The Squeeze on Real Wages is Intensifying Rapidly (Publication Centre)

CPI inflation increased to 2.9% in May, from 2.7% in April, exceeding the no-change expectation of both the consensus and the MPC, as well as our own 2.8% forecast.

24 Mar. 2016 In the March Employment Report, Wages are Wild (Publication Centre)

This is the final Monitor before we head out for our spring break, so we have added a page in order to make room to preview the employment report due next Friday, April 4. We expect a solid but unspectacular 175K increase in payrolls, slowing from February's unsustainable 242K, but still robust.

11 Apr. 2016 Stronger Growth and Accelerating Wages Will Shift Rate Sentiment (Publication Centre)

A reader sent us last week a series of five simple feedback loops, all of which ended with the Fed remaining "cautious". For example, in a scenario in which the dollar strengthens--perhaps because of stronger U.S. economic data--markets see an increased risk of a Chinese devaluation, which then pummels EM assets, making the Fed nervous about global growth risks to the domestic economy.

Bloomberg - Pantheon Chief Economist Worries Wages May Pressure Fed (Media Centre)

Ian Shepherdson, chief economist at Pantheon Macroeconomics, discusses the impact of improving wage growth and inflation on the Federal Reserve ahead of today's February jobs report. He speaks on "Bloomberg Surveillance."

Independent - UK pay growth data disappoints again as real wages decline at fastest rate in three years (Media Centre)

Chief U.K. Economist Samuel Tombs on U.K. Labour Market data for May

1 September 2017 Expect Strong August Payrolls, but Calendar Distortions will hit Wages (Publication Centre)

Leading indicators all point to a solid August payroll number. Survey-based measures of the pace of hiring signal a 200K-plus increase, and jobless claims--a proxy for the pace of gross layoffs--are at a record low as a share of the workforce.

3 October 2018 Are Higher Wages Squeezing EZ Manufacturing Margins? (Publication Centre)

Producer price inflation in the euro area almost surely peaked over the summer.

9 May. 2016 Payrolls Will Rebound--Maybe not in May--and Wages Are Rising (Publication Centre)

The undershoot in April payrolls, relative to the consensus, is a story of a fluke number in just one sector. Retail payrolls reportedly shrank by 3K, after rising by an average of 52K over the previous six months. Our first chart shows clearly that the retail payrolls are quite volatile over short periods, with sudden and often inexplicable swings in both directions quite common.

9 Jan. 2015 - Expect Another Robust Payroll Report - Watch Hourly Wages Too (Publication Centre)

Most of the evidence points to a robust December employment report today, though we doubt the headline number will match the heights seen in November, when the initial estimate showed payrolls up 321K. We look for 275K.

7 September 2017 Japanese Regular Wages Breaking out of a 20-year Stagnation? (Publication Centre)

Japanese labour cash earnings data threw analysts another curveball in July, falling 0.3% year-over-year. At the same time, June earnings are now said to have risen by 0.4%, compared with a fall of 0.4% in the initial print.

4 January 2018 Unemployment in Germany is Close to Nairu. Will Wages Rise? (Publication Centre)

The labour market in Germany tightened further at the end of last year. The headline unemployment rate--unemployment claims as a share of the labour force--fell to 5.5% in December, from 5.6% in November, driven by a 29K plunge in claims.

6 April 2017 Firms in the EZ are Investing Again, but What About Wages? (Publication Centre)

Readers have asked us about the availability of flow-of-funds data in the Eurozone similar to the detailed U.S. reports. The ECB's sector accounts come close and cover a lot of ground, but are also released with a lag. We can't cover all sectors in one Monitor, but the investment data for non-financial firms, excluding construction, suggest that investment growth slowed last year.

12 September 2018 Wage Growth Won't Remain Above 3% this Year, Despite July's Leap (Publication Centre)

It's tempting to conclude that the pick-up in year over-year growth in average weekly wages, excluding bonuses, to a three-year high of 3.1% in July, from 2.8% in June, signals that employees' bargaining power has strengthened and that a sustained wage recovery now is under way.

*February 2018 - U.S. Economic Chartbook* (Publication Centre)

Has the wages dam finally burst? If it hasn't, it will soon

16 Dec. 2015 LatAm Central Banks Will Tighten in Response to the Fed? (Publication Centre)

We look for the Fed to increase rates today by 25bp to a range of 0.25%-to-0.50%. The FOMC will likely say that policy remains very accommodative and that rate hikes will be slow. Unfortunately, this will provide only temporary relief to LatAm. According to our Chief Economist, Ian Shepherdson, faster wage gains next year in the U.S. will disrupt the Fed's intention to move gradually. If wages accelerate as quickly as we expect, the Fed will need to raise rates more rapidly than it currently expects, which is also faster than markets anticipate. That, in turn, will put EM markets and currencies under further pressure.

07 May. 2015 Inflation Expectations, not Greece, are Pushing EZ Yields Higher (Publication Centre)

Even though Greece managed to avert default yesterday by paying €200M in interest to the IMF, our assumption is that the country remains on the brink of running out of money. Our view is supported by the government's decision to expropriate local authority funds, and reports that the government's domestic liabilities, excluding wages and pensions, are not being met.

19 January 2017 Wage Growth Won't Force The MPC to Hike Rates This Year (Publication Centre)

The most striking aspect of yesterday's labour market report was the pick-up in the headline three month average year-over-year growth rate of average weekly wages, to a 14-month high of 2.8% in November, from 2.6% in October. Although still low by pre-recession standards, wage growth now is close to the rate that might worry the MPC.

8 Apr. 2016 Tame Inflation Pressures Leave Banxico Room to Breathe (Publication Centre)

Good news keeps on coming from Mexico, and the outlook is still favourable. Overall inflation pressures remain subdued and the domestic economy remains reasonably solid, despite a modest slowdown in recent months. Job creation remains robust, and real wages have been growing at a solid, non-inflationary pace.

17 Sept. 2015 No rate hike today - December a better bet than October? (Publication Centre)

We expect the Fed not to raise rates today. In the eyes of the waverers who will need to change their minds in order to trigger action, the latest data-- especially wages--do not make a compelling case for immediate action, and the obvious fragility of markets strengthens the case for doing nothing today. This is a Fed which in recent years has greatly preferred to err on the side of caution. With no immediate inflation threat, the waverers and the doves will take the view that the cost of delaying the first move until October or December is small. As far as we can tell, they are the majority on the committee.

5 February 2018 January's Wage Acceleration is not Definitive, but it's a Clear Warning (Publication Centre)

To be clear, the 2.9% year-over-year increase in headline hourly earnings in January does not restore the prior relationship between the rate of growth of nominal wages and measures of labor market tightness.

27 April 2018 Households' Borrowing is Slowing, Highlighting Their Renewed Caution (Publication Centre)

The squeeze on real wages has just ended and GfK's consumer confidence index hit a 11-month high in March.

IG - US labour market driving the need for a rate rise from the Fed (Media Centre)

Dr Ian Shepherdson, chief economist at Pantheon Macroeconomics, says that while US rates will rise by 0.25% on 14th December, the central bank needs to continue to move rates up or wages will spiral up out of control.

5 July 2018 ADP Likely to Report Another Solid Gain in Payrolls (Publication Centre)

Payroll growth rebounded to 223K in May, after two sub-200K readings, and we're expecting today's June ADP report to signal that labor demand remains strong.

Market Watch - The stock market is too complacent about risk of higher rates, says top forecaster (Media Centre)

Chief U.S. Economist Ian Shepherdson named Market Watch forecaster of the month for July

WALL STREET JOURNAL - Economists react to the May jobs report: "Unambiguously Positive" (Media Centre)

Chief US economist Ian Shepherdson on the latest Jobs report

WALL STREET JOURNAL - Economists react to the May jobs report: "Unambiguously Positive" (Media Centre)

Chief US economist Ian Shepherdson on the latest Jobs report

WALL STREET JOURNAL - Economists react to the May jobs report: "Unambiguously Positive" (Media Centre)

Chief US economist Ian Shepherdson on the latest Jobs report

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