Search Results: 228
Pantheon Macroeconomics aims to be the premier provider of unbiased, independent macroeconomic intelligence to financial market professionals around the world.
Sorry, but our website is best viewed on a device with a screen width greater than 320px. You can contact us at: email@example.com.
228 matches for " weather":
Today brings a raft of January data on both economic activity and prices, but we expect the headline numbers in each report to be distorted by the impact of severe weather or the plunge in oil prices.
A reader pointed out Friday that the standard measurement of the impact of the weather on January payrolls--the number of people unable to work due to the weather, less the long-term average--likely overstated the boost from the extremely mild temperatures.
The upward revisions to real consumers' spending in the fourth quarter, coupled with the likelihood of a hefty rebound in spending on utility energy services, means first quarter spending ought to rise at a faster pace than the 2.2% fourth quarter gain. Spending on utilities was hugely depressed in November and December by the extended spell of much warmer-than-usual weather.
If our inbox is any guide, a significant proportion of investors remain far from convinced that the slowdown in the economy in the first quarter is largely the consequence of the severe weather, with an additional temporary hit to capex from the rollover in the oil sector.
The latest round of Fed analysis on the weakness of first quarter growth, from the New York Fed, completely contradicts the conclusions of the San Fran Fed's work published a couple of weeks ago. The NY Fed found no statistically significant residual seasonality in the GDP numbers, and argued that the reported decline in economic activity was due entirely to the severe weather, which subtracted about two percentage points from headline growth.
The flash readings of the Markit/CIPS surveys in February provide reassurance that GDP is on track to rebound in Q1, despite disruption to the global economy caused by the COVID-19 outbreak and bad weather in the U.K. this month.
The reported 225K jump in payrolls in January was even bigger than we expected, but it is not sustainable. The extraordinarily warm weather last month most obviously boosted job gains in construction, where the 44K increase was the biggest in a year
The 1.2% month-to-month fall in retail sales volumes in March undoubtedly was due mostly to the bad weather.
Consumers' spending in the second quarter is still set to be less than great, thanks in part to unfavorable base effects from the first quarter, but a respectable showing of about 2¾% now seems likely. The core May retail sales numbers were a bit stronger than we expected, with gains in most sectors, and the upward revisions to April and March were substantial.
We expect the flash reading of Markit's composite PMI, released today, to print at 52.4 in February, below the consensus, 52.8, and January's final reading, 53.3, albeit still in line with last month's flash.
Our below-consensus 125K forecast for today's February payroll number is predicated on two ideas.
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.
Last week's preliminary estimate of Q1 GDP has extinguished any lingering chance that the MPC might raise interest rates at its next meeting on May 10.
At the end of last year, U.S. homebuilders were more optimistic than at any time in the previous 18 years, according to the monthly NAHB survey.
We have been pleasantly surprised by the recent Redbook chainstore sales numbers.
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.
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.
We are hearing a great deal about the threat of a second wave of Covid-19 infections, caused either by the reopening of the economy, or the arrival of cooler weather in the fall, or both.
Chile's Q1 GDP report, released yesterday, confirmed that the economy weakened sharply at the beginning of the year, due mainly to temporary shocks, including adverse weather conditions.
The conventional wisdom that the U.K. economy will comfortably weather the coming fiscal squeeze is misplaced. The planned adjustment is large, designed to minimise its political, not economic, impact, and based on overly optimistic assumptions. What's more, the economy is in many respects less well-placed to cope with the tightening than when the previous government applied the fiscal brakes. And when the recovery slows, the Chancellor is less likely to change tack and ease the squeeze this time.
The February industrial production numbers were flattered by an enormous 7.3% jump in the output of electricity and gas utility companies, thanks to a surge in demand in the face of the extraordinarily cold weather. February this year was the coldest since at least 1997, when comparable data on population weighted heating degree days begin.
The combination of weather effects and the meltdown in the oil sector make it very hard to spot the underlying trend in manufacturing activity. The sudden collapse in oil-related capital spending likely is holding down production of equipment, but the data don't provide sufficient detail to identify the hit with any precision.
The stagnation of GDP in August, following five consecutive month-to-month gains, confirms that the economy's momentum in prior months was simply weather-related.
After a very light week for economic data so far, everything changes today, with an array of reports on both activity and inflation. We expect headline weakness across the board, with downside risks to consensus for the December retail sales and industrial production numbers, and the January Empire State survey and Michigan consumer sentiment. The damage will b e done by a combination of falling oil prices, very warm weather, relative to seasonal norms, and the stock market.
New home sales are much more susceptible to weather effects -- in both directions -- than existing home sales. We have lifted our forecast for today's February numbers above the 575K pace implied by the mortgage applications data in recognition of the likely boost from the much warmer-than-usual temperatures.
Chief US Economist Ian Shepherdson attributes bad weather to February US Retail Sales
Chief U.K. Economist Samuel Tombs on U.K. Retail Sales in July
Our long-standing forecast for GDP to be about 5% below its pre-Covid level at the end of this year assumes that the government will not need to impose new nationwide restrictions on businesses.
News that the Covid-19 virus has spread to more countries frayed investors' nerves further yesterday, with the FTSE 100 eventually residing 5.3% below its Friday close.
New home sales performed better during the winter than any other indicator of economic activity. At least, we think they did. The mar gin of error in the monthly numbers is enormous, typically more than +/-15%.
The MPC was more hawkish than we and most investors expected yesterday. The vote to keep Bank Rate at 0.50% was split 6-3, f ollowing Andy Haldane's decision to join the existing hawks, Ian McCafferty and Michael Saunders.
The spread of the Covid-19 virus remains the key issue for markets, which were deeply unhappy yesterday at reports of new cases in Austria, Spain and Switzerland, all of which appear to be connected to the cluster in northern Italy.
The consensus forecast of a mere 0.3% month-to-month decline in retail sales volumes in December, following the 1.7% surge in November, looks far too timid. We anticipate a much bigger decline, about 1%, bringing volumes back in line with their underlying trend. We can't rule out a bigger fall.
News websites are emblazoned with the headline that retail sales are falling at their fastest rate since the 2008-to-09 recession.
Complacency and wishful thinking seem to be creeping back into the government's approach to containing Covid-19.
Friday's economic data suggest that the downtrend in German PPI inflation is reversing.
We have learned over the years not to become too excited in the face of swings in the jobless claims numbers, even when the movement appears to persist for a month or two.
A shutdown of the federal government, which could happen as early as this weekend, is a political event rather than a macroeconomic shock. But if it happens--if Congress cannot agree on even a shortterm stop-gap spending measure in order to keep the lights on after the 28th--it would demonstrate yet again that the splits in the House mean that the prospects of a substantial near-term loosening of fiscal policy are now very slim.
Yesterday's stock market bloodbath stands in contrast to the U.S. economic data, most of which so far show no impact from the Covid-19 outbreak.
Japan's advance PMI numbers for August suggest that the economy dodged most of the bullets fired by the second wave of Covid-19.
Britain's Covid-19 data have continued to improve, despite the partial reopening of the economy.
The ECB will leave its main refinancing and deposit rates at 0.00% and -0.4% unchanged today, and it will also maintain the pace of QE at €30B per month.
China's loan prime rates were unchanged for a second straight month in June, as expected.
It's hard to read the minutes of the April 30/May 1 FOMC meeting as anything other than a statement of the Fed's intent to do nothing for some time yet.
The nominal value of orders for non-defense capital equipment, excluding aircraft, fell by 3.4% last year. This was less terrible than 2015, when orders plunged by 8.4%, but both years were grim when compared to the average 7.5% increase over the previous five years.
Yesterday was a watershed moment for investors.
Markets tend to ignore Eurozone construction data, but we suspect today's report will be an exception to that rule. Our first chart shows that we're forecasting a 8.5% month-to-month leap in February EZ construction output, and we also expect an upward revision to January's numbers.
The declines in headline housing starts and building permits in September don't matter; both were driven by corrections in the volatile multi-family sector.
The Eurozone construction sector took a step back at the end of Q1, but only temporarily. Construction output fell 1.1% month-to-month in March, after a revised 5.5% jump in February. The year-over-year rate slipped to +3.6%, from a two-year high of 5.5% in February.
It's easy to read the January minutes as the dovish counterpart to a clear hawkish shift in the meeting. The statement, remember, upgraded the growth view to "solid" from "moderate"; it reiterated that the downward inflation shock from energy prices will be "transitory" and it said that the the pace of job growth is now "strong", having previously been "solid".
January's retail sales figures, released today, look set to indicate that consumers are keeping the recovery going, amid deteriorating business sentiment and faltering external trade.
CPI inflation has been extremely stable this year, only breaking away from 0.3% in March due to the shift in the timing of Easter. June, however, should mark the beginning of a sustained upward trend in inflation, fuelled by rising prices for imports, raw materials and labour. Indeed, we think CPI inflation is on course to hit 3% in 2017, ensuring that the MPC provides additional stimulus only cautiously.
Hot on the heels of yesterday's news that the NAHB index of homebuilders' sentiment and activity dropped by two points this month -- albeit from December's 18-year high -- we expect to learn today that housing starts fell last month.
The case for the MPC to hold back from implementing more stimulus was bolstered by September's consumer prices figures.
Data on air quality in China provide some useful insights into the economic disruptions--or lack thereof--caused by the outbreak of the coronavirus from Wuhan and the government's aggressive containment measures.
Over the past 18 months, the year-over-year rate of growth of manufacturing output has swung from minus 2.1% to plus 2.5%.
The trend in manufacturing output probably is about flat, with no real prospect of any serious improvement in the near term.
The spectacular 1.3% rebound in manufacturing output last month -- the biggest jump in seven years, apart from an Easter-distorted April gain -- does not change our core view that activity in the sector is no longer accelerating.
Higher gasoline prices will lift today's headline October CPI, which should rise by 0.3%. Unfavorable rounding could easily push it to 0.4%, though, and year-over-year headline inflation should rise to 1.6% or 1.7%, from 1.5% in September and just 0.2% a year ago.
Housing rents account for some 41% of the core CPI and 18% of the core PCE, making them hugely important determinants of the core inflation rate.
It's been a sobering couple of months in the Eurozone economy.
Just as we turned more positive on the labor market, following three straight months of payroll gains outstripping the message from an array of surveys, the Labor Department's JOLTS report shows that the number of job openings plunged in November.
Today's housing market data likely will look soft, but will probably not be representative of the underlying story, which remains quite positive.
As we write, markets see a 70% chance that the MPC will cut Bank Rate on January 30.
We previewed the FOMC meeting in detail yesterday -- see here -- but to recap briefly, we expect a 25bp rate hike, with no significant changes in the statement, and a repeat of the median forecasts of three rate hikes this year.
A spell of outright CPI deflation in Japan is just around the corner. Headline inflation slipped to 0.2% in August, from 0.3% in the previous month, as the drag from the discounts backed by the government's "Go To Travel" subsidies more than outweighed the upward pressure from non-core goods.
This weekend's first round of the French presidential election is too close to call. Our first chart indicates that a runoff between Marine Le Pen and Emmanuel Macron remains the best bet. But the statistical uncertainty inherent in the predictions, and the proximity of the two remaining candidates--the centre-right Mr. Fillon and far-left Mr. Melenchon-- mean that this is now effectively a four-horse race.
April's consensus-beating retail sales figures fostered an impression that the recovery in consumer spending is in fine fettle, even though the rest of the economy is suffering from Brexit blues. Retailers have stimulated demand, however, by slashing prices at an unsustainable rate. With import prices and labour costs now rising, retailers are set to increase prices, sapping the momentum in sales volumes.
The duration and future scope of the current lockdown is the main uncertainty that U.K economic forecasters have to grapple with at present.
The case for expecting a robust January jobs number is strong, but it is not without risks.
We keep hearing that the auto market is struggling, but that idea is not supported by the recent sales numbers.
The March money and credit figures provide more evidence that the economy's weak start to the year won't be just a blip.
A classic indicator of impending recession is the emergence of excessive levels of inventory across the economy. The pace of businesses inventory accumulation typically lags sales growth, so when activity slows, usually in response to higher interest rates, firms are left with unsold goods.
The Fed will soon have to step in to try to put a firebreak in the stock market.
We think today's February payroll number will be reported at about 140K, undershooting the 175K consensus.
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.
Markets likely will be particularly sensitive to May's industrial production and construction output figures, released today, as they will provide a guide to the strength of the preliminary estimate of Q2 GDP, released shortly before the MPC's key meeting on August 3.
In his second confirmation hearing, Governor Kuroda continued his dance with markets, dialling down the exit talk.
Last week's heavy snowfall, which blighted the entire country, will depress GDP growth in Q1, making it harder for the MPC to read the economy.
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.
The MPC's view that the economy likely will grow at an above-trend rate over the coming quarters was challenged immediately last week by the PMIs.
We aren't in the business of trying to divine the explanation for every twist and turn in the stock market at the best of times, and these are not the best of times.
We continue to distrust the suggestion from the Markit/CIPS PMIs that the economy is in recession.
We set out in detail yesterday, here, why we think the official payroll number today will be better than the 129K ADP reading; we look for 160K.
A range of indicators show that the pace of the economic recovery shifted up a gear in July, when all shops were open for the entire month, and most consumer services providers finally were permitted to reopen.
The economic data calendar for next week is so congested that we need to preview early September's GDP report, released on Monday.
Last week's manufacturing data in Germany left investors with more questions than answers.
A third wave of Covid-19 outbreaks is now underway. The first, in China, is now under control, and the rate of increase of cases in South Korea has dropped sharply. The other second wave countries, Italy and Iran, are still struggling.
January's GDP report, released on Wednesday, was set to be one of the most important data releases of this year, due to its role in providing the first official steer on the economy's post-election performance.
We were pretty sure that the underlying trend in jobless claims had bottomed, in the high 230s, before the hurricanes began to distort the data in early September.
Today brings only the preliminary Michigan consumer sentiment data for January so we want to take some time to look at how recent changes to Medicare Part B premiums, which cover doctors' fees, are likely to affect inflation over the next few months.
Most investors remain convinced that the MPC will raise Bank Rate when it meets next, on May 10.
The lockdown in Britain that began two-and-a half weeks ago is starting to stem the number of new infections.
The 0.7% month-to-month rise in industrial production in September marked the sixth consecutive increase, a feat last achieved 23 years ago.
We expect to see a 180K increase in November payrolls
China's post-Covid-19 economic recovery is becoming increasingly undeniable. But the more relevant questions now are the speed of its revival, and whether there are still any low-hanging fruit to pick.
Headline inflation in Brazil remained low in October, and even breached the lower bound of the BCB's target range.
The unexpectedly small 2,760K drop in the ADP measure of May private payrolls is consistent, at least, with the idea that the partial reopening of several states in the early part of the month prompted an immediate wave of rehiring.
Today's October ADP measure of private payrolls likely will overshoot Friday's official number.
Core durable goods orders in recent months have been much less terrible than implied by both the ISM and Markit manufacturing surveys.
Falling demand for utility energy, thanks to yet another very warm month, relative to normal, will depress the headline industrial production number for October, due today. We look for a 21⁄2% drop in utility energy production, enough to subtract a quarter point from total industrial output.
The FOMC flagged recent market developments as a source of risk to the U.S. economy yesterday, unsurprisingly, but didn't go overboard: "The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook."
The Prime Minister's resignation and the stillborn launch of the Withdrawal Agreement Bill last week has forced us to revise our Brexit base case, from a soft E.U. departure on October 31 to continued paralysis.
The emergence last month of a new E.U. Withdrawal Agreement that has a strong chance of being ratified by MPs appears to have given a small boost to business confidence.
Headline M3 money supply growth in the Eurozone was steady as a rock at around 5% year-over-year between 2014 and the end of 2017.
Whatever number the BEA publishes this morning for first quarter GDP growth -- we expect zero -- you probably should add about one percentage point to correct for the persistent seasonal adjustment problem which has plagued the data for many years. Reported first quarter growth has been weaker than the average for the preceding three quarters in 21 of the 31 years since 1985 -- and in eight of the past 10 years.
The rate of growth of Covid-19 cases outside China appears to have peaked, for now, but we can't yet have any confidence that this represents a definitive shift in the progress of the epidemic.
Forecasting the health insurance component of the CPI is a mug's game, so you'll look in vain for hard projections in this note.
Today's FOMC announcement will be something of a non-event. Rates were never likely to rise immediately after December's hike, and the weakness of global equity markets means the chance of a further tightening today is zero.
Yesterday's figures from trade body U.K. Finance showed that January's pick-up in mortgage approvals was just a blip.
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.
The number of coronavirus cases continues to increase, but we're expecting to see signs that the number of new cases is peaking within the next two to three weeks.
Yesterday's advance Eurozone Q4 GDP report conformed to expectations. Headline GDP increased 0.6% quarter-on-quarter, slowing trivially from an upwardly-revised 0.7% rise in Q3, and nudging the year-over-year rate down marginally to 2.7%.
Chair Yellen's final FOMC meeting today will be something of a non-event in economic terms.
We now have consumption data for two-thirds of the first quarter, making it is easy to see that a near-herculean spending effort is required to lift the quarter as a whole into anything like respectable territory. After February's 0.1% dip, real spending has to rise by at least 0.4% in March just to generate a 2.0% annualized gain for the quarter, and a 2.5% increase requires a 0.7% jump.
On the face of it, the February consumer spending data, due today, will contradict the upbeat signal from confidence surveys. The dramatic upturn in sentiment since the election is consistent with a rapid surge in real consumption, but we're expecting to see unchanged real spending in February, following a startling 0.3% decline in January.
Markets remain convinced that the U.S. faces no meaningful inflation risk for the foreseeable future.
We're fully expecting to see a hit to September payrolls from Hurricane Florence, which struck during the employment survey week.
The next nine weeks bring three jobs reports, which will determine whether the Fed hikes again in September, as we expect, and will also help shape market expectations for December and beyond.
Barring some sort of miracle, or substantial upward revision to prior data--it happens--first quarter consumption spending growth is unlikely to reach 3%, despite the robust 0.3% gain reported yesterday for January. Part of the problem is a basis effect.
The Fed likely will do nothing today, both in terms of interest rates and substantive changes to the statement. We'd be very surprised to hear anything new on the Fed's plans for its balance sheet.
Yesterday's advance Q1 GDP data in the EZ confirmed that growth slowed at the start of the year.
Yesterday's ECB meeting was comfortably uneventful for markets.
LatAm assets did well in Q1, on the back of upbeat investor risk sentiment, low volatility in developed markets and a relatively benign USD.
China's trade surplus has been trending down in the last two years.
Yesterday's deluge of output and trade data broadly supported our call that quarter-on-quarter GDP growth likely slowed to 0.3% in Q4, from 0.4% in Q3.
First things first: Payroll growth likely will be sustained at or close to November's pace.
Markets rightly placed little weight on October's below-consensus GDP report yesterday, and still think that the chances of the MPC cutting Bank Rate within the next six months are below 50%.
Recent inflation numbers across the biggest economies in LatAm have surprised to the downside, strengthening the case for further monetary easing.
Markets rightly interpreted yesterday's above consensus GDP report as having little impact on the outlook for monetary policy.
Chair Powell broke no new ground in his semi-annual Monetary Policy Testimony yesterday, repeating the Fed's new core view that the current stance of policy is "appropriate".
Inflation in Brazil surprised to the upside this week, with a sharp rebound that looks alarming at face value.
February's industrial production and construction output data leave us little choice but to revise down our forecast for quarter-on-quarter GDP growth in Q1 to 0.2%, from 0.3% previously.
Today's industrial production data in the Eurozone will extend the run of soft headlines at the start of the year.
Japan's labour cash earnings rose by 1.5% year-over- year in July, a strong result in the Japanese context, if it hadn't been preceded by the 3.6% leap in June.
Our hopes of a hefty rebound in payrolls in October, following the hurricane-hit September number, have been dashed by the imminent landfall of Hurricane Michael in Florida panhandle.
China's economy looks to have shrugged off the supposed "second wave" of Covid-19, sparked by a cluster in Beijing's largest wholesale market for fruit and veg, looking at June's PMIs.
We have few doubts that labor demand remained strong in January, but the chance of a repeat of December's 312K payroll gain is slim.
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.
The over-hyped mystery of the gap between the hard and soft data in the industrial economy has largely resolved itself in recent months.
House purchase mortgage approvals by the main street banks jumped to 40.1K in January, from 36.1K in December, fully reversing the 4K fall of the previous two months, according to trade body U.K. Finance.
If you apply a seasonal adjustment to a seasonally adjusted series, it shouldn't change. When you apply a seasonal adjustment to the U.S. GDP numbers, they do change. First quarter growth, reported Friday at just 0.7%, goes up to 1.7%, on our estimate.
German manufacturing snapped back at the end of summer. Industrial production jumped 2.6% month-to-month in August, pushing the year-over- year rate up to 4.7% from a revised 4.2% in July.
Yesterday's German manufacturing and trade data did little to allay our fears over downside risks to this week's Q4 GDP data. At -1.2% month-to-month in December, industrial production was much weaker than the consensus forecast of a 0.5% increase. Exports also surprised to the downside, falling 1.6% month-to-month. Our GDP model, updated with these data, shows GDP growth fell 0.2%-to-0.3% quarter-on-quarter in Q4, reversing the 0.3% increase in Q3.
We can't quibble with the consensus that GDP likely rose by 0.2% month-to-month in December, reversing only two-thirds of November's drop.
November's industrial production figures, released today, look set to surprise the consensus to the downside, underscoring our view that the economic recovery is continuing to lose momentum. Moreover, with sterling remaining uncompetitive, despite depreciating over recent weeks, and lower oil prices making extracting oil from the North Sea unprofitable, the industrial sector likely will impede the economic recovery further in 2016.
Industrial production figures look set to surprise the consensus to the downside again today. We think that production was flat on a month-to-month basis in August, falling short of the consensus forecast of 0.2% growth.
October's 0.1% month-to-month fall in retail sales volumes was disappointing, following substantial improvements in the CBI, BRC and BDO survey measures.
The headline May retail sales numbers were flattered by a 2.4% leap in the wildly volatile building materials component and a price-driven 2.0% surge in gasoline sales.
In order to support current market pricing, the MPC will have to be more specific about the timing of the next rate hike in the minutes of next Thursday's meeting.
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.
More evidence emerged yesterday of the fading impact of the severe winter on the data, in the form of the strength of the NAHB survey and the weakness of the headline industrial production number.
Having panicked at the January hourly earnings numbers, markets now seem to have decided that higher inflation might not be such a bad thing after all, and stocks rallied after both Wednesday's core CPI overshoot and yesterday's repeat performance in the PPI.
Today brings yet another broad array of data, with new information on housing construction, industrial production, consumer sentiment, and job openings.
The House passage of a stimulus bill last Friday, seeking to ameliorate some of the damage done by the coronavirus outbreak, will not be nearly enough.
Ahead of the release of the retail sales report for December 2018, markets expected to see unchanged non-auto sales.
The market-implied probability that the MPC will cut Bank Rate at its meeting on January 30 jumped to 63%, from 44%, following the release of December's consumer prices report.
May's consumer price figures, released on Wednesday, likely will show that CPI inflation held steady at 2.4%--matching the consensus and the MPC's forecast--though the risks lie to the upside.
The 0.242% increase in the January core CPI left the year-over-year rate at 2.3% for the third straight month.
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.
Last week's official data supported our forecast that GDP growth likely will slow further in Q1, suggesting that a May rate hike is not the sure bet that markets assume.
It's hard to find anything to dislike in the February employment report.
Sooner or later, the surge in consumers' spending power triggered by the drop in gas prices and the acceleration in payrolls will appear in the retail sales data.
We argued a couple of weeks ago that the stock market could suffer a relapse, on the grounds that valuations hadn't fallen far enough from their peak to reflect the extent of the hit to the economy; that hopes for an early re-opening were likely to prove forlorn; and that investors were likely to be spooked by the incoming coronavirus data.
The U.K. economy underperformed its peers to an extraordinary degree in Q2.
Straight-line extrapolations are always risky--nothing lasts forever--but if you allow us the indulgence, our first chart suggests that domestic U.S. oil production will breach 10M barrels per day by the summer.
The underlying trend in the core CPI is rising by just under 0.2% per month, so that has to be the starting point for our January forecast.
LatAm governments and policymakers are bracing for a more dramatic and longer virus-led downturn than initially expected.
Most of the time we don't pay much attention to the monthly import and export prices numbers, which markets routinely ignore. Right now, though, they matter, because the plunge in oil prices is hugely depressing the numbers and, thanks to a technical quirk, depressing reported GDP growth.
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%.
The BLS offered no estimate of the impact on payrolls of the snowstorm which hit the Northeast during the March survey week, but it appears to have been substantial. All the leading indicators pointed to a solid 200K-plus reading, more than double the official initial estimate, 98K.
The latest survey evidence strongly supports our view that momentum is building in the industrial economy, but the official production data continue to lag. Yesterday's March Philly Fed survey was remarkably strong, with the correction in the headline sentiment index -- inevitable, after February's 33-year high -- masking increases in all the subindexes.
The consensus for a modest 0.5% month-to- month rise in retail sales volumes in October looks too timid; we expect today's data to show a 1% increase.
It would be a mistake to conclude much about the economic impact of the Brexit vote from today's official industrial production figures for September, and the British Retail Consortium's figures for retail sales in October.
As warned--see our Monitor April 7--economic data in the Eurozone disappointed while we were away. Industrial production, ex-construction, in the euro area slipped 0.3% month-to-month in February, and the January month-to-month gain was revised down by 0.6 percentage point to +0.3%.
So far, the surge in retail spending promised by the plunge in gasoline prices has not materialized. The latest Redbook chain store sales numbers dipped below the gently rising trend last week, perhaps because of severe weather, but the point is that the holiday season burst of spending has not been maintained.
The FOMC's statement on April 29 mentioned the winter--"...economic growth slowed during the winter months"--but did not explicitly blame any of the first quarter's weakness on the extended cold and snowy weather. That was a change from the March statement, which made no mention of the weather and gave the distinct impression that policymakers had no firm view on why growth had "moderated".
Retail sales fell back to earth in September, indicating that the pick-up in spending over the summer largely was a weather-related blip.
The Chancellor can go on his Christmas vacation content that the public finances have weathered the economy's slowdown relatively well this year.
On the face of it, British manufacturers are weathering the global slowdown well. The Markit/CIPS PMI jumped to 55.1 in March, from 52.1 in February, and now comfortably exceeds those for the Eurozone, U.S. and Japan.
If the recovery in existing homes hadn't been interrupted by the taper tantrum, in the spring of 2013, sales by now would likely be running at an annualized rate in excess of 6M. The rising trend in sales from late 2010 through early 2013 was strong and stable, as our first chart shows, but the decline was steep after the Fed signalled it would soon slow the pace of QE, and it was made temporarily worse by the severe late fall and early winter weather.
August's mortgage lending data from the trade body U.K. Finance provided more evidence that the pick-up in housing market activity in Q2 simply reflected a shift from Q1 due to the disruptive weather, rather than the emergence of a sustainable upward trend.
the past few observations make clear. Real spending jumped by 0.5% in March, rebounding after its weather-induced softness in February, before stalling again in April. Then, in May, the s urge in new auto sales to a nine-year high lifted total spending again, driving a 0.6% real increase.
Across all the major economic data, perhaps the biggest weather distortions late last year and in the early part of the year were in the retail sales numbers, specifically, the building materials component. Sales rocketed at a 16.5% annualized rate in the first quarter, the biggest gain since the spring of 2014, following a 10.2% increase in the fourth quarter of last year.
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.
The weather-driven surge in December housing starts, reported last week, is unlikely to be replicated in today's existing home sales numbers for the same month.
In three of the past four months, new home sales have been reported above the 460K top of the range in place since early 2013. Sales dipped below this mark in November, when the weather across the country as a whole was exceptionally cold, relative to normal.
Mexican manufacturing sector kicked off the year on a soft note, due mainly to the sharp drop in oil prices, and the sharp weather-induced slowdown in the U.S. Mexico's northern neighbor is its largest trading partner, by far, accounting for about 85% of total exports last year and close to 80% of total non-oil exports.
"We know from last year's experience during the polar vortex, when the headline index fell 10 points, that the NAHB survey is extremely susceptible to severe weather, so we can't right now view it as a reliable indicator of the underlying trend in housing market activity," Ian Shepherdson, chief economist for Pantheon Macroeconomics, said in a note to clients.
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.
Taken at face value, the preliminary estimate of Q2 GDP suggests that the economic recovery weathered Brexit risk well. But growth received support from some unsustainable sources, and also probably was boosted by a calendar quirk. Meanwhile, with few firms or consumers expecting a vote for Brexit prior to the referendum, Q2's brisk growth tells us little about how well the economy will cope in the current climate of heightened uncertainty.
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.
It's tempting to conclude from the third quarter's GDP figures, which showed output rising 0.5% quarter-on-quarter, despite a record drag from net trade, that the U.K. economy is comfortably weathering sterling's appreciation. But a closer look at the data shows the net trade drag is the counterparty to some erratic inventory movements. The real net trade hit is still to come.
You'd have to be very brave to take the weakness of yesterday's Empire State survey more seriously than the strong official industrial report published 45 minutes later. The hard data showed industrial production up 1.3% month-to-month, and only two tenths of that gain was explained by the cold weather, which drove up utility energy output.
October industrial production data in France surprised to the upside yesterday, with headline output rising 0.5% month-to-month, well above the consensus estimate and our own forecast for a monthly fall. Production was lifted by a 5.1% month-to-month jump in energy output, due to unusually cold weather, offsetting a 0.5% decline in manufacturing output, the fifth drop in the past six months.
Last fall and winter, when the weather was warmer than usual--thanks largely to El Nino--construction employment rocketed. Between October and March, job gains averaged 36K, compared to an average of 20K per month over the previous year. When these strong numbers began to emerge, we expected to see a parallel acceleration in construction spending.
In the absence of an unexpected surge in auto sales or a sudden burst of unseasonably cold weather, lifting spending on utilities, fourth quarter consumption is going to struggle to rise much more quickly than the 2.1% annualized third quarter increase.
It's easy to claim from yesterday's labour market data that the economy is weathering the uncertainty caused by the E.U. referendum. Employment rose by 172K, or 0.5%, between Q1 and Q2, and the claimant count fell by 7K month-to-month in July. These numbers, however, flatter to deceive.
In one line: Boosted by mild winter weather, but the underlying trend is rising strongly too.
In one line: Pre-virus, the labor market was strong, if weather-assisted. Now, trouble is coming, fast.
In one line: Reassuringly solid, given virus and weather headwinds.
The first estimate of Q1 growth will show that the economy struggled in the face of the severe winter and, to a lesser extent, the rollover in capital spending in the oil sector. But the weather hit appears to have been much smaller than last year, when the economy shrank at a 2.1% rate in the first quarter; this time, we think the economy expanded at an annualized rate of 1.1%.
April's 2.0% month-to-month leap in industrial production was the biggest upside surprise on record to the consensus forecast, which predicted no change. The surge, however, just reflects statistical and weather-related distortions. These boosts will unwind in May, ensuring that industry provides little support to Q2 GDP growth. Make no mistake, the recovery has not suddenly gained momentum.
In one line: Bad weather has pushed inflation up, temporarily.
In one line: Poor performance likely due to warm weather hitting demand for clothing.
In one line: Decent core manufacturing hidden by weather-driven utility plunge.
In one line: Pre-virus, the labor market was strong, if weather-assisted. Now, trouble is coming, fast.
In one line: Reassuringly solid, given virus and weather headwinds.
In one line: Revisions to the saving ratio leave households looking better placed to weather a future storm.
Mark Carney revealed last week that recent data had given him "greater confidence" that the weakness of Q1 GDP was almost entirely due to severe weather.
Japan's December wage data suggest household in no mood to weather tax hike
March payrolls were constrained by both the impact of colder and snowier weather than usual in the survey week, and a correction in the construction and retail components, which were unsustainably strong in February.
We are not bothered by either the drop in real December consumption, all of which was due to a weather-induced plunge in utility spending, or the drop in the ISM manufacturing index, which is mostly a story about hopeless seasonal adjustments.
The widespread view, which we share, that GDP will rebound in Q2 following the disruption caused by bad weather in Q1, was supported yesterday by the E.C.'s Economic Sentiment survey.
The FOMC delivered no big surprises yesterday, but seemed keen to make it clear that policymakers are sticking to their core views, despite the slowdown in growth in the first quarter. Unlike the March statement, yesterday's note pointed out that the slowdown came in the winter months, though it did not directly blame the weather for the sluggishness in growth.
April payroll growth likely will be reported at close to 200K. Overall, the survey evidence points to a stronger performance, but they don't take account of weather effects, and April was a bit colder and snowier than usual. We're not expecting a big weather hit, but some impact seems a reasonable bet.
Business surveys released over the last week have made us more confident in our call that quarter-on- quarter GDP growth will recover to about 0.4% in Q2, from Q1's weather-impacted 0.1% rate.
We argued yesterday that the steep declines in the ISM surveys in August, both manufacturing and services, likely were one-time events, triggered by a combination of weather events, seasonal adjustment issues and sampling error. These declines don't chime with most other data.
The winter hit to payrolls is now ancient history. Private employment rose by an average of 273K per month in the second half of last year, so May's 262K has restored normal service, more or less. History strongly suggests the number will be revised up, so we are happy to argue that the data convincingly support our view that the weakness in late winter and early spring was temporary, substantially due to the severe weather.
It's entirely possible--though impossible to prove--that the weather is responsible for the below-consensus April payroll number.
Today's consumer credit report for April likely will show that the stock of debt rose by about $15B, a bit below the recent trend. The monthly numbers are volatile, but the underlying trend rate of increase has eased over the past year-and-a-half, as our first chart shows. The slowdown has been concentrated in the non-revolving component, though the rate of growth of the stock of revolving credit--mostly credit cards--has dipped recently, perhaps because of weather effects and the late Easter.
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.
Chief U.K. Economist Samuel Tombs on U.K. GDP in Q3
Chief U.K. Economist Samuel Tombs on U.K. Industrial Production
Chief U.K. Economist Samuel Tombs on U.K. growth data
Chief U.K. Economist Samuel Tombs on U.K. Retail Sales in February
pantheon macroeconomics, pantheon, macroeconomic, macroeconomics, independent analysis, independent macroeconomic research, independent, analysis, research, economic intelligence, economy, economic, economics, economists, , Ian Shepherdson, financial market, macro research, independent macro research