A decent bounce, but the headwinds to consumption are mounting.
Oliver Allen (Senior US Economist)US
- State and local government investment spending has slowed sharply; soon it will fall outright…
- ...Both tax revenues and federal government payments to S&L are falling; cashflow is evaporating.
- The rebound in consumers' confidence likely will prove unsustainable if job growth weakens as we expect.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Better headline numbers, but the underlying trend is still weak.
Oliver Allen (Senior US Economist)US
The drop in sales is probably noise, but the underlying trend is weak.
Oliver Allen (Senior US Economist)US
- Ignore the rise in the composite PMI in May it has been a poor guide to GDP growth since the pandemic...
- ...The failure of the employment index to reverse April's plunge adds to signs of slowing payroll growth.
- We look for a small rise in core capital goods shipments in April, due to a calendar quirk, not an improving trend.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Sales likely to stagnate for the next few months, at best.
Oliver Allen (Senior US Economist)US
- S&P's employment index has a poor long-term correlation with payrolls, but markets are paying attention now.
- Leading indicators leave us looking for an above-consensus 230K initial claims print today.
- "Various" FOMC members signalled willingness to hike in the minutes, but the data has moved on since then.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We see existing home sales unchanged last month, but the outlook for the rest of Q2 is dim.
- The May rise in Manheim used car prices looks like a blip; sluggish sales will lead to a further margin squeeze.
- Fed minutes unlikely to change market perceptions about easing timing.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Our Homebase model points to an initial estimate of a subpar 150K rise in private payrolls in May.
- The Redbook measure of year-over-year growth in retail sales has been remarkably strong lately...
- ...But it has often overstated the trend in the official retail sales data in the recent past; we think it is again.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Not definitive, but consistent with the idea that the trend is starting to rise.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Recovery in housing construction running out of steam.
Oliver Allen (Senior US Economist)US
- The manufacturing sector continues to disappoint and a sustained recovery still looks some way off.
- April's pick-up in import prices likely will have a near-zero impact on core goods CPI inflation.
- The failure of housing starts and claims fully to reverse recent adverse shifts suggest interest rates are too high.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
A clear signal of weakening consumption.
Oliver Allen (Senior US Economist)US
A broad-based slowdown, pointing to a 0.24% core PCE print.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Underlying services inflation slowed in April; momentum in rents and auto insurance prices will fade.
- The CPI and PPI data suggest the core PCE deflator rose by 0.23%, the smallest increase since December.
- April's retail sales report supports the case for a slowdown in consumption growth.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
An improvement, but small businesses are still under pressure.
Oliver Allen (Senior US Economist)US
- We are merely nudging up our forecast for the April core CPI to 0.37%, from 0.35%, following the PPI data.
- Short-term movements in many equivalent PPI and CPI components are weakly correlated.
- We also look today for a 0.4% rise in total retail sales, consistent with near-zero real consumption growth.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The consensus forecast for a 0.2% rise in the April core PPI is well-grounded, but big surprises are common.
- Tight credit is weighing heavily on small businesses; we expect another dip in the NFIB survey in April.
- NY Fed data suggest consumers are becoming more worried about job losses, pointing to higher layoffs.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
One big jump is not a trend, but a rising trend is now due
Ian Shepherdson (Chief Economist, Chairman and Founder)US
