The preliminary Homebase data for the payroll survey week signal an increase of about 250K.
Autos, gas prices and restaurants likely boosted April retail sales, but the core seems to have been softish.
Homebuilders’ sentiment will roll over, sooner or later, in the face of plunging mortgage demand.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The surge in inflation is largely a margin story; costs have jumped too, but margins are the bigger factor.
- Absent structural change in markets, margins will mean-revert, pulling inflation down, but how quickly?
- The Empire State survey looks primed for a correction after the inexplicably strong April reading.
Ian Shepherdson (Chief Economist and Founder)U.S.
Two more 50bp hikes expected by Mr. Powell, but once inflation is falling, back to 25bp moves…
…This will happen sooner than markets expect; by the July meeting, inflation will have dropped sharply.
First quarter productivity likely fell sharply, but these data are wild; we remain medium-term optimists.
Ian Shepherdson (Chief Economist and Founder)U.S.
The manufacturing sector is feeling the weight of China’s slowdown; the ISM is set to fall further.
Manufacturing is not GDP, but—like housing—it is has an outsized impact on perceptions of the economy.
The number of job openings has peaked, likely be- cause rapid hiring has reduced the Covid backlog.
Ian Shepherdson (Chief Economist and Founder)U.S.
The trade deficit is rocketing again as inventory- rebuilding pulls in imports of consumer goods.
Expect a fifth straight drop in pending home sales in March, with more to come.
Core capex orders rose at a decent pace in the first quarter, but the second will be better.
Ian Shepherdson (Chief Economist and Founder)U.S.
Both headline and core inflation peaked in March; base effect alone will trigger a clear drop in Q2.
The risks to the March core consensus are mostly to the downside, thanks to falling used vehicle prices.
The NFIB index likely dropped again in March; it’s sensitive to the stock market and gas prices.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Recessions are the process by which the private sec- tor unwinds financial imbalances...
- ...Absent financial imbalances, recessions happen only after large exogenous shocks.
- The U.S. private sector is in good financial shape, so near-term recession is unlikely.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Real yields have risen recently by much more than breakevens; is faith in the "new normal" crumbling?
- If productivity growth is mean-reverting to 2%-plus, real yields have much further to rise.
- Downside risk to headline February durable goods orders, but the the core should be solid.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Our interpretation of the Homebase data suggests payroll growth stalled in March…
- …This might be nothing more than a blip, or Homebase could be wrong; but it's not what we expected.
- Auction data show the drop in used vehicle prices is accelerating; downside risk for existing home sales.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The Fed's plan to hike seven times this year is based on inflation forecasts which look too bearish…
- …But longer-run rate forecasts look too optimistic; perhaps because no one now wants to talk about r*.
- Retail sales data show consumers not fazed by Omicron; downside risk for February IP data today.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The February PPI likely was boosted by soaring energy and food prices, but the March hit will be bigger.
- Core PPI inflation likely peaked in February; it looks set to fall sharply from the spring onwards.
- Base effects will hugely depress year-over-year chainstore sales growth over the next few months.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The surge in gasoline prices will disproportionately hammer the poorest households...
- ...A policy response could include simply subsidizing gasoline spending for the bottom 40%.
- Real-time data suggest that the war in Ukraine and the gas price shock has hit spending on services.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Headline and core inflation will peak in March; the key question now is the speed of the subsequent drop.
- The Fed needs to see falling vehicle prices, slower wage gains and improving supply chains.
- These are all reasonable bets, but they aren't certain in terms of both timing and extent.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Headline inflation likely hit a 40-year high in February, but the monthly core increases likely have peaked.
- Lower used vehicle prices and airline fares probably limited the core increase in February.
- JOLTS job openings remain close to their record high, despite rising labor participation rates.
Ian Shepherdson (Chief Economist and Founder)U.S.
- U.S. headline inflation is likely to hit 8%, but it will go much higher if oil prices keep rising.
- Consumers' huge cash pile means people don't have to cut back other spending as gas prices surge.
- The Fed need not deviate from its tightening plans, unless markets collapse.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Rapid payroll growth will continue for some time yet, but a return to the pre-Covid trend is unlikely...
- ...Participation, especially among older people, is unlikely to reverse the entire Covid-driven plunge.
- The soft February wage data are more noise than signal, but the trend probably is no longer accelerating.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Chair Powell sticks to the tightening story, while ac-knowledging uncertainty due to the Ukraine war.
- The unwinding of the Omicron hit should mean lower claims and stronger ISM services today.
- The auto sales rebound is stalling, but Q1 sales still on course to rise by more than 40%, annualized.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Fed Chair Powell will acknowledge the uncertainty caused by the war in Ukraine…
- …But the impact on the U.S. is not big enough to justify a drastic pivot away from the tightening story.
- The manufacturing recovery continues, but the improvement in supply chains looks to be stalling.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The post-Omicron rebound in demand for consumer services is underway, but watch out for base effects.
- Manufacturing growth appears to be slowing, but the sector continues to expand.
- The soaring trade deficit and rapid domestic inventory rebuild are two sides of the same coin.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Key U.S. market metrics are now marginally better than immediately before Russia invaded Ukraine...
- ...Oil prices, particular, priced-in the invasion, so retail gas prices will now stabilize.
- First quarter GDP growth looks set to be lower than we hoped, thanks to continued auto supply problems.
Ian Shepherdson (Chief Economist and Founder)U.S.
