- The strong headline Q3 GDP number hid a disconcerting, broad-based slowing in business capex.
- The big inventory contribution to Q3 growth likely will reverse; we expect zero GDP growth in Q4.
- The September core PCE inflation data should bring further good news, but the Fed wants to see more.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Still rising, but not for long.
US
- Unemployment is creeping up, despite strong payroll gains, thanks to rapid labor force growth...
- Rebounding immigration likely is the key driver, rather than rising participation.
- Wage growth has already slowed sharply; it will soften further if unemployment continues to increase.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Surging consumption and a spike in net foreign trade likely propelled Q3 GDP to 4.9% growth…
- …But consumption will slow in Q4, the trade gain won’t be repeated, and inventories will be a big drag.
- A massive Boeing order from Ryanair means upside risk for headline durable orders; core still sluggish?
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Surging exports and a dip in imports mean that net trade will make a big contribution to Q3 GDP growth.
- Q4 will be different; imports are due to rebound and exports will be constrained by slow global growth.
- Netflix is raising prices sharply but it will have little impact on the CPI.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- SEPTEMBER’S PAYROLL SPIKE IS NOISE, NOT SIGNAL...
...AND CORE INFLATION PRESSURE CONTINUES TO FADE
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Slowing wage inflation and tightening financial conditions make it more likely that the Fed is done.
- Policymakers still want to retain optionality, given non-zero risks of adverse growth/inflation surprises...
- ...But a base case of an extended pause, followed by a victory declaration next spring, seems reasonable.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
A new cycle low, and likely to fall further in Q4.
US
The tepid recovery in manufacturing continues; jobless claims still trending lower.
US
- Consumption has surprised to the upside this year; the story is more than than just savings rundown.
- Spending also has been boosted by very rapid real income growth in H1, but the numbers have turned.
- Existing home sales reached a fresh cycle low in September, and will fall further in the fourth quarter.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
The rebound in construction activity is already petering out.
US
- Homebase signals only a 100K increase in private payrolls in October.
- Residential investment will boost Q3 GDP growth, following earlier gains in starts, but it won’t last.
- Used vehicle prices falling again at auction; the summer bump has reversed, despite the UAW strike.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Rebounding, albeit very gradually.
US
A strong finish to Q3, but the headwinds are building.
US
- Real consumption spending likely rose at a 4% annualized rate in Q3, as people ran down savings further.
- Manufacturing probably is past the trough, but the upturn so far has been extremely modest.
- Housing starts probably rebounded in September, but the trend is flattening as mortgage demand falls.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Noisy but signalling stable manufacturing output; inflation pressures still fading
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Headline retail sales likely were unchanged in Sep- tember, but the control measure probably fell.
- Consumers’ spending likely ended Q3 on a soft note, with worse to come in Q4.
- A strike-related hit to auto production is the key risk to September manufacturing output.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Consumers' confidence likely to rebound from here, now that gas prices are falling.
US
- Higher for longer reflects stronger trend growth, but the interest rate cycle has not been abolished…
- …The next substantial move in rates will be to the downside, and it will be faster than the Fed expects.
- Consumers are unhappy, but cheaper gasoline will cheer them up, provided stocks don’t tank.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
