- A second Trump administration apparently has plans for the Fed; none of them are good; some are wild.
- The March rise in the core PCE deflator matched expectations; muted increases are coming in Q2.
- Strong real consumption growth in Q1 was driven partly by a falling saving rate; expect the reverse in Q2.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Housing market activity likely to slow sharply in Q2.
Oliver Allen (Senior US Economist)US
- The Q1 data suggest upside risk to our 0.28% March core PCE forecast, but 0.3% rounded still looks likely.
- Q1 GDP growth was better beneath the hood; the headline was hit by a big foreign trade drag...
- ...But expect drags in Q2 from inventories and residential investment, as well as slowing consumption growth.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Rounding off another weak quarter for equipment investment.
Oliver Allen (Senior US Economist)US
- Durable orders were stronger than we expected in March, but they still fell in Q1 as a whole.
- GDP likely rose by 2.6% in Q1; this week's data have triggered only marginal changes in our forecast.
- Time lags and generous seasonals mean today's initial claims data likely will be little changed, again.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- S&P's employment index has inaccurately pointed to sharp slowdowns in growth in payrolls before...
- ...but its grim message should be taken seriously now, given that it is echoed by the NFIB survey.
- Easter effects point to a downside surprise in durable goods orders ex-transportation.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Residential investment bounced in Q1.
Oliver Allen (Senior US Economist)US
- S&P's PMI is too unreliable a guide to GDP to be useful, but its soft inflation signal should be taken seriously.
- Annual retail sales revisions could have significant implications for consumption growth in Q1.
- New home sales probably rose in March, capping a strong quarter for residential investment.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Last year’s strong consumption was due to rapid real income growth; the saving rate rose.
- Real income growth will be much slower this year, so if the saving rate keeps rising, spending will suffer.
- Consumption might slow gradually, but in the 2001 business cycle recession, growth lurched down.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
This housing market recovery will be slow.
Oliver Allen (Senior US Economist)US
Tranquil labor market conditions unlikely to last much longer.
Oliver Allen (Senior US Economist)US
- We think GDP rose at a 2.6% quarter-on-quarter pace in Q1, powered primarily by consumers’ spending.
- Data released before the GDP estimate next Thursday, however, could shift our forecast materially.
- Home sales likely still have further to fall in Q2, despite their big drop in March.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Ignore the fall in the LEI in March—Q1 GDP growth will be brisk—but it should become a better guide soon.
- Look out for an above-consensus rise in jobless claims today as Easter distortions unwind; the trend is rising.
- February’s surge in existing home sales looks like an anomaly; expect a plunge in March.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Encouraging, but too soon to call a real recovery.
Oliver Allen (Senior US Economist)US
Large fall is likely an Easter timing quirk; the trend still looks flat.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
LABOR MARKET WARNING SIGNS ARE FLASHING RED…
- …BUT CHAIR POWELL SEES NO “CRACKS”
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Chair Powell signals that the Fed requires much more data to start easing soon; June odds down again.
- The widening spread between part-time and full-time job growth is an alarming signal for payrolls.
- The early Easter hit March housing starts but, in any event, a sustained recovery is some way off.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Limited inventory of existing homes continues to help homebuilders.
Oliver Allen (Senior US Economist)US
Consumption is still booming...for now.
Oliver Allen (Senior US Economist)US
