A solid start to Q2; no sign of any hit from energy and food prices
Ian Shepherdson (Chief Economist and Founder)U.S.
Retail and wholesale profit margins fell in April, in a sign of better inflation news ahead.
Progress will be uneven, but the ongoing inventory rebuild should push margins down over the next year.
Jobless claims seem to have stabilized at about 200K per week; nothing to worry about.
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.
- A big drag from inventories means we have pulled down our Q1 GDP forecast to zero…
- …Growth likely will rebound strongly in the second quarter, because final demand looks solid.
- Chainstore sales growth is slowing rapidly, but mostly—perhaps entirely—due to adverse base effects.
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.
- Rates to rise by 25bp today, with five dots, at least, likely for 2022 as inflation forecasts rise...
- Chair Powell will repeat his willingness to hike more quickly if needed, but no runoff announcement yet.
- February's core retail sales numbers likely were were OK; headline constrained by a drop in auto sales.
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.
- Some of the huge spike in food commodity prices will work its way into the CPI, but not much...
- ...U.S. consumers buy processed food, and most of the price is labor; it's different in emerging markets.
- A drop in JOLTS job openings in January would be a good thing, signalling rising labor supply.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Consumers' confidence has dipped in recent months but it will rebound, and Q1 spending looks good.
- Inflation expectations are falling despite big increases in a wide array of infrequently-purchased items.
- Case-Shiller home price data will reinforce the picture of relentless increases, due to record-low inventory.
Ian Shepherdson (Chief Economist and Founder)U.S.
- A gratifyingly huge leap in auto sales likely will flatter today's headline January retail sales...
- The core will be mixed, but we hope falling restaurant sales were offset by gains elsewhere.
- A weather-driven leap in utility output likely will hide soft January manufacturing data.
Ian Shepherdson (Chief Economist and Founder)U.S.
- An Omicron hit to airline fares and lodging costs sug- gests modest downside risk to January's core CPI.
- Reweighting will not materially change the path of core inflation; fundamentals are what matter.
- Vehicle prices are the most likely driver of downside inflation surprises in the spring and summer.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Consumers are under short-term pressure from all sides, but the turn in spending will likely come soon.
- Payrolls will be a bit slower to respond to falling Covid cases than the real-time activity data...
- ...The January and February reports will both be scarred by Omicron, even as inflation rises further.
Ian Shepherdson (Chief Economist and Founder)U.S.
- The Omicron hit likely will be visible in the retail sales data, but the core goods numbers should be OK.
- Industrial production probably was depressed by very warm December weather; expect a quick rebound.
- Car prices are beginning to moderate in the PPI, both at the manufacturer and dealer margin levels.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Core retail sales are rising at a solid pace; a strong holiday season is a decent bet...
- ...But a sustained rebound in spending on services is still the missing link in the recovery story.
- Mortgage demand continues to rise steadily; home sales and housing construction follow.
Ian Shepherdson (Chief Economist and Founder)U.S.
- Rising food service spending despite Covid Delta is a positive sign for fourth quarter consumption.
- We're assuming that the drop in cases continues, facilitating a sustained surge in spending.
- Soaring energy inflation will constrain the rate of in- crease of OER, but it will rise nonetheless.
Ian Shepherdson (Chief Economist and Founder)U.S.
