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US economic prospects look good

  US GDP growth decelerated from 2.8% in H2 2016 to 0.7% quarter on quarter (q-o-q) annualised in Q1, slightly below consensus expectations (1.0%). However, this weak reading is mainly due to statistical anomalies (growth tends to be lower in Q1) and transitory factors that weighed on consumer spending and stockbuilding. However, fixed investment growth […]

Markets react well to Fed hike

In line with what almost every forecaster was expecting, the Federal Open Market Committee (FOMC) decided at its latest policy meeting to raise the Fed funds rate target range by 25bp to 0.75%-1.0%. Fed Chair Janet Yellen explained that the decision to raise rates was appropriate “in light of the economy’s solid progress toward our […]

Healthy job reports open the way to rate increases

February’s US non-farm payroll figure was strong (although partly due to temporary factors and unusually mild weather), with non-farm payrolls rising 235,000, above expectations. Other data in the February employment report were also upbeat. The US unemployment rate fell back from 4.8% to 4.7% in February, slightly below the Fed median estimate for full employment […]

Early rate hike means change in our U.S. rates scenario

As we don’t expect any big negative surprise in the February employment report (to be released on Friday), the probability of a hike next week has risen sharply. We are therefore changing our forecasts for Fed rates this year. Our main scenario is now that the Fed will first hike in March, instead of June. […]

Trump’s fiscal stimulus package may well be delayed

In his first speech to Congress yesterday, President Trump sounded more presidential but was short of specifics on many of his main policy proposals. He once again complained that US companies are facing higher barriers than their foreign counterparts, but didn’t elaborate on how specifically he intended to remedy this situation. Most notably, there was […]

Solid U.S. retail sales follow Fed’s upbeat economic assessment

Core retail sales in the US rose by a solid 0.4% m-o-m in January, above consensus expectations. Moreover, December’s figure was revised up. The result was that between Q4 and January, core retail sales grew by a robust 4.2% annualised. We forecast that consumer spending will grow by around 2.2% q-o-q annualised in Q1, after […]

US inflation still low at end-2016, our forecast unchanged for 2017

Core PCE inflation in the US settled at 1.7% y-o-y in December, in line with consensus and exactly the same rate as in February 2016. We continue to believe that PCE core inflation will pick up only modestly in 2017, ending the year at around 2.1%. Following a significant pick-up between October 2015 and February […]

US GDP picked up in 2H 2016; outlook for 2017 unchanged

US GDP growth decelerated from 3.5% in Q3 to 1.9% quarter-on-quarter annualised in Q4, below consensus expectations of 2.2%. However, this soft reading was mainly due to a reversal of the surge in soybean exports in the previous quarter, while growth in final domestic demand picked up from 2.1% in Q3 to 2.5% in Q4. […]

Fed revises rate projections higher: ours remain unchanged

The decision by the Fed this week to raise the Fed funds rate target range by 25bp to 0.5%-0.75% was widely expected. More surprisingly for the market was certainly the upward revisions in the (in)famous ‘dot plot’. The Federal Open Market Committee’s (FOMC) median forecast for Fed funds rates at the end of 2017 was […]

Healthy U.S. jobs report points to early rate hike

US non-farm payroll employment rose by a healthy 178,000 month-on-month (m-o-m) in November, in line with consensus expectations. Unexpectedly, the US unemployment rate fell further in November, to 4.6% from 4.9% in October, reaching its lowest level in more than nine years. At 4.6%, the US unemployment rate is now below the median rate of […]

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