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Eco Pulse

United States: not really worse, nor really better

24/03/2023 • By Hélène BAUDCHON

In February, the evolution of business climate survey data was positive. On the other hand, consumer confidence surveys have moved in opposite direction:

Eco Week

Monetary policy’s long and variable lags: the case of the US

14/03/2023 • By William DE VIJLDER

The Federal Reserve’s Senior Loan Officer Opinion Survey sheds light on how changes in monetary policy influence banks’ credit standards and expected loan demand. Based on the historical relationships, the latest survey points towards a high likelihood of average negative growth of the volume of company and household investments over the next several quarters. Moreover, recent research shows that since 2009, the maximum impact of monetary policy on inflation may be reached more quickly [...]

Eco Pulse

United States: A landing? What landing?

24/02/2023 • By Hélène BAUDCHON

Signs from the ISM business climate surveys were contrasting in January, with a further decline in the manufacturing sector index, going deeper into the contraction zone at 47.4, while the non-manufacturing sector made a strong rebound to 55.2, cancelling out almost its entire December fall.

Eco Week

US: "It ain't over till it's over"

20/02/2023 • By William DE VIJLDER

In the US, it seems that the expansion phase of the business cycle, the period of elevated inflation, the monetary tightening cycle and the ‘risk-on’ mindset in markets are all far from over. Ongoing relatively strong growth increases the risk that inflation would stop declining. Market commentators have started referring to such an outcome as the ‘no landing’ scenario. However, judging by the latest data, a ‘delayed landing’ seems the more likely one [...]

Charts of the Week

Disinflation: it is a matter of scale

15/02/2023 • By Hélène BAUDCHON

While goods disinflation is expected to increase, or even turn into deflation in the coming months, services inflation is expected to show more inertia (due in particular to the shelter component), slowing the overall decline in inflation.

Eco Week

United States: Do a high vacancy rate and labour hoarding imply slow disinflation?

13/02/2023 • By William DE VIJLDER

In the US, the ratio between the job openings rate and the unemployment rate remains very elevated. It is one sign amongst many of a very tight labour market. As growth slows down, this ratio should decline. Historically, this has been accompanied by slower wage growth [...]

Eco Flash

Slowdown in the labour market and recession

10/02/2023 • By Félix BERTE

While the US labour market has been very tight since the 2021 economic recovery, first signs of a slowdown are emerging. The extent of this slowdown will be key to ensuring the expected disinflation and the gradual return to price stability.

Eco Week

United States: GDP growth, good on the surface but with negative undercurrents

30/01/2023 • By William DE VIJLDER

On an annualised basis, US GDP increased 2.9% in the fourth quarter compared to the third. This healthy increase implies only a mild quarterly slowdown. The result was also better than the consensus expectation. However, a detailed analysis shows causes for concern. About half of the increase in GDP reflects inventory rebuilding, although this comes after a negative contribution in the previous two quarters [...]

Eco Pulse

United States: Resilience

27/01/2023 • By Félix BERTE

According to January’s Beige Book published by the Federal Reserve (Fed), economic activity has remained relatively unchanged in all 12 districts since the previous report. However, activity is slowing in the manufacturing sector, despite the mitigation of disruptions in the supply chain. The decline in net real disposable income, combined with higher borrowing costs, is expected to moderate future consumer spending.

Charts of the Week

United States: the Fed’s discount window now more attractive for smaller banks

25/01/2023 • By Céline CHOULET

The drawdowns of depository institutions from the US Federal Reserve’s (Fed) discount window have intensified over the past year. Their outstandings amounted to USD 4.6 bn on 18 January, certainly far from the USD 110 billion borrowed at the height of the 2008 financial crisis, but well above the USD 360 million borrowed on average for 15 years.

Eco Week

US: job creation and the unemployment rate

23/01/2023 • By William DE VIJLDER

The state of the labour market occupies a central role in the analysis of the business cycle. Historically, the percentage of months over the past 12 months with nonfarm payrolls below the 200K threshold increases in the run-up to a recession. Today, this indicator stands at 0 percent. Although there have been many false signals, a significant increase in this percentage calls for vigilance, necessitating closer monitoring of other data as well to assess the risk of recession [...]

Eco Conjoncture

United States: Will the Fed’s QT2 balance sheet reduction programme last the course?

21/01/2023 • By Céline CHOULET

In June 2022, the US Federal Reserve kick-started a programme to reduce the size of its balance sheet (QT2). However, banking regulations could hinder its ambitions. The first quantitative tightening (QT1) programme, which was launched by the Fed in October 2017, had already been curtailed early due to the liquidity requirements imposed on banks. Balance sheet constraints could in turn bring QT2 to an early end [...]

Eco Week

US: leading indicators, the labour market and the recession narrative

15/01/2023 • By William DE VIJLDER

Despite the ongoing good pace of job creation and slower wage increases, which through its impact on inflation could influence future Fed policy, there is enough ambiguity in the recent data to fuel the debate on whether the US will end up in recession or not. The survey of professional forecasters points towards heightened recession risk and so do the inversion of the yield curve and the downtrend of the Conference Board’s index of leading economic indicators [...]

Eco Perspectives

United States: a recession lies ahead

15/12/2022 • By Félix BERTE

US growth recovered significantly during Q3, but is expected to slow down during Q4 according to our forecasts. The labour market is still tight, but early signs of a slowdown are emerging. Headline inflation appears to have peaked, but core disinflation remains to be confirmed, which would forced the Federal Reserve (Fed) to continue its monetary policy tightening, even if it means pushing the economy into a recession in 2023 [...]

EcoTV Week

US disinflation: surely, but slowly

15/12/2022 • By William DE VIJLDER

The latest inflation data in the US were greeted by financial markets because inflation declined more than expected. However, upon closer inspection, the picture is mixed. On the one hand, there is mounting evidence of disinflation (easing of input price pressures, shorter delivery times, decline of goods price inflation) but on the other hand food inflation remains high and shelter is a major contributor to inflation. Prices in certain services rise at a fast pace due to rising wage costs. On balance, this implies that the Federal Reserve will continue to hike its policy rate in the near term and will keep a firm tone thereafter. It will be in no hurry at all to start easing. For that we will have to wait until 2024.

Eco Week

United States: Will US GDP grow in Q4?

05/12/2022 • By Félix BERTE

According to the latest estimate by the Atlanta Federal Reserve (GDPnow) on 1st December, quarterly annualised growth in US GDP could be 2.8% in Q4 2022, which would be hardly different from the Q3 performance (+2.9% q/q), but well above the first two quarters (-1.6% in Q1 and -0.6% in Q2). This latest estimate strengthens the idea that the US economy is resilient and is not expected to enter a recession in 2022.

EcoTV Week

United States: Expanding US federal debt will require raising more foreign capital

01/12/2022 • By Céline CHOULET

For the past 10 years the attractiveness of US Treasuries for foreign investors has been in decline. In the light of official projections that the US federal debt will almost double over the next ten years, strengthening their appetite appears paramount.