Ian Shepherdson
Ian Shepherdson
Ian Shepherdson is an award-winning British economist. He is the founder and Chief Economist of Pantheon Macroeconomics, an economic research firm located in Newcastle, England, with an office in White Plains, New York. In February 2015, he was named The Wall Street Journal's US economic forecaster of the year for the second time, having previously won the award in 2003...
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The key point is that the deficit is being easily financed.
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The key number in this report, in our view, is the rise in the supply of homes for sale. There are now 14.4 percent more homes for sale than a year ago, while actual sales are up just 3.3 percent. With mortgage demand slipping a bit and supply rising, price gains cannot continue at their current pace.
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If February is broadly similar, a March 28 rate hike is assured. The May meeting's risk is rising.
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The headline was pulled down by slightly bigger declines in gasoline, natural gas and fuel oil prices than we expected. Core PPI is now up just 1.7% year over year, down from May's 2.8% peak. It will slow further in the wake of the slowing in raw-materials prices, but the Fed cares much more about the labor market than PPI.
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The headline reflects a 3.2 percent rise in gasoline prices. Natural gas and electricity prices were also much stronger than the PPI suggested. The good news is the 0.1 percent core, which supports the Fed's view that transitory factors have boosted inflation in recent months.
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The headline is all about Boeing, which reported 200 new aircraft orders in May, up from 14 in April. Unusually, it seems that nearly all these orders have hit the official data immediately. Apart from this, however, these are soft data. Ex-transportation orders fell 0.2% and there was a downward revision to April, now put at -0.7%.
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The impact of the hurricanes is now clearly diminishing,
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The improvement in the stock market is allowing the hugely favorable monetary and fiscal environment to do its work -- just as it was in the spring before the stock market melted down,
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The details are not as important as the overall message, which is that to the extent that the U.S. economy faces an inflation threat, it is not coming from core goods prices.
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The details are close to our expectations, though consumers' spending, up 5.5%, was a bit stronger than we expected. Overall, solid domestic final demand, but the second quarter will be much weaker.
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The January revision is mostly due to the plunge in aircraft orders reported in the durable-goods numbers. In February, the index was pulled down by lower consumer confidence, higher jobless claims, shorter delivery times and lower building permits.
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The Chicago survey is very susceptible to changes in conditions in the auto industry, where activity has been very volatile in recent months.
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The Chicago PMI has been very volatile over the past couple of years, probably as a result of the tribulations of the auto industry. As a result it has become a less reliable indicator of movements in the national ISM and the January dip does not necessarily mean the ISM will follow suit.
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(The GDP and inflation data) won't prevent modest further easing,