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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It is disappointing in the wake of the huge rise in the Empire State survey -- the indexes are usually at similar levels,
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Manufacturers are still miserable, and output will keep falling for some time, but they can now see light at the end of the tunnel, ... They are working off their excess inventory ... and are now hopeful of stronger orders by the year-end.
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With the fastest productivity growth and biggest drop in unit labor costs in seven years, the numbers are certainly worth shouting about, but as yet we are far from convinced that much of the improvement is structural. Mr. Greenspan is of the same view, which is why rates are going up no matter what happens to productivity growth.
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We think confidence will rebound next month, but in the meantime the odds surely now favor a Fed ease next week,
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Given the huge decline in consumer confidence, this (gain in spending) does not seem unreasonably weak, especially with consumers' real after-tax income growth slowing too.
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Given the complete absence of meaningful inflationary pressure evident in the economy now, and -- as the Fed put it, 'tentative evidence of a slowing in certain interest-rate sensitive sectors of the economy' -- we think there is very little chance that rates will rise again in the current cycle.
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Bear in mind this survey is always more volatile than the ISM, and there may be an outsized July 4 long weekend effect, too. But these are bad numbers.
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If we had any faith in the reliability of these numbers, we'd have to call them disappointing, ... But we don't, so we won't.
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If these declines were part of the normal economic cycle we would now call for a recession in the U.S., but they aren't. The index is responding to a shock, and we expect it quickly to rebound.
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If this continues, it can do real damage to core inflation, making it all the more important that the Fed succeeds in slowing the economy to ease inflation pressure.
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If this is sustained we can be more hopeful the trade deficit will not rise further,
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No doubt these numbers will be taken by the market as a clear sign of a softening housing market and, by implication, an indication that higher interest rates are biting. We are much more skeptical: housing starts lag home sales, which have been depressed in recent months more by lack of inventory than by higher interest rates.
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On the face of it these are very Fed-friendly numbers.
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Looks to us like tax rebate money is being spent, ... Retailers should have a good autumn.