Subdued core PCE inflation and slowing ECI growth green light further material Fed easing.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- PPI and CPI data collectively point to a 0.14% increase in the August core PCE deflator.
- Slowing wage growth, a margin squeeze and lower energy prices will return core inflation to 2% in Q2.
- Jobless claims have fallen since July, but hiring is dropping faster; expect even lower job growth in Q4.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Don’t panic, it's noise not signal; the core PCE probably rose by about 0.22%.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The uptick in the core CPI in August largely was due to the reversal of erratic price falls in prior months.
- We expect smaller increases in primary rent, falling services inflation and flat goods prices through Q4.
- The CPI data tentatively imply a 0.22% core PCE, but will hone our forecast after today’s PPI data.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We look for a 0.3% rise in the August core CPI, driven by rebounds in hospital charges and airline fares.
- Underlying core services inflation probably continued to decline, while goods prices likely rose weakly.
- The rebounding CPI components don’t feed into the core PCE, but the Fed still looks set to ease by 25bp.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Households plan to sustain 5% annualized nominal spending growth, despite income gains of just 3%...
- ...That requires people to slash the saving rate to a record low 1%, during a worsening labor market.
- NFIB’s headline index probably dipped in August on political news, but capex plans likely worsened too.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The trend in private payrolls has halved to just 100K in six months; NFIB data signal further slowing.
- The August dip in unemployment was due to a jump in temporary layoffs unwinding; the trend is rising.
- FOMC members Waller and Williams don’t sense the urgency; expect only a 25bp easing this month.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- August unemployment has often surprised to the upside, perhaps due to shifting seasonality…
- …But continuing claims and state-level data suggest unemployment overshot its trend in July.
- Growth in unit labor costs is now running well below 2%, pointing to weak underlying inflation.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Homebase data point to strong August payrolls, but most other indicators signal another weak print.
- Our 125K forecast for private payrolls will be unaffected by ADP’s estimate today, whatever it says.
- Q3 GDP looks set to rise at a modest 1½% rate, despite recent momentum in real consumption.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The details of the August ISM manufacturing survey are bleak, despite the uptick in the headline.
- Weakness in the manufacturing sector looks set to remain a small drag on payrolls and growth.
- The July JOLTS report will reinforce the message that the labor market is cooling.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Undershooting the Fed’s June core PCE forecast for the third straight month.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
The rising trend has flattened off; expect a run of lower numbers this fall.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The core PCE deflator undershot the Fed’s forecast yet again in July; expect more benign prints in H2.
- Recent strength in consumption lacks solid foundations; the saving rate will be higher a year from now.
- The ISM probably remained soft in August, pointing to weak growth in manufacturing employment
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The small recent rise in continuing claims suggests July’s unemployment rate was overestimated.
- We are pencilling in a 0.1pp dip in the rate to 4.2% in August, despite the worsening trend.
- The rapid 2.9% growth in consumers’ spending in Q2 looks unsustainable; expect a sharp slowdown.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We look for little change in in initial jobless claims today, and a run of lower numbers this fall…
- …Leading indicators have improved and the seasonals will help; but lower hiring will slow job gains.
- The hit to growth from the rising trade deficit will be offset by boosts from inventories and investment.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We look for a 0.13% rise in the July core PCE deflator, implying downside risk to the 0.2% consensus.
- Real consumption probably rose by 0.3% in July, setting up a strong base for growth in Q3…
- …But we expect a slowdown ahead, due to weak income growth and rising the saving rate.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Ignore the near-10% surge in headline durable goods orders in July; the details were weak…
- …Real core capital goods shipments fell by 0.5%, pointing to falling equipment investment in Q3.
- A hit to sentiment among Republicans probably weighed on overall consumer confidence in August.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Chair Powell’s Jackson Hole speech foreshadows a rapid easing of policy in the coming months.
- Headline durable goods orders likely jumped in July, but the details will be far less impressive.
- New home sales reportedly surged last month, but are unlikely to keep on climbing.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
Expect a small rise in H2 sales, but the weakening labor market will constrain activity.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Chair Powell probably will indicate at Jackson Hole that multiple rate cuts are likely this year.
- The S&P Global composite PMI has joined the raft of indicators pointing to weaker hiring.
- Existing home sales rebounded in July, but a sustained near-term recovery is unlikely.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
