- 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
- The only question for September is the size of the Fed move; we still expect 25bp, but hope for 50.
- The downward revision to March payrolls is big, but this tells us very little about the near-term outlook.
- Existing home sales probably bounced in July, but are unlikely to climb much further in Q3.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Leading indicators suggest that the upturn in initial claims in recent months is petering out.
- But the slowdown in employment growth will likely continue, as companies continue to reduce hiring.
- Benchmark payroll revisions are unforecastable, but have been small in recent years.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Our Homebase model points to a 250K jump in August private payrolls, which looks implausible.
- Other labor market indicators are far less upbeat; we have pencilled in an increase of 125K.
- We expect a meagre rise in government payrolls this month, and see a sharp slowdown ahead.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- July’s drop in single-family starts was concentrated in the South, probably a hit from Hurricane Beryl...
- ..Still, the overhang of new home inventory points to a downturn in residential construction.
- Consumers’ confidence has picked up despite the stock market dip, pointing to solid spending growth.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Retail sales were strong in July, but weak consumer fundamentals still point to a slowdown ahead.
- The fall in initial claims distracts from the slowly rising trend; expect higher prints ahead.
- We think housing starts dipped in July, as rising inventory drove a drop in single-family construction.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The July CPI and PPI data collectively point to a mere 0.13% increase in the core PCE deflator...
- ...But seasonal adjustment now might be flattering the data; the dip in CPI hospital prices will unwind.
- We look today for a fall in July manufacturing output and a slight increase in initial jobless claims.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- PCE-relevant components of the PPI collectively rose in July at the slowest rate for 11 months.
- Hospital services prices will rebound soon, but core goods prices will drop as retailers’ margins contract.
- We look for a weak July retail sales report Thursday, with the control measure falling by 0.3%.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- July PPI data likely to reverse to June’s jump in retailers’ gross margins; a profit squeeze lies ahead.
- The NFIB survey likely will show small firms remain under intense pressure from high interest rates.
- Inflation expectations are trending down, but the plunge in the NY Fed’s three-year measure is noise.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The first estimate of GDP growth was positive at the start of the last three normal recessions...
- ...Payrolls provided a much better near-real time guide; they are not flashing bright red, for now.
- Initial claims still point to a resilient economy, but a run of higher prints this autumn remains likely.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We look for a decline in initial claims to 235K, from 249K, as the boost from Hurricane Beryl wears off...
- ...The trend in initial claims is rising, but daily Homebase employment data present no cause for panic.
- The latest plunge in Treasury yields likely will support housing market activity only marginally.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- A 5% stock price fall usually knocks confidence enough to lower real consumer spending growth by about 0.5pp.
- Associated falls in interest rates will do less than usual to bolster confidence, as households are less indebted.
- Bank lending standards are now tightening at a slower pace, but they remain very restrictive.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Economic and market conditions usually have been worse than now to trigger an emergency Fed meeting...
- ...But rates are far above neutral and the next meeting is six weeks out; Mr. Powell will act if markets deteriorate.
- July’s ISM services survey kept recession fears at bay, but it still strongly supports the case for Fed easing.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Homebase data are less useful than usual in July, but business surveys point to sluggish growth in payrolls.
- We see an even chance of the Sahm rule being triggered and expect a below-trend 0.2% increase in AHE.
- Growth in unit labor costs has slowed to well below 2%, pointing to further falls in core inflation ahead.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Chair Powell says a September easing “could be on the table”, now that labor market risks loom larger.
- Growth in employment costs slowed in Q2, and a further softening in wage growth ahead looks likely.
- The July ISM survey probably will show manufacturing is still treading water; claims are a wildcard today.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The FOMC likely will say inflation progress has been better than “modest” and highlight labor market risks.
- A September easing remains very likely; further easing this year is probable, but won’t be signalled strongly yet.
- We expect a below-consensus increase of 0.8% in the ECI in Q2, supporting our dovish Fed view.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The low personal saving rate stems from low unemployment and recent rapid growth in asset prices.
- The saving rate will likely rise over the next year as unemployment rises and stock price growth slows.
- Consumer confidence probably ticked up in July, but from a level consistent with soft consumption growth.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We think GDP grew by 2.2% in Q2, but we expect a weaker second half as consumption softens.
- A 2.7% rise in the core PCE deflator should reassure the Fed that the 3.7% spike in Q1 was a blip.
- The further uptick in the S&P Global Composite PMI probably overstates the economy's strength.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Q2 GDP likely rose at a faster rate than in Q1 but well below the rapid growth seen in 2023.
- A further slowdown lies ahead, as high interest rates bite harder and the personal saving rate normalizes.
- The earlier release of advance trade and inventories data should make GDP forecasts more accurate.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- All bets are off for November, so it makes little sense to change macro forecasts at this point.
- The further fall in pending home sales in May points to a steep decline in existing home sales in June.
- We expect a weaker labor market and ongoing lack of supply to mean sales remain subdued for some time.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
