- 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
- June's muted core PCE deflator likely will be followed by sustained benign readings.
- Consumption will slow further, as the labor market weakens and the savings rate creeps up.
- July's regional Fed services surveys also support the case for a rapid easing of monetary policy.
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
- Interest rate rules monitored by the FOMC suggest rates should already have been reduced to 4%.
- Policy rules are sensitive to the assumed neutral rate, but also to unemployment, which will rise further.
- The latest readings for a raft of leading indicators suggest that lower housing inflation is here to stay.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Equipment investment likely leapt by about 7% in Q2, driven by surging transport and computer spending...
- ...But these components are volatile; high borrowing costs will weigh on capex unrelated to the AI boom.
- The jump in jobless claims was due to auto plant closures and Hurricane Beryl, but the trend is rising too.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The manufacturing downturn is over, but growth in output in the second half of this year will be sluggish.
- High mortgage rates and excess new home inventory suggest single-family housing starts will fall further.
- We look today for a pick-up in initial jobless claims, but the data are prone to unpredictable swings in July.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The jump in core retail sales in June has the hallmarks of a weather-related blip; expect a pullback in July.
- We expect partial recoveries in June housing starts and building permits, but a poor outturn for Q2 overall.
- Manufacturing output likely grew briskly in both June and Q2, but the recovery will slow in Q3.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Our Homebase model points to a 200K rise in private payrolls, but its errors in prior Julys have been big...
- ...So we will place more weight this time on the NFIB, S&P Global, ISM and regional Fed business surveys.
- Headline retail sales probably fell in June, due to a slump in sales of autos and gasoline.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- The June core PCE deflator likely undershot the Fed’s implied forecast pace for a second straight month.
- The jump in PPI trade services looks like noise; margins likely will come under renewed pressure in Q3.
- People expect higher unemployment and lower inflation; the Fed needs to ease, soon.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Plunging airline fares flattered June’s tiny rise in the core CPI, but most services prices were subdued too.
- CPI data and our PPI forecasts map to a 0.17% rise in the core PCE deflator, but our estimate will shift today.
- The Michigan consumer sentiment index probably rose slightly in July, lifted by a surging stock market.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Auto insurance prices likely rebounded in June, driving a 0.3% increase in the core CPI...
- ...But we look for chunky falls in vehicle prices and a modest increase in core-core services prices.
- We look for a rise in jobless claims today, as auto plant and school closures overwhelm the seasonals.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Mr. Powell still wants more good inflation data, but the tiring job market is gaining more of his attention.
- The NFIB survey ticked up in June, but pressure on the economy from high rates remains intense.
- The pick-up in Redbook sales almost certainly overstates current momentum in consumers’ spending.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Job gains are no longer “strong”; Powell might signal rates will be cut swiftly if the slowdown continues.
- Consumers are increasingly worried about losing their jobs, and for good reason.
- NFIB survey likely to suggest that small businesses remain under pressure from high rates.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Private payroll growth slowed sharply in Q2; revisions could easily worsen the picture.
- Tight monetary policy is the primary cause; employment growth will slow further in Q3.
- Wage growth now is consistent with the 2% inflation target; the Fed will ease multiple times in H2.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- We’re sticking with our forecast that payrolls rose by 160K in June, below the 190K consensus.
- The unemployment rate likely was unchanged at 4.0%, but large sampling error creates uncertainty.
- Neither the ISM or S&P services PMI is clearly better than the other; the truth likely lies between the two.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
- Chair Powell sounds more optimistic on inflation, but wants to see no further rise in unemployment.
- We expect initial claims above the consensus for the fifth time in six weeks; summer data will be volatile.
- The June ISM services survey will probably provide further signs of disinflation ahead.
Ian Shepherdson (Chief Economist, Chairman and Founder)US
