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13 Apr 2015
US economic expansion remains intact – BBH
FXStreet (Barcelona) - The Brown Brothers Harriman Team preview the key drivers in this week likely to impact the USD, noting that the economic data due out in the coming days will likely reinforce the belief that another weak Q1 was a bit of a fluke, with weather, the port strikes, and payback from a surge in consumption in Q4 slowing activity.
Key Quotes
“The US economic expansion remains intact. We expect the Beige Book prepared for the upcoming FOMC meeting to provide anecdotal evidence that economic activity is strengthening.”
“Retail sales fell three consecutive months through February, but likely bounced back with a vengeance. We already know that auto sales were strong. An early Easter and a seasonally adjusted gasoline prices can combine for a strong report. The GDP component (excludes autos, gasoline and building materials) has not posted a gain since last November. It is expected to have risen by at least 0.5% in March.”
“The Fed's preferred inflation measure, core PCE deflator, is not being reported this week but its close cousin, core CPI, will come out Friday. The small month-over-month rise in both the core and the headline will likely only be enough to keep the year-over-year readings steady at 1.7% and 0% respectively.”
“The view of numerous officials, including the leadership at the Federal Reserve, is influenced by ideas that over time the tightness of the labor market will boost the general price level (inflation). That means that as long as the labor market continues to improve, higher measured core inflation is not necessary to reach a consensus on lift-off. However, a decline in core inflation would not be particularly helpful in this context.”
“Manufacturing output has also been soft, declining in the three months through February. It should bounce back in March, even if industrial output as a whole is weak.”
“Similarly, US housing starts have begun Q1 poorly. The flat January reading was followed by a sharp 17% decline in February. Expect the thaw in March to have helped fuel recoup the loss almost in full. Softness in permits, however, warns that housing is still likely to disappoint.”
Key Quotes
“The US economic expansion remains intact. We expect the Beige Book prepared for the upcoming FOMC meeting to provide anecdotal evidence that economic activity is strengthening.”
“Retail sales fell three consecutive months through February, but likely bounced back with a vengeance. We already know that auto sales were strong. An early Easter and a seasonally adjusted gasoline prices can combine for a strong report. The GDP component (excludes autos, gasoline and building materials) has not posted a gain since last November. It is expected to have risen by at least 0.5% in March.”
“The Fed's preferred inflation measure, core PCE deflator, is not being reported this week but its close cousin, core CPI, will come out Friday. The small month-over-month rise in both the core and the headline will likely only be enough to keep the year-over-year readings steady at 1.7% and 0% respectively.”
“The view of numerous officials, including the leadership at the Federal Reserve, is influenced by ideas that over time the tightness of the labor market will boost the general price level (inflation). That means that as long as the labor market continues to improve, higher measured core inflation is not necessary to reach a consensus on lift-off. However, a decline in core inflation would not be particularly helpful in this context.”
“Manufacturing output has also been soft, declining in the three months through February. It should bounce back in March, even if industrial output as a whole is weak.”
“Similarly, US housing starts have begun Q1 poorly. The flat January reading was followed by a sharp 17% decline in February. Expect the thaw in March to have helped fuel recoup the loss almost in full. Softness in permits, however, warns that housing is still likely to disappoint.”