Economic Commentaries

Entries for July 2018

10

In recent Commentaries we pointed to trending weakness in economic data reports as denting global growth prospects and turning attention back toward a U.S. centric one. A strengthening dollar exchange rate, on again off again trade issues, and weak European data reports were all in play over the past few weeks.

Meanwhile, domestic economic indicators point toward a resumption of economic momentum. ISM activity reports for May recouped lost ground from recent months while remaining below levels of late last year. The important orders/inventory mix widened to double digits for the first time this year. And the labor market posted a solid gain for May across almost all industry groups.

For us the implication is that QII GDP is on track for roughly 3.5% growth in the spring quarter with little inflation pressure. Commodity prices have come off the boil. Slow growth in aggregate hours suggests a solid productivity performance while wage growth continues in a 2.5% to 3% range. And importantly since it is key to forming inflation expectations, oil prices have eased since the administration's announced abandonment of the Iran nuclear agreement.

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