Richard Leong contributed to this post
U.S.durable goods orders rebounded a solid 9.9 percent in September following the prior month’s plunge. However, a proxy for business investment was essentially stuck in neutral. This was sufficiently worrying to JP Morgan economists to force them to revise down their estimates for third quarter U.S. economic growth down to 1.6 percent from 1.8 percent. Barclays economists also marked down their Q3 GDP forecast by 0.2 percentage point, putting it at 1.8 percent. The Reuters consensus forecast for the number, due out on Friday, is 1.9 percent.
JP Morgan economist Mike Feroli:
Don’t let the headline fool you: the September durables report was a big disappointment. In particular, the weakness in the capital goods figures leaves intact our concerns regarding the capex outlook. In light of today’s report we are revising down our expectations for tomorrow’s 3Q GDP report from 1.8% to 1.6%. We continue to look for 2.0% growth in 4Q, though there is now some downside risk to our business investment projection for next quarter. […]
WASHINGTON (Reuters) – The Federal Reserve on Wednesday stuck to its plan to keep stimulating the U.S. economy until the job market improves and repeated its vow to keep rates near zero until mid-2015.
In a policy statement after a two-day meeting, the central bank acknowledged hints of strength in the U.S. housing market, but reiterated a pledge to continue supporting growth even as the recovery picks up.
The Federal Reserve’s open-ended bond-buying stimulus announced last month was coupled with a promise to continue purchasing assets “if the outlook for the labor market does not improve substantially.” Central bank officials are expected to continue discussing what parameters they will take into account to define such progress, but are not expected to come to any hard and fast decisions just yet.
In a research note entitled “What the Fed didn’t say: Payrolls at 160K,” Torsten Slok, economist at Deutsche Bank, offers a few guideposts:
WASHINGTON (Reuters) – The U.S. Federal Reserve appears intent to stick to its bond-buying stimulus on Wednesday, having already indicated it would take more than a modest show of economic strength for policymakers to begin taking their foot off the gas.
The Fed unveiled a third round of bond purchases last month to try to rev up a sluggish economic recovery despite a looming presidential election that some thought might deter action.
Just how scarce is potable water on this Earth? We learn in school that more than two-thirds of the planet is covered in water. But that figure is deceptive because it refers to just surface area, and describes only the total quantity of undrinkable salt-water.
The truth about just how little water we have to go around is just about crystal clear in this graphic from the U.S. Geological Survey, courtesy of my wife’s father Raj Bhattarai, regulatory manager of the Austin, Texas water utility.
The term ‘fiscal cliff’ has now safely transitioned from economic jargon to popular cliché. But how worried should Americans be about the growth-stunting mélange of expiring tax cuts and spending reductions set to begin kicking in at the start of next year?
Economists widely believe that if Congress fails to come to some sort of agreement on the budget, the U.S. economy would plunge into a deep recession. RBS economist Michelle Girard, however, thinks a recent pick up in U.S. economic activity could offset some of the cliff-related weakness.
Federal Reserve officials have been worried that their policy of ultra-low interest rates may be having less of an effect than usual because of a “broken transmission channel.” In plain English, this means the money hasn’t really been flowing smoothly from liquidity-flooded banks to would-be borrowers.
Economists at TD Securities argue banks have passed on less than half of their lower funding rates as reflected in yields on mortgage-backed securities onto consumers.
During a Q&A at the Brookings Institution last week, former Fed Vice Chairman Donald Kohn asked new board member Jeremy Stein, formerly a Harvard professor, about the impression that the Fed’s quantitative easing was only helping wealthy people who benefit most from rising stocks.
“How do you deal with this sense that the effects of policy aren’t being equitably felt in all parts of society,” asked Kohn, who worked at the Fed for four decades before stepping down in 2010, and is now a Brookings Fellow.
ROANOKE, Virginia (Reuters) – The Federal Reserve’s latest monetary stimulus risks unwanted inflation and will not do much for economic growth, Richmond Fed President Jeffrey Lacker said on Monday.
Lacker, an inflation hawk who has dissented at every policy meeting this year, said a troubled U.S. labor market was being dampened by factors outside the control of Fed officials.
WASHINGTON (Reuters) – Federal Reserve Chairman Ben Bernanke on Sunday denied the U.S. central bank’s highly stimulative monetary policy hurts emerging economies, saying stronger growth in the United States bolsters global prospects as well.
Bernanke has often defended Fed actions against domestic critics, who argue the policy of keeping interest rates near zero while ramping up asset purchases hurts savers and risks future inflation.