After decades of growing trade and current account imbalances in the United States, the new administration has set out to change this equation with nothing less than a rebalancing of the global economy. Today, a new mercantilism, rooted in tariffs and trade protection, is emerging. We define ... READ MORE >
Economics
The decline in January retail sales is less concerning than it might seem
A combination of factors—including the holiday hangover, seasonal noise, wildfires and severe cold weather—contributed to the downside surprise in retail sales in January. Sales fell by 0.9% on the month with the control group—which feeds into GDP—falling by 0.8%. Even though the data was reported ... READ MORE >
Market minute: Clash of the titans to cause further currency manipulation
Trade War 2.0 between China and the United States will stimulate further currency manipulation out of China to partially offset the 10% tariffs on Chinese goods imposed by the new administration. Now, with China imposing $14 billion on trade taxes on goods, it is likely that a series of tit-for-tat ... READ MORE >
Producer inflation topped forecasts in January, led by food and energy prices
The producer price index (PPI) rose by 0.4% in January, following an upwardly revised 0.5% increase in December, making it the hottest two-month stretch of inflation since February last year. The main drivers were food and energy prices, which rose by 1.1% and 1.7%, respectively. Excluding those ... READ MORE >
Market minute: Money markets signal an easing in 10-year yields
A look at the spread between the two-year and 10-year U.S. Treasury yields in comparison with the Treasury term premium implies room for further easing in long-term yields. Our forecast calls for the 10-year yield to average 4.5% this year, trading between 4.3% and 4.7% and testing 5%. Through Feb. 10, ... READ MORE >
Inflation accelerates in January amid concerns about rising expectations
Strong aggregate demand driven by job gains and rising real wages that in turn supported robust demand for services, rents and energy resulted in a 0.5% increase in the top-line consumer price index in January and a 0.4% advance in core inflation. A year-ago basis, the index increased by 3% and core ... READ MORE >
Market minute: The problem of sticky and stubborn inflation
The consumer price index for January, which will be released this morning, will most likely reaffirm that service sector inflation remains sticky and stubborn amid strong job and wage gains that are the primary drivers of aggregate demand. While housing inflation is easing, owners’ equivalent rent ... READ MORE >
Market minute: Foreign purchases of U.S. Treasury issuance
This week the federal government will issue $366 billion in debt, much of which will be purchased by foreign investors. The combination of growth and interest rate differentials, as well as rapidly changing fiscal and trade policies that favor a stronger dollar and the purchase of dollar-denominated ... READ MORE >
NIH adopts new policy for funding research
The National Institutes of Health's announcement that it would slash funding that covers overhead costs in research to a 15% maximum poses a grave risk to basic medical research in the United States. This policy, effective immediately, puts at risk public and private organizations engaged in pioneering ... READ MORE >
Morning market minute: Inflation expectations at risk
Well-anchored inflation expectations, based on the Federal Reserve's credibility over the past five decades, played a large part in the central bank surviving the great price and interest rate shocks of 2021. But given the considerable policy uncertainty caused by the return of global trade ... READ MORE >