The RSM US Manufacturing Index implies improvement in national manufacturing sentiment in February, and we expect a similar uptick in the February ISM survey of manufacturing sentiment next month. However, February may be the last month before the coronavirus takes its toll on the global supply chain; at the same time, the Boeing shutdown will adversely impact the domestic supply chain throughout the first quarter of the year–the impact is expected to show up in both hard and soft data. … READ MORE >
Economics
Negative yields increase as global coronavirus risk proliferates
With the outbreak of Covid-19 in China in late December, a global safe haven move by investors started in earnest around Jan. 14; as a result, negative-yielding debt has jumped back to $13.96 trillion as of Feb. 26, writes RSM US Chief Economist Joe Brusuelas. … READ MORE >
Canary in a coal mine: What money market spreads tell us about risk
The recent upset in financial markets has caused a move in sensitive risk spreads implying potential credit market challenges should the crisis spread into the real economy. … READ MORE >
How the Fed responds to economic downturns
Since the 1970s, the Federal Reserve has relied on manipulating expectations of short-term interest rates through cuts in its overnight policy rate in response to economic and manufacturing slowdowns. … READ MORE >
As coronavirus spreads, what are the fiscal and monetary policy options?
Investors over the past few days have priced in three 25 basis-point cuts in the federal funds rate by the end of the year, with the first cut implied by the markets coming in June. This is somewhat misguided, given the nature of the global public health emergency that is … … READ MORE >
Seaports grow quiet amid trade tensions and the coronavirus outbreak
While commercial activity as measured by the comings and goings of shipping containers at the Los Angeles/Long Beach seaport has been dropping since the onset of the U.S. trade war, it is now threatened by a health crisis as the coronavirus spreads out of Asia. … READ MORE >
The new tech economy is all about location, location, location
Economic output in the United States is increasingly revealing a geographic divide, with a greater share of gross domestic product being concentrated in the nation’s largest metropolitan areas. … READ MORE >
U.S. GDP grew an estimated 1.5% in January; household consumption expected to be strongest segment in Q1
The United States’ gross domestic product grew an estimated 1.5% in January, according to RSM’s Monthly Index of Economic Activity. That bump followed GDP growth of 2.3% in the fourth quarter of 2019. We forecast a 1% GDP growth rate with downside risk for the first quarter of the year, … … READ MORE >
Estimating the probability of a recession
Consensus estimates of the probability of a U.S. recession have receded and our analysis of monthly economic data imply that risks of a recession are negligible for the time being. … READ MORE >
Closer look at monthly jobs data shows the glass only half full
The monthly change in non-farm payrolls is closely followed by financial markets and is often the catalyst for outsized market moves. Analysis of the payroll data outside of the traditional focus on the latest monthly number shows some cracks in the decade-long recovery from the 2007-09 Great Recession, pointing to long-term issues that will likely need to be addressed by monetary and fiscal policymakers. … READ MORE >