US: Economic performance stabilizing - AmpGFX

While in the last few weeks the market may have been focusing on the shifting tone of the Fed and political uncertainty, activity indicators in the US suggest that the economy may have stabilized and growing sufficiently to keep tightening the labor market, according to Greg Gibbs, Analyst at Amplifying Global FX Capital.

Key Quotes

“The Citibank USA Economic Surprise Index has recovered from a near record low -79% in June to -44%; as more recent data points meet or exceed expectations, ending the consistent underwhelming trend in much of the first half of the year.”

“More recent manufacturing surveys have stabilised or firmed.  Durable goods orders released on Thursday show an improving growth trend.”

“The US economy remains closer to full-employment than most other economies, and this yet may prove to raise the inflation outlook over coming months.  Obviously how wages evolves remains a key piece to the puzzle.”

“Financial conditions have eased further

A factor that may also keep the Fed pushing cautiously ahead with rate rises is easing financial conditions.  This was a key consideration in the June FOMC decision to ignore low inflation and push on with rate hikes.  Financial conditions have eased further since then. As such, arguably monetary conditions have not been tightened much, despite the rate rises in the last year.”