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US: Growth may be slowing - BBH

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 5, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at BBH, suggests that some soft data has the Atlanta Fed GDPNow tracker indicating that growth may be slowing to 1.3% before Christmas compared with 1.9% in the middle of December.

    Key Quotes

    “The market does not appear convinced that the Fed will hike rates again in March. The implied yield on the March Fed funds futures contract is 43 bp. Fed funds effective average in December was 20 bp through December (not the nearly 25 bp Bloomberg WIRP page had assumed) and has not averaged the middle of the 25-50 bp range even once since the rate hike.

    A favorable monthly jobs report on January 8 would encourage participants to take more seriously the prospect of a hike at the mid-March FOMC meeting. Although monthly nonfarm payrolls growth may slow over the course of the year, the pace may be sufficient for additional declines in unemployment measures. The consensus anticipates 200k net new jobs in December. If true, it would be the third consecutive increases of 200k or more after soft reports in August and September.

    Investors will be particularly sensitive to wage growth. The Federal Reserve appears to be putting much stock in the idea that a tighter labor market will push wages up, and this will lift core inflation over time. The year-over-year pace of average hourly earnings may accelerate to 2.8% in December from 2.3% in November. This is largely a function of the base effect. The January comparison is more difficult, and the year-over-year pace should revert to the mean. That said, some 14 states and several cities hiked the minimum wage as of January 1.

    Lastly, we note that December appears to have been the fourth consecutive month that US vehicle sales reached an 18 mln unit annualized pace. Cheap financing, 2.3 mln new jobs created through November, and low gasoline prices facilitated what appears to have been a record sales year.”
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