US: Good start of the year for the economy – BMO CM
|Sal Guatieri, Senior Economist at BMO Capital Markets, notes that the January numbers for the U.S. economy are mostly in, and the prognosis is good.
Key Quotes
“Unlike last year’s early stumble which foreshadowed a slowdown for the year, the economy is showing some pep early this year. In previous weeks, we saw the best payrolls gain in four months in January, a fifth straight increase in the ISM manufacturing index, and a near 16-month high for the non-manufacturing measure. And this week, the data were solid once again, provided you look below the surface of a few soft headline prints.”
“The post-election jump in confidence among businesses, homebuilders and households has translated into a decent bump in production, construction and spending. In fact, the NFIB small business index hit fresh 12-year highs last month, as more firms planned to increase output and staff, and a near-record number expect the economy to improve—a level of optimism often reserved for recoveries rather than late-cycle expansions. After slowing last year, hiring by small firms is poised to pick up. The ISM’s rising trend was supported by a solid advance in factory production in January, led by a recent pickup in business equipment—and February could be even better as the Empire State and Philly Fed measures popped to 2½-year and 33-year highs. Although a pullback in volatile condos chopped housing starts in January, rising singles and permits suggest hammers will continue to swing in coming months. In fact, the number of units under construction (a much smoother series than starts) hit post-recession highs. The housing market should support the expansion for a seventh straight year, even as mortgage rates creep higher. Last, but not least, the biggest increase in “core” retail sales in nine months (and the sixth in a row) suggests consumers have plenty of gas left in the tank. They might be paying more for gas now than a year ago, but record-high inventories look to cap prices for a while.”
“Bottom Line: The U.S. economy is off to a good start this year, led by robust consumer spending, vibrant housing markets, and a long-awaited upturn in business spending. It’s on track for 2½% growth, even before the fiscal stimulus door swings open.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.