Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
Why today's Philly Fed report is not as strong as it seems
Christopher Dembik
Head of Macro Analysis
Summary: Today's figures from the Philadelphia Federal Reserve appear bullish at first glance, but a closer examination reveals some mixed signals amidst a decidedly end-of-cycle overall tone.
We received the last update of the Philadelphia Federal Reserve’s survey for the month of January today. It covers eastern Pennsylvania, southern New Jersey and Delaware. It is a closely watched economic indicator since it tends to give the direction of the broader Chicago Fed’s National Activity Index and the ISM manufacturing reading.
At first glance, the last print is rather positive since the diffusion index of current activity is up at 17 (versus 11 expected and prior 9.4) but we need to keep in mind that the monthly release is usually quite noisy. We put more weight on its three-month average that seems to confirm the long-term downward trend. It is still getting down at 12.7, which is the lowest level since the end of 2016.
Interestingly, as you can see in the chart below, the six-month outlook is rather positive since it came in at 31.2, an increase from the previous month’s 27.9. It is clearly too early to say but there might be something to look out for if it continues to increase again next month (which is, in my view, unlikely due to the impact of the shutdown and the ongoing US economic slowdown).
On the employment side, over 22% of the responding firms reported increases in employment in January while 13% of the firms reported decreases in employment. On the cost side, the prices paid index decreased six points to 32.6, confirming it keeps trending lower. This is the worse print in the past 13 months.
Overall, the last Philly Fed report is rather mixed. It sends both positive and negative signals which is typical of an economy going into the end of the business cycle.
At first glance, the last print is rather positive since the diffusion index of current activity is up at 17 (versus 11 expected and prior 9.4) but we need to keep in mind that the monthly release is usually quite noisy. We put more weight on its three-month average that seems to confirm the long-term downward trend. It is still getting down at 12.7, which is the lowest level since the end of 2016.
Interestingly, as you can see in the chart below, the six-month outlook is rather positive since it came in at 31.2, an increase from the previous month’s 27.9. It is clearly too early to say but there might be something to look out for if it continues to increase again next month (which is, in my view, unlikely due to the impact of the shutdown and the ongoing US economic slowdown).
On the employment side, over 22% of the responding firms reported increases in employment in January while 13% of the firms reported decreases in employment. On the cost side, the prices paid index decreased six points to 32.6, confirming it keeps trending lower. This is the worse print in the past 13 months.
Overall, the last Philly Fed report is rather mixed. It sends both positive and negative signals which is typical of an economy going into the end of the business cycle.
Latest Market Insights
Quarterly Outlook
-
-
Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Chief Investment Strategist
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Chief Investment Strategist
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer