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US macro scorecard - December

Daniel Richards - MENA Economist
Published Date: 01 February 2022


A round-up of the most widely followed monthly macro data points from the US, compared to expectations and the previous month's results.

Macro scorecard

Source: Bloomberg, Emirates NBD Research

While real GDP growth in the US held up well at an annualised 6.9% in Q4, the evidence is that this tailed off through the end of the period, and current trends suggest the first quarter will be weaker. The macroeconomic data that has come out over the past month has indicated an economy under pressure in December, with Covid-19, high inflation, and ongoing issues around supply chains weighing on both the consumption and output sides of the economy. With concerns around Omicron starting to fade the expectation is that some of these pressures will alleviate, but real GDP growth in 2022 is in any case expected to be softer than last year given that many of the reopening benefits have already been bagged and monetary and fiscal policy will be tighter. Consensus forecast is for growth of 3.8% this year, compared to an expansion of 5.7% in 2021.

Of the most-followed macro indicators on Bloomberg, almost all December prints showed a deterioration not only on the previous month’s reading, but also compared to consensus analyst projections, showing that the slump was worse than anticipated. One key driver of this was the rapid spread of the Omicron variant of Covid-19 through the month. New daily case numbers averaged 201,000 daily, compared to just 86,000 in November, and this weighed on both consumption and output. US consumer spending declined -0.6% m/m in December, and while some of this might be down to Americans starting their Christmas shopping early because of concerns over supply shortages, the virus was likely also a major contributing factor, along with annual CPI inflation which climbed to levels last seen in the early 1980s. The University of Michigan consumer sentiment index did pick up modestly in December but remained low compared to historical averages and the preliminary reading for January shows a deterioration once more.

The global price rises are hitting manufacturing also, as are the ongoing supply chain issues, and the macro indicators concerned with output were also largely worse in December. Industrial production declined -0.1% m/m, compared to growth of 0.7% in November, while durable goods orders contracted by -0.9%, compared to November’s 3.2% expansion. The Markit manufacturing PMI was also lower than in November, although it should be noted that at 57.7 the reading was still comfortably above the 50.0 level in expansionary territory. In a positive signal, the flash PMIs for January have indicated that some of the supply chain issues appear to be improving.

By contrast, the housing sector remained green on our scorecard as home sales continued to perform well, with new home sales hitting 811,000, from 725,000 the previous month. There was also a marked ramp-up in housing starts, but this will likely prove insufficient to remedy what is an increasingly tight market with limited supply. This, alongside rising mortgage rates as the FOMC moves towards tightening policy (Freddie Mac has said that average rates on long-term mortgages have already risen by half a percentage point to 3.5% over the past month) could see growth in home sales slow over the course of the year.

Looking at the last NFP data, the headline figure for December somewhat belies what has remained a fairly robust labour market to now, although the Omicron variant will have weighed on it over the past month as well, and expectations are for a smaller net gain again for January. The headline December figure was 199,000, missing projections of 450,000, and slower than the (upwardly revised) November gain of 249,000. However, there remain issues around reporting, as evidenced by the November revision, and the December figure could yet also be changed. Other jobs data was solid as the headline U3 unemployment figure fell to 3.9%, from 4.2% the previous month, while the prime age (25-54) participation rate was unchanged at 81.9%, not far off the pre-pandemic January 2020 level of 83.1. Projections for January are for a net gain of 150,000. While the headline net gain in jobs in the US in December disappointed, the December data in total did nothing to convince the FOMC that they should hold off tightening any further, with Jerome Powell saying post the January meeting that ‘I would say that most FOMC participants agree that labour market conditions are consistent with maximum employment… and that is my personal view.’