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Pretty good economy will keep being pretty good, award-winning forecaster says – MarketWatch



Forecaster of the Month

By Rex Nutting

Published: Feb 11, 2020 6:50 pm ET

Jay Bryson of Wells Fargo says economy will slow but not crumble

Jay Bryson, acting chief economist, Wells Fargo

What the U.S. economy lacks in drama, it more than makes up for in consistency as it moves into a record-setting 12th year of steady if unspectacular growth.

“The economy is growing pretty well,” said economist Jay Bryson, the winner of the Forecaster of the Month contest for January. “The expansion has more room to run.”

Notice that he’s not saying it’s the best economy since sliced bread. Nor does he think it’s ready for the scrap heap. The economy is OK.

True, it’s slowing down a bit with age, but it’s not showing any signs of a recession, said Bryson, who is acting chief economist for Wells Fargo Economics Group.

No big imbalances

“The way you get recessions is to have an exogenous shock (which is impossible to forecast) or big imbalances in the economy,” he said. Fortunately, the kind of imbalances that caused the last two recessions (in tech stocks and housing) just aren’t apparent, he says, at least “nothing that would cause a recession in the next 12 months.”

As for exogenous shocks, the most likely candidate right now is the coronavirus that’s caused more than 1,000 deaths in China from Covid-19 (the respiratory disease that’s caused by what they are now calling the SARS-CoV-2 virus).

Bryson doesn’t think the impact on the U.S. economy will be major. Right now, it doesn’t look like “we’ll have 100,000s of deaths here.”

He’s assuming that the epidemic is mostly contained to China and that China’s self-quarantine doesn’t last months. If China’s factories are closed longer, then the disruptions will begin to have major repercussions for U.S. companies that rely on the supply chain that snakes through China.

2.1% growth

For 2020, he’s calling for growth of around 2.1%, a steady unemployment rate, 2% inflation, and job growth averaging about 135,000 per month. That’s not too shabby.

Most likely, the Federal Reserve will keep rates on hold (70% chance) this year. He puts the odds of a rate cut at about 25%. “There’s a very high bar for rate hikes,” Bryson said.

Bryson said Wells Fargo’s forecasts are a team effort. Azhar Iqbal is the econometrician who runs the basic models. Senior economists Mark Vitner, Sam Bullard, Tim Quinlan, and Sarah House play key roles in tweaking the forecasts. “There is a lot of art involved in this,” Bryson said.

Wells Fargo’s forecast Number as reported*
ISM manufacturing index 48.8% 47.2%
Nonfarm payrolls 150,000 145,000
Trade deficit -$43.3 billion -$43.1 billion
Retail sales 0.3% 0.3%
Industrial production -0.3% -0.3%
Consumer price index 0.2% 0.2%
Housing starts 1.392 million 1.608 million
Durable goods orders 0.9% 2.4%
Consumer confidence index 129.8 131.6
New home sales 745,000 694,000
GDP 2.3% 2.1%
*Subject to revision

In the January contest, Bryson’s team had the most accurate forecasts among 45 forecasting teams on four of the 11 indicators we track: retail sales, the consumer price index, industrial production and the trade deficit. They were among the 10 most accurate on four other forecasts: the consumer confidence index, nonfarm payrolls, housing starts and durable goods orders.

The runners-up in the January contest were Andrew Hollenhorst of Citigroup, Mike Thomas of Met Capital, Peter Morici of the University of Maryland, and Brian Wesbury and Bob Stein of First Trust Advisors.

The MarketWatch median consensus published in our Economic Calendar includes the predictions of the 15 forecasters who have earned the most points in our contest over the past 12 months, plus the forecast of the most recent winner of the monthly contest.

The forecasters in our survey are: Jim O’Sullivan of TD Securities, Christophe Barraud of Market Securities, Ryan Sweet of Moody’s Analytics, Andrew Hollenhorst of Citigroup, Seth Carpenter’s team at UBS, Ian Shepherdson of Pantheon Macro, Richard Moody of Regions Financial, Stephen Stanley of Amherst Pierpont Securities, Lou Crandall of Wrightson ICAP, Michelle Girard’s team at NatWest Markets, Jan Hatzius’s team at Goldman Sachs, Chris Low of FHN Financial, Lewis Alexander’s team at Nomura Securities, Michelle Meyer’s team at Bank of America, Peter Morici of the University of Maryland, and Jay Bryson’s team at Wells Fargo.

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Canadian retail sales slide in April, May as COVID-19 shutdown bites



december retail sales

Canadian retail sales plunged in April and May, as shops and other businesses were shuttered amid a third wave of COVID-19 infections, Statistics Canada data showed on Wednesday.

Retail trade fell 5.7% in April, the sharpest decline in a year, missing analyst forecasts of a 5.0% drop. In a preliminary estimate, Statscan said May retail sales likely fell by 3.2% as store closures dragged on.

“April showers brought no May flowers for Canadian retailers this year,” Royce Mendes, senior economist at CIBC Capital Markets, said in a note.

Statscan said that 5.0% of retailers were closed at some point in April. The average length of the closure was one day, it said, citing respondent feedback.

Sales decreased in nine of the 11 subsectors, while core sales, which exclude gasoline stations and motor vehicles, were down 7.6% in April.

Clothing and accessory store sales fell 28.6%, with sales at building material and garden equipment stores falling for the first time in nine months, by 10.4%.

“These results continue to suggest that the Bank of Canada is too optimistic on the growth outlook for the second quarter, even if there is a solid rebound occurring now in June,” Mendes said.

The central bank said in April that it expects Canada’s economy to grow 6.5% in 2021 and signaled interest rates could begin to rise in the second half of 2022.

The Canadian dollar held on to earlier gains after the data, trading up 0.3% at 1.2271 to the greenback, or 81.49 U.S. cents.

(Reporting by Julie Gordon in Ottawa, additional reporting by Fergal Smith in Toronto, editing by Alexander Smith)

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Canadian dollar notches a 6-day high



Canadian dollar

The Canadian dollar strengthened for a third day against its U.S. counterpart on Wednesday, as oil prices rose and Federal Reserve Chair Jerome Powell reassured markets that the central bank is not rushing to hike rates.

Markets were rattled last week when the Fed shifted to more hawkish guidance. But Powell on Tuesday said the economic recovery required more time before any tapering of stimulus and higher borrowing costs are appropriate, helping Wall Street recoup last week’s decline.

Canada is a major producer of commodities, including oil, so its economy is highly geared to the economic cycle.

Brent crude rose above $75 a barrel, reaching its highest since late 2018, after an industry report on U.S. crude inventories reinforced views of a tightening market as travel picks up in Europe and North America.

The Canadian dollar was trading 0.3% higher at 1.2271 to the greenback, or 81.49 U.S. cents, after touching its strongest level since last Thursday at 1.2265.

The currency also gained ground on Monday and Tuesday, clawing back some of its decline from last week.

Canadian retail sales fell by 5.7% in April from March as provincial governments put in place restrictions to tackle a third wave of the COVID-19 pandemic, Statistics Canada said. A flash estimate showed sales down 3.2% in May.

Still, the Bank of Canada expects consumer spending to lead a strong rebound in the domestic economy as vaccinations climb and containment measures ease.

Canadian government bond yields were mixed across a steeper curve, with the 10-year up nearly 1 basis point at 1.416%. Last Friday, it touched a 3-1/2-month low at 1.364%.

(Reporting by Fergal Smith; editing by Jonathan Oatis)

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Toronto Stock Exchange higher at open as energy stocks gain



Toronto Stock Exchange edged higher at open on Wednesday as heavyweight energy stocks advanced, while data showing a plunge in domestic retail sales in April and May capped the gains.

* At 9:30 a.m. ET (13:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 16.77 points, or 0.08%, at 20,217.42.

(Reporting by Amal S in Bengaluru; Editing by Sriraj Kalluvila)

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