In World Economy News 30/01/2017
The first inkling of what’s going on in the economy in the early days of the Trump White House will comes in a barrage of reports this week led by U.S. job creation in January. The early evidence is likely to offer rays of hope.
Before the grand finale — Friday’s employment report — a pair of closely followed business surveys are likely to show manufacturers and service-oriented firms are both growing at a healthy pace.
The manufacturing sector especially appears to have kicked into a higher gear after a prolonged bout of weakness in 2016, when investment fell for the first time in eight years. Businesses ramped up investment in the fourth quarter to the highest rate in almost two years.
Consumer confidence is also expected to remain elevated just one month after hitting highest level in more than a decade, helped by a record stock market DJIA, -0.04% Many Americans are optimistic the new president can jazz up the economy with tax cuts and more spending on public works — though a sudden trade eruption with Mexico is fraying some nerves.
“Now if only the new administration could pound the stimulus drum a little louder than the protectionist cymbal, the U.S. economy would be well on its way to 2.5% growth this year,” said Sal Guateri, senior economist at BMO Capital Markets.
The U.S. grew just 1.6% in 2016, the weakest performance in five years.
The newfound optimism of consumers, however, didn’t lead to a big surge in holiday shopping. Auto sales did rev up in December owing to deep discounts by car dealers, but overall consumer spending was on the softer side. Economists predict a mild 0.4% gain.
Even though the economy is sitting on stable ground, though, the Federal Reserve is almost certain to stand pat and leave U.S. interest rates unchanged.
The central bank wants to see more evidence of faster growth, and perhaps get a more detailed look at some of Trump’s plans, before committing to another increase in borrowing costs for consumers and small businesses.
Those costs are still quite low, but higher rates would make it harder to buy a car, take out a home mortgage and obtain a business loan.
The employment report for January, for its part, is likely to follow recent patterns. Economists polled by MarketWatch forecast about a 170,000 increase in new jobs, with the unemployment rate holding below 5%. The U.S. added an average of 180,000 jobs a month in 2016.
While there’s a chance businesses could ramp up hiring, they are likely to wait to see what the White House and Congress do. “Until we see some tangible proposals, it’s hard to turn talk into actual hiring,” said Richard Moody, chief economist at Regions Financial.
Source: MarketWatch
