Monday, 22 of April of 2019

Economics. Explained.  

Small Business Optimism

April 9, 2019

Small business optimism rose 0.1 point in March to 101.8 after having risen 0.5 point in February.  The August level of 108.8  broke the previous record high level of 108.0 set 35 years ago back in July 1983.  So while confidence has slipped in recent months, it has fallen from a record high level and still remains lofty.

NFIB President Juanita Duggan said,  “Small business owners continue to create jobs, expand their operations, and are enjoying strong sales. Since Congress resolved the shutdown, uncertainty has declined as small business owners add jobs, increase sales, and invest in their businesses and employees.”

NFIB Chief Economist added that, “Owners are growing their businesses and expect that they can sell more if they can produce more with additional employees.  Investment spending has been solid for the past two years and owners are choosing to invest in their workforce as well by creating new jobs and raising wages.”

In our opinion the economy is expected to expand at a reasonably robust pace this year.  Specifically, we believe that the cut in the corporate income tax rate, legislation that will allow firms to repatriate corporate earnings currently locked overseas back to the U.S. at a favorable 15.5% rate, and the steady elimination of unnecessary, confusing and overlapping federal regulations will boost investment.  That, in turn, should boost our economic speed limit should from 1.8% or so today to 2.8% within a few years.

After falling 20% late last year the stock market has recovered almost all of the earlier loss and is now only about 2% below its prior peak level.   Jobs are being created at a brisk pace.  The unemployment rate is well below the full employment threshold.  Mortgage rates have fallen in the past couple of months from 4.9% to 4.0%.  And investment spending remains solid.  We expect GDP growth to be 2.6% this year after having risen 3.0% in 2018.  The core inflation should be relatively stable at 2.2% in 2019 after rising 2.2% in 2018.  The Fed will has pledged to keep rates steady through the end of the year.  Moderate GDP growth, low inflation, and low interest rates should continue to bolster the stock market in the months ahead.

Stephen Slifer

NumberNomics

Charleston, SC


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