Thursday, 19 of April of 2018

Economics. Explained.  

Small Business Optimism

April 10, 2018

Small business optimism dipped 2.9 poionts in March to 104.7, but it fell from a record high level of 107.6 in February.

NFIB President Juanita Duggan said, ““It has been a remarkable 16 months for small business optimism.  Small business owners are so optimistic that they feel confident enough to raise wages and invest in their business, which grows the economy.”

NFIB Chief Economist added that, “Although expected sales and expected business conditions posted large declines, it was from historically high levels and this still left the overall index reading among the 20 best in survey history,”

In our opinion the economy is expected to gather momentum in coming months in response to a number of significant policy changes.  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.

The stock market has been extremely volatile in the past month or two as market participants fret about the possibility of a trade war and increasing tensions with Syria and Russia.  However, jobs are being created at a reasonably robust pace.  The unemployment rate is below the full employment threshold.  The housing sector is continuing to climb.  And now investment spending should pick up after essentially no growth in the past three years.  We expect GDP growth to climb from 2.5% in 2017 to 2.8% in 2018.  The core inflation will  climb from 1.8% in 2017 to 2.4% in 2018.  The Fed will continue to raise short-term interest rates very slowly.  Accelerating GDP growth, low inflation, and low interest rates should propel the stock market to new record high levels prior to yearend.

Stephen Slifer


Charleston, SC

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