Wednesday, 17 of October of 2018

Economics. Explained.  

Small Business Optimism

October 8, 2018

Small business optimism fell 0.9 point in September to 107.9 after having risen 0.8  point in August to 108.0 which which broke the previous record high level of 108.0 set 35 years ago back in July 1983.

NFIB President Juanita Duggan said,  “This is the longest streak of small business optimism in history, evidence that tax cuts and regulatory rollbacks are paying off for the economy as a whole. Our members say that business is booming and prospects continue to look bright.”

NFIB Chief Economist added that, “The economy continues to deliver a spectacular performance for one so near its record length. Small business owners continue to face labor force challenges but are increasing compensation to keep up.  With profits and investment remaining strong, our hope is that policymakers will stay the course and not screw around with success.”

In our opinion the economy is expected to expand at a rapid clip 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 retreated somewhat from its recent record high level.    Jobs are being created at a brisk pace.  The unemployment rate is well below the full employment threshold.  The housing sector is continuing to climb slowly.  And now investment spending has picked up after essentially no growth in the past three years.  We expect GDP growth to climb from 2.5% in 2017 to 3.1% in 2018 and 2.9% in 2019 .  The core inflation will  climb from 1.8% in 2017 to 2.4% in both 2018 and 2019.  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.

Stephen Slifer

NumberNomics

Charleston, SC


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