Wednesday, 15 of August of 2018

Economics. Explained.  

Small Business Optimism

August 14 2018

Small business optimism rose 0.7  point in July to 107.9 which is 0.1 point below the survey’s record high level of 108.0 set back in July 1983.

NFIB President Juanita Duggan said,  “Small business owners are leading this economy and expressing optimism rivaling the highest levels in history.  Expansion continues to be a priority for small businesses who show no signs of slowing as they anticipate more sales and better business conditions.”

NFIB Chief Economist added that, “Small business owners have never been so optimistic for so long, helping to power the second longest expansion in history.  Despite challenges in finding qualified workers to fill a record number of job openings, they’re taking advantage of this economy and pursuing growth.”

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 experienced a correction in the past several months but has rebounded and is now within an eyelash of its 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.  And now investment spending has picked up after essentially no growth in the past three years.  We expect GDP growth to climb from 2.6% in 2017 to 3.0% 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.

Stephen Slifer

NumberNomics

Charleston, SC


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