Thursday, 22 of February of 2018

Economics. Explained.  

Small Business Optimism

February 13, 2018

Small business optimism rose 2.0 points in January to 106.9 after having declined 2.6 points in December.

NFIB President Juanita Duggan said, “Main Street is roaring.  Small business owners are not only reporting better profits, but they’re also ready to grow and expand. The record level of enthusiasm for expansion follows a year of record-breaking optimism among small businesses.”

NFIB Chief Economist added that, “The historically high index readings over the last year tell us small business owners have never been more positive about the economy. This is in large response to the new management in Washington tackling the biggest concerns of small business owners – high taxes and regulations.”

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.

Already we see the stock market close a record high level despite the recent correction.   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 2.9% in 2018.  The core inflation will  climb from 1.7% in 2017 to 2.5% 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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