Friday, 14 of December of 2018

Economics. Explained.  

Small Business Optimism

December 11, 2018

Small business optimism fell 2.6 points in November to 104.8 after having fallen 0.5 point in October.  The August level of 108.8  broke the previous record high level of 108.0 set 35 years ago back in July 1983.

NFIB President Juanita Duggan said,  “Small business owners are enthusiastic about the economy and have demonstrated their optimism by raising wages, creating new jobs, and investing in their businesses throughout 2018.  Overall, small business owners have shown a historic trend in optimism for their businesses and the economy and continue to be the driving force behind economic growth.”

NFIB Chief Economist added that, Small business employs about half of the private workforce, so investment and training in that sector is critical to improving overall worker productivity over the next five years,”

In our opinion the economy is expected to expand at a reasonably robust pace in the upcoming 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.

The stock market has retreated from its recent record high level.   However, jobs are being created at a brisk pace.  The unemployment rate is well below the full employment threshold.  The housing sector should continue 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 2.8% in 2019 .  The core inflation will  climb from 1.8% in 2017 to 2.2% in 2018 and 2.3% in 2019.  The Fed will continue to raise short-term interest rates very slowly.  Accelerating GDP growth, low inflation, and low interest rates should re-invigorate the stock market to new record high levels in the months ahead.

Stephen Slifer

NumberNomics

Charleston, SC


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