Economic Commentaries

Entries for February 2018


Economic activity was strong heading into the New Year. Households spent freely during the holiday season; payroll growth was solid across industries; and activity indexes here and abroad were strong and better than in November. Real GDP growth in the U.S. may well have notched another 3% annual reading in the October - December quarter with strong momentum going forward.

Expectations are high that tax stimulus will add to this momentum. Households should see a reduction in withholding by late January. Some of this will be spent but with heating bills soaring in much of the country and the saving rate about half last year's level, consumption will be most influenced by job and wage trends. On this score prospects are favorable as the minimum wage is up in many states; a handful of companies have announces bonuses tied to tax reform; and the job market is solid.

But the economy's real impetus should derive from business tax reduction. Corporate rate cuts, repatriated corporate cash, and full expensing for business equipment are presumed to set off a proverbial investment boom. This would be a further spur to productivity and it would generate strong wage and salary income. This is the hope and we shall be closely monitoring incoming data which should soon reflect this.

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