Tag: Economic growth

Trump’s economy: The state of growth, jobs and stocks
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Trump’s economy: The state of growth, jobs and stocks

Former Virginia Gov.
From economic growth and job creation, to the surging stock market, business has boomed in America over the past year; spurred in large part by expectations – and the resulting fulfillment – of a longstanding promise to overhaul the U.S. tax code.
Here’s a look at what has changed since the president was inaugurated one year ago: Economic growth On Friday, the U.S. Commerce Department said the economy grew at a rate of 2.6% in the fourth quarter of 2017, slightly below economists’ expectations of 3%.
For the year, the economy expanded at a rate of 2.3%, compared with 1.5% in 2016.
The Trump administration hopes its economic policies will fuel 4% economic growth in the coming years, once the full effects of its tax reform bill have been realized.
Job creation Another big promise the administration made to Americans was to spur job creation in the country.
In 2017, about 2.1 million new jobs were added to the economy, according to government statistics.
Sector-wise, the trends were quite different between 2016 and 2017.
During Trump’s first year in office, the Dow had its best year on record under a Republican president.
The day following Trump’s first address to the country last year, the S&P 500 surged 1.5%.

Australia wages rise stronger than expected in 4Q
Unemployment

Australia wages rise stronger than expected in 4Q

SYDNEY–Australian wages growth came in stronger than expected in the fourth quarter of 2017, lending support to the idea that interest rates might be raised sooner than anticipated.
Wages rose 0.6% in the fourth quarter from the third quarter, and rose 2.1% over calendar 2017, the Australian Bureau of Statistics said Wednesday.
Economists expected a 0.5% rise over the quarter.
Still, the overall picture for wages is soft.
Years of depressed wage gains pose a risk to the outlook for consumer spending and GDP growth over time, something the Reserve Bank of Australia has warned of, adding that record household debt adds to the worry.
In a deluge of commentary since the start of the February, the RBA made it clear that without a recovery on the wages front, inflation might not return to its 2-3% target band.
Interest rates have already been held at record lows since mid-2016, with economists expecting the RBA could be sidelined into 2019 or longer.
However, Australia’s job market has been strong in the last year, adding more than 400,000 jobs in 2017 and lowering unemployment, raising the potential that eventually wages growth will heat up over time.
In the private sector, wages rose 0.4% in the fourth quarter, while public-sector wages rose 0.6%.
-Write to James Glynn at james.glynn@wsj.com

UK growth downgrade possible after run of weak figures
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UK growth downgrade possible after run of weak figures

Official figures showed a 1.3 percent monthly decline in industrial production in December and a 4.9 billion-pound ($6.9 billion) trade deficit for goods and services, its worst since September 2016.
Though construction output was stronger than anticipated, expanding by 1.6 percent during the month, some economists say that the figures could lead to economic growth being revised down. “Today’s data reinforces the message that the U.K. continues to underperform other developed market economies, growing at around half the rate of the U.S. and the eurozone,” said James Knightley, chief international economist at ING. “As such, while the Bank of England is clearly hinting at the potential for a May rate hike, we remain cautious on the longer term path for rates, particularly given the Brexit-related uncertainty.”
Last month, the Office for National Statistics estimated that the economy grew 0.5 percent in the fourth quarter from the previous three-month period, a better-than-expected outturn that partly allowed the Bank of England on Thursday to talk up the chance of more rate increases.
The Bank of England is tasked with setting rates to keep inflation near 2 percent.
In December, it stood at 3 percent.
Even if fourth-quarter growth is not downgraded when the next estimate is published later this month, the trade figures are likely to provide rate-setters on the Bank’s Monetary Policy Committee with pause for thought.
Governor Mark Carney had said exporters were in a “sweet spot” at the moment — still in the European Union ahead of Brexit but also benefiting from the fall in the pound after Britain voted to leave the EU. “The latest trade figures should temper the MPC’s optimism that the economy is rebalancing and enjoying a trade boost,” said Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics.

White House budget to project 3% growth
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White House budget to project 3% growth

The White House’s budget proposal — to be released Monday — assumes the economy can grow at a much stronger pace than independent forecasters expect and with lower inflation and government borrowing costs than officials projected last year, according to a preview of the proposal.
Many private forecasters also expect economic growth to pick up this year because of consumer and business spending encouraged by tax cuts signed by the GOP president in December, plus a two-year, $300 billion funding deal signed Friday.
On Friday, economists at J.P. Morgan said they now expect the economy to grow 2.6% this year and 1.9% next year.
The White House expects that without its policy changes, the economy would grow at a 2.2% rate over the coming decade, Mr. Hassett said.
The administration sees around half of the increase to 3% growth coming from last year’s $1.5 trillion tax cut, and the rest from a combination of reducing regulations, attracting new private and local spending on infrastructure and policies to boost labor-force participation.
When the economy grew consistently at a 3% or higher rate in the 1990s and early 2000s, the average 10-year Treasury moved in a range between 4% and 7%.
Higher budget deficits from the tax cuts and spending deal could also push up yields on government bonds.
Tax cuts and government spending could boost the economy in two ways.
If Fed officials conclude the tax cut is boosting demand without boosting the economy’s potential — for example, because inflation begins rising too much — the Fed might boost borrowing costs more aggressively.
This would lead the Fed to raise interest rates higher than now planned.

Americans didn’t get much of a pay raise last year. Thanks, inflation.
Unemployment

Americans didn’t get much of a pay raise last year. Thanks, inflation.

That’s mainly because inflation picked up over the past two years, eroding the value of any wage increases.
Much of the gain came from wages tied to supervisory positions and the finance industry, Shambaugh said.
The typical American worker saw an increase of only 2.4% … and all these figures are before inflation, which we don’t yet know. “For typical workers, you are not seeing much right now,” said Shambaugh, who served on former President Obama’s White House Council of Economic Advisers.
Wage growth returned to the spotlight recently with President Trump repeatedly claiming that wages are finally on the rise after years of going nowhere. “After years of wage stagnation, wages — you saw what happened two days ago and a month ago — wages are now, for the first time in many years, rising,” he told supporters and employees at a manufacturing firm in Ohio on Monday.
The typical worker made just over $22 an hour last year, compared to a little more than $20 in 1973, according to the Hamilton Project’s calculations.
Most economic observers, Shambaugh included, feel that wages will likely increase in a more meaningful way this year.
The Federal Reserve would like to see wage growth in the 3% to 3.5% range. “You would think at some point firms would have to offer higher wages to get workers,” he said.

U.S. GDP rises 2.6% in 4Q
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U.S. GDP rises 2.6% in 4Q

() U.S. economic growth unexpectedly slowed in the fourth quarter as the strongest pace of consumer spending in three years resulted in a surge in imports.
The economy grew at a 3.2 percent pace in the third quarter.
Strong domestic demand is part of a synchronized global rebound that includes the euro zone and Asia.
Economists expect annual GDP growth will hit the government’s 3 percent target this year, spurred in part by a weak dollar, rising oil prices and strengthening global economy.
That was the quickest pace in three years and followed a 2.2 percent rate of growth in the July-September quarter.
The saving rate dropped to 2.6 percent from 3.3 percent in the prior period.
The burst in consumer spending was satiated with imports, which grew at a 13.9 percent pace in the fourth quarter, the fastest since the third quarter of 2010, offsetting a rise in exports, which is being driven by dollar weakness.
The Fed’s preferred inflation gauge, the personal consumption expenditures (PCE) price index excluding food and energy, rose at a 1.9 percent rate.
That was the quickest pace in more than a year and followed a 1.3 percent pace of increase in the third quarter.
Spending on equipment is likely to be underpinned in 2018 by the corporate income tax cuts and recent gains in crude oil prices.

New Stimulus Leads Economists to Revise Up Growth, Deficit Projections — Update
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New Stimulus Leads Economists to Revise Up Growth, Deficit Projections — Update

Economists on Wall Street are revising up their estimates of U.S. economic growth over the coming two years due to Washington’s embrace of tax cuts and government spending increases.
Meanwhile, Congress is likely to consider a deal in January to boost federal spending caps and spend heavily on disaster relief to address storms earlier this year.
Nomura expects the fiscal stimulus to drag on growth after 2019 because it will help induce higher short-term and long-term interest rates.
Goldman and J.P. Morgan expect deficits to rise from $664 billion in the fiscal year ended September, or around 3.4% of GDP, to $1 trillion, or 5% of GDP, in 2019.
Economists at Goldman and J.P. Morgan expect stronger growth, including from the new stimulus, to lead Federal Reserve officials to raise rates four times next year.
Write to Nick Timiraos at nick.timiraos@wsj.com Economists on Wall Street are revising up their estimates of U.S. economic growth over the coming two years due to Washington’s embrace of tax cuts and government spending increases.
Meanwhile, Congress is likely to consider a deal in January to boost federal spending caps and spend heavily on disaster relief to address storms earlier this year.
Nomura expects the fiscal stimulus to drag on growth after 2019 because it will help induce higher short-term and long-term interest rates.
Goldman and J.P. Morgan expect deficits to rise from $664 billion in the fiscal year ended September, or around 3.4% of GDP, to $1 trillion, or 5% of GDP, in 2019.
Economists at Goldman and J.P. Morgan expect stronger growth, including from the new stimulus, to lead Federal Reserve officials to raise rates four times next year.

Fed Predicts Modest Economic Growth From Tax Cut
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Fed Predicts Modest Economic Growth From Tax Cut

WASHINGTON — The Federal Reserve, buoyed by a steadily strengthening economy, raised interest rates on Wednesday for a fifth time since the financial crisis and predicted that a proposed tax cut moving through Congress would modestly increase economic growth for the next few years without stoking inflation.
She said they expected the bill to provide “a modest lift.” Ms. Yellen spoke at a news conference after the Fed announced a widely expected decision to increase its benchmark interest rate by a quarter of a percentage point, to a range of 1.25 percent to 1.5 percent.
Wednesday’s increase is the third time this year that the Fed has raised rates, reflecting its confidence that the economy is in good health.
Some Fed officials, including Ms. Yellen, cautioned earlier this year that tax cuts could push the pace of growth to an unsustainable level, resulting in higher inflation, and that the Fed might respond by raising interest rates more quickly, to restrain growth and keep a lid on inflation.
A quarterly update of the Fed’s economic forecast showed that officials still expect to raise rates three times next year — unchanged from the last economic forecast.
Fed officials predicted that the economy would grow at a 2.5 percent pace next year; the previous forecast was 2.1 percent.
President Trump has predicted that the tax plan could deliver 4 percent growth or more.
They do not want the Fed to get in the way by raising rates.
It would be relatively easy for the Fed to respond if inflation does begin to climb.
Mr. Gonzalez noted that housing prices were rising, and he said that higher mortgage rates could worsen affordability problems in some markets.

AUSTRALIAN GDP MISSES
Unemployment

AUSTRALIAN GDP MISSES

Australian economic growth missed expectations in the September quarter of 2017, driven lower by a weak increase in household consumption expenditure, the largest part of the economy.
Showing the impact of strong levels of population growth, real GDP in per capita terms grew by 0.3% in seasonally adjusted chain volume terms, half the level reported for headline GDP.
This table from the ABS shows the percentage point contribution to quarterly real GDP from an expenditure perspective.
“Compensation of employees (COE) increased in all states and territories, resulting in a national quarterly growth of 1.2% and growth of 3.0% since the September quarter 2016,” the bureau said.
“This weak household spending combined with growth in household income resulted in an increase in the household saving ratio for the first time in five quarters.” According to the ABS, the household savings ratio inched up to 3.2%, above the 3.0% level reported in the June quarter.
“Gross household disposable income grew 0.5% during the quarter, outstripping the 0.2% growth in current price household final consumption expenditure,” the ABS said.
The ABS said that average compensation per employee rose by 0.3% over the quarter, reflecting that most of the 1.2% increase in total compensation was driven by an increase in workers.
Helping to offset weakness in the household sector, most other components added to GDP, especially private sector investment.
Investment in machinery and equipment added a smaller 0.1ppts, helping to offset a 0.1ppts decline in dwelling investment.
Others, such as Walters of the AICD, think that with GDP now growing at its trend pace, the RBA will likely begin normalising policy settings should its forecasts be proven correct.

U.S. GDP growth revised up to 3.3% rate in third quarter
Unemployment

U.S. GDP growth revised up to 3.3% rate in third quarter

U.S. economic growth in the third quarter was stronger than earlier thought, and corporate profits rebounded during the summer months.
Gross domestic product, a broad measure of goods and services created across the U.S., expanded at a 3.3% seasonally and inflation-adjusted annual rate in the third quarter, the Commerce Department said Wednesday.
That was the strongest quarterly growth reading in three years, matching economists’ expectations and revised up from the government’s initial estimate of 3.0%.
The latest report showed more business investment in equipment and software compared with prior estimates, as well as stronger government spending.
The pace of growth was boosted last quarter by two volatile components, private inventories and net exports.
Wednesday’s report also showed stronger profits at U.S. businesses.
Compared with a year earlier, profits were up a solid 10.0% in the third quarter. “I think the case for raising rates at our next meeting is coming together,” Mr. Powell told lawmakers.
Wednesday’s report showed personal consumption expenditures, which accounts for more than two-thirds of total economic output, expanded at a 2.3% pace in the third quarter, down slightly from an initial estimate of 2.4% growth.
The housing market was a drag on growth for the second straight quarter, with fixed residential investment falling at a 5.1% pace in the third quarter versus an earlier estimate of a 6.0% decline.