US: Confidence in the economy may fade - AmpGFX

The research team at Amplifying Global FX Capital suggests that while confidence in the Eurozone recovery is gaining momentum (even before the French election that may further support confidence), Confidence in the US economy may be ebbing. 

Key Quotes

“USA economic confidence may be much influenced by progress made by Trump in delivering tax reform.”

“It is widely recognized that the surge in confidence surveys following the Trump election has so far not been matched by a recovery in economic activity indicators.  The Atlanta Fed GDPNow projection is for an anemic 0.5%q/q SAAR growth in Q1.”

“There has been a tendency for weak Q1 outcomes for US data in recent years, suggesting there may be some residual seasonality that biases this data down.  Earnings season is so far showing solid results, and some more forward looking indicators are positive, the Conference Board Leading Index and Chicago Fed National Activity index are pointing to above trend growth.”

“Nevertheless, some more recent survey data have lost some momentum, including manufacturing surveys.”

“The failure thus far for confidence surveys, such as the NFIB small business confidence and consumer confidence, to flow through to activity indicators may reflect a wait and see attitude to Trump policies.”

“Companies may be waiting for clearer indications on what the tax implications are for new capital investment.  For instance, one budget proposal was accelerated depreciation.  In anticipation, companies may decide it is wise to wait until such tax benefits are in place before spending.”

“A quarterly survey by the Association of Finance Professionals (AFP)  – its Corporate Cash Indicators – found that despite a net 10% of respondents surveyed in January expecting to reduce cash holdings (an indication of economic confidence and willingness to spend cash on capital expenditure),  a net 15% did the opposite and raised cash holding over the three months to April.”

“And for the next three months a net 3% of respondents in April expect to raise their cash, a reversal in the optimism shown in January.”