Overview of the week commencing 26 June
Graham Cross, CEO
This week we examine global business confidence and some US uncertainty.
Moody’s Survey of Global Business Confidence ‘has been strong and steady … and is consistent with [a global] economy that is expanding firmly above its potential’. Hiring and investment are, apparently, particularly strong. That’s good news. And while we are not usually moved by such measures of confidence we are a little comforted by the persistent high reading. That is because there is a lot riding on sustained global growth, not least for us in the UK. A global downturn wouldn’t make our withdrawal from the EU any easier.
In the US, the Policy Uncertainty Index, compiled by Moody’s Analytics, marks an attempt to measure rates of fiscal and monetary policy uncertainty among businesses and financial market participants. A higher index number is representative of more uncertainty, a lower number represents the reverse.
It is unsurprising that the index gained dramatically, rising from around 70 to nearly 110, in the weeks and months after Donald Trump’s inauguration.
On the fiscal front, healthcare reform is rumbling slowly and delaying any potential for lower corporate taxes. At the same time, funding for the government is secure only until the end of September – the debt ceiling was reached in March this year with the Treasury Department relying on ‘extraordinary measures’ to meet obligations since then.
Meanwhile on the monetary front, the outlook for rates is a little more muddied than is usual, at least in the short term. Will we have one more hike this year, or two? Will the Fed begin to wind down it’s balance sheet sooner or later?
In other developments, last week was a quiet one in the economic calendar (hence our focus on those obscure indexes) but it certainty wasn’t an unhappy one...
Over in Japan, data released by the Ministry of Finance revealed strong external demand, particularly from China and other Asia Pacific trading partners. Indeed, Japan posted a ¥98billion (£692 million) increase in the country’s trade surplus in April.
Russian retail sales were up 0.7 percent year-on-year in May. After the official statistics office revised April’s estimate upward, April and May are the first months of positive sales growth since late 2014.
The Argentinian economy is showing signs of life too. Following three consecutive quarters of negative growth, the first quarter of this year ended 0.3 percent higher in year-on-year terms.
Finally, France’s new president will be pleased with an upward revision to Q1 growth. It now seems that the French economy expanded by 0.5 percent rather than 0.4 percent.