January 25, 2018.
U.S. Heads for 3% Growth Trifecta on Spending, Investment Punch
The U.S. economy probably ended last year with the longest stretch of 3 percent-or-better growth since 2005. The $17 trillion question is, can it keep up this performance this late in the business cycle?Solid consumer spending, accelerating business investment and a housing rebound combined to drive fourth-quarter demand in the world’s largest economy. Gross domestic product expanded at a 3 percent annualized rate after 3.2 percent in the third quarter and 3.1 percent in the previous period, according to the Bloomberg survey median ahead of Commerce Department data due Friday.Tax cuts championed by President Donald Trump have fuelled expectations of an extended boom in capital spending and buoyed household confidence. Maintaining economic growth of at least 3 percent, a goal of the president’s, is a bigger challenge. One reason is household consumption — which accounts for about 70 percent of GDP — may struggle to pick up amid tepid wage gains, rising debt and gradually increasing borrowing costs as the Federal Reserve tightens monetary policy. “The economy entered this year with solid momentum,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “Consumers did their part. Business investment picked up. We’re coming off of a very strong second half, which will be difficult to duplicate,” as “there’s going to be a bit of a spending hangover.”
Dollar Under Pressure; Euro Steadies Before ECB: Markets Wrap
The dollar’s miserable week continued, with the greenback slipping against most major peers as traders digest the latest comments from White House officials. The euro was steady before the first ECB policy decision of the year, while stocks were mixed and crude gained. U.S. Treasury Secretary Steven Mnuchin expanded on his remarks about the dollar from a day earlier, saying he isn’t concerned about short-term fluctuations and there are economic pros and cons to where the exchange rate now is. As the currency slipped, the euro held steady before the central bank decision and after data showed improving business confidence in Germany. Stocks in the region were mixed following declines in Asia, where Japanese shares fell as the yen traded at the strongest since September. The MSCI Emerging Markets Currency Index hit the highest on record, while dollar weakness also boosted commodities. Bloomberg’s index of raw materials is at the highest since October 2015, and gold traded at about the strongest in more than a year. Mnuchin’s endorsement of a weaker dollar as a help to U.S. trade on Wednesday heaped more pressure on an already sliding greenback, although White House Press Secretary Sarah Sanders appeared to soften his comments later. Eyes now turn to the ECB, where traders will be looking for further clues on its plans to roll back stimulus, and its officials’ thoughts on a strengthening single currency.
BoE’s Carney sees 10 billion-pound Brexit hit to UK economy
LONDON (Reuters) – Bank of England Governor Mark Carney told business leaders that the 2016 Brexit vote is costing Britain’s economy around 10 billion pounds a year, the Times newspaper said on Thursday. Carney was asked by an attendee at a meeting on the side-lines of the World Economic Forum in Davos to quantify lost economic growth since the referendum, the newspaper said.While Britain’s economy has performed better than the BoE forecast after the June 2016 referendum, it grew at the slowest pace of all Group of Seven rich economies over the first three quarters of 2017. Carney said he thought the loss to economic growth was equivalent to between two-thirds and three-quarters of the weekly 350 million-pound boost to public spending that Brexit supporters said was a key advantage of Brexit, the Times reported. Government statisticians have accused Britain’s foreign minister Boris Johnson of misusing state data by repeating the 350 million-pounds-a-week figure. A spokesman for the BoE declined to comment on the report which was based on comments from people who attended the meeting. Media were not allowed to attend. Carney has been criticised by Brexit supporters for previous public comments he has made on the impact of a vote to leave the bloc on Britain’s economy.
Malaysia Raises Key Rate as Analysts Bet No More This Year
Malaysia’s central bank raised its benchmark interest rate for the first time since 2014, with economists guessing that it won’t need to tighten again this year. Bank Negara Malaysia increased the overnight policy rate to 3.25 percent from 3 percent, it said in a statement in Kuala Lumpur on Thursday, as predicted by 16 of the 20 economists in a Bloomberg survey. The central bank followed through on its plans after signalling in November that it may adjust its stance given the strength of the economy. The government is forecasting growth of as much as 5.5 percent this year, buoyed by a global trade recovery and rising domestic spending. Inflation pressures are also building because of rising fuel and food costs.