Trump’s Economy Is Still Waiting for the Tax-Cut Boost
The U.S. economy is beginning the year with a downshift in growth despite $1.5 trillion in tax cuts signed by President Donald Trump in December. Unexpectedly weak February retail sales pushed down forecasts for the annualized pace of expansion in the first quarter, with the Federal Reserve Bank of Atlanta’s GDPNow tracking estimate at 1.8 percent on Friday, cut from 2.5 percent a week earlier. Economists at Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Moody’s Analytics all lowered their estimates to 2 percent or less this week. While strong job gains, rising industrial production and elevated consumer confidenceindicate underlying health, the data as a whole suggest the tax cuts haven’t had a major impact yet. With Americans starting to enjoy fatter paychecks, though, most economists see the sluggishness as temporary, blaming it on factors including inclement weather, delays in tax refunds and consumers taking a break after a late-2017 spending spree tied partly to post-hurricane rebuilding. “There has been a general downward drift and the quarter is looking a little softer than expected,” said Ethan Harris, head of global economics research at Bank of America Merrill Lynch in New York. “The effects of the tax cuts build very slowly as the year unfolds. We need more time for the fiscal stimulus to show up.”
Euro-Area Inflation Unexpectedly Revised Lower for February
Euro-area inflation slowed more than initially estimated last month, highlighting the challenges faced by the European Central Bank as it tries to stoke price pressures. Consumer prices in the 19-country bloc rose just 1.1 percent in February from a year earlier, according the European Union’s statistical office. That’s the weakest rate since late 2016 and falls short of an initial reading of 1.2 percent. The ECB has unleashed unprecedented stimulus in a bid to boost inflation back to its goal of just under 2 percent, with negative interest rates and a bond-buying program that is due to run at least until September. While officials meeting last week unexpectedly dropped their pledge to expand purchases, reflecting the region’s robust economic expansion, price pressures remain far too muted. In an interview published Friday, ECB chief economist Peter Praet opposed shifting the institution’s language on its stimulus plans any time soon, saying rising labor supply suggests the euro area’s economic slack may be greater than previously thought.
Economists Are Split on Whether Singapore’s Central Bank Is About to Tighten
Economists are split on whether the Monetary Authority of Singapore will change its policy stance in April amid subdued inflation pressure. Four of seven economists see the central bank shifting to a tightening stance next month, according to a Bloomberg survey conducted March 13-16. The MAS opened the door to a possible move in its October policy meeting, after easing three times between January 2015 and April of last year. The MAS is the only central bank in a major developed nation to use the exchange rate as its main tool. All four economists who projected an April tightening in the latest survey see the central bank adjusting the slope, rather than the width or center, of the currency band, which it doesn’t disclose. Low rates of unemployment and a pick-up in global demand are kindling inflation pressures in developed nations around the world, prompting more central banks to begin tightening monetary policy, including in Asia. In Singapore, policy makers are faced with an “expansionary” budget that will underpin a recovering economy, albeit one with weak inflation. Consumer prices were unchanged in January from a year ago, and economists surveyed by Bloomberg predict price growth of just 0.4 percent in February, ahead of the government release on Friday.