Tags: donald trump | white house | instability | administration

Trump's White House Is a Picture of Worrying Instability

Trump's White House Is a Picture of Worrying Instability
(Photo: Nicholas Kamm/AFP/Getty Images)

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Thursday, 29 March 2018 11:59 AM Current | Bio | Archive

The revolving door of the U.S. administration seems to be revolving a little bit faster with a cabinet level change published on the Trump Twitter feed yesterday.

On Wednesday, President Trump has fired his Veterans Affairs Secretary David Shulkin and is going to nominate Ronny Jackson, who is the physician to the president, for the role.

By the way, Veterans Affairs (VA) is the second-largest federal agency.

Markets, probably do not care that much about who it is in charge of U.S. veterans affairs, the position is 16th in the line of presidential succession.

However, markets do care about policy stability overall. The recent, rather high turnover of staff in the administration creates an impression of policy instability.

Of more practicable relevance today, the Bureau of Economic Analysis (BEA) will release the personal income and personal spending data of February, and the PCE deflator that is reputedly the Feral Reserve’s favored inflation measure.    

Personal income in the United States is growing at around 4 percent a year at present. This fact occasionally surprises investors who fixate on average hourly earnings, which is a number that tells us nothing about how income is growing. Partly that is due to averaging process of average hourly earnings, but in part, it’s also structural change in the U.S. economy. With the gradual rise of self-employment, income has become more than just about wage growth. Someone who is self-employed may pay themselves a low income coupled with high dividend payments for example.

Today’s data is therefore as it gives a better sense of the overall health of the U.S. consumer and somewhat less directly the cost pressures that exist in the U.S. economy.

The personal consumer expenditure (PCE) deflator obviously adds to the impression of strength in the economy and there are fewer non-market prices in the PCE deflator, which means that this is less subject to random distortions than are consumer price inflation (CPI) numbers.

From Germany, we’ll also get today inflation data for March, and this will be in the form of consumer price inflation (CPI).

Underlying inflation pressures in Germany are probably stronger than in other economies in the Euro area, given the strength of the labor market and the level of recent pay settlements.

Modest fiscal stimulus is being adapted to that mix as well. Therefore, some acceleration in the German inflation numbers for March cannot be excluded.

If so, this supports the idea of the European Central Bank (ECB) ending its frankly unnecessary bond buying program by the end of the year, which by the way, will have an impact on the yields of the various Euro area government bonds, which will be of course important for investors.

From its side, the UK economy grew by 0.4 percent on quarter in the three months to December of 2017, unrevised from the second estimate and following a 0.5 percent expansion in the previous period. Fixed investment increased firmly despite a slowdown in business investment, while net trade contributed negatively to growth. The annual expansion rate remained unchanged at 1.4 percent from its July-September reading.

The Bank of England’s Monetary Policy Committee (BoE MPC) remains on course to raise the Bank Rate by a further 25 basis points to 0.75 percent on May 10.

The Bank Rate is the interest rate that the Bank of England charges banks for secured overnight lending. It is the British Government's key interest rate for enacting monetary policy and is more analogous to the U.S. discount rate than to the Federal Reserve funds rate.

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The revolving door of the U.S. administration seems to be revolving a little bit faster with a cabinet level change published on the Trump Twitter feed yesterday.On Wednesday, President Trump has fired his Veterans Affairs Secretary David Shulkin and is going to nominate...
donald trump, white house, instability, administration
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2018-59-29
Thursday, 29 March 2018 11:59 AM
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