Tags: us | economy | investors | global | rivals

US Economy Better Bet for Investor Than Global Rivals

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Thursday, 14 February 2019 11:01 AM Current | Bio | Archive

The U.S. economy and the American dollar remain the most atrractive investment when they are compared to their global rivals.

Meanwhile, President Donald Trump is considering a 60-day extension of the March 1 deadline for higher tariffs on Chinese imports, Bloomberg reported, citing unnamed sources.

Chinese officials had initially proposed an extension of 90 days, but U.S. official declined that offer.

The idea of some kind of deal has become more firmly established in financial markets. There is therefore perhaps only limited upside from the confirmation that tariff increases or tax increases are increasingly likely to be avoided.

As a large scale deal seems relatively to be unlikely, it is now important to avoid negative trade comments if the equity markets are to be allowed to avoid weakening.

U.S. Producer Price Index for January and Retail Sales in December

The Producer Price Index for final demand decreased 0.1 percent in January, seasonally on an unadjusted basis, the final demand index rose 2.0 percent for the 12 months ended in January.

The index for final demand less foods, energy, and trade services rose 0.2 percent in January following no change in December. For the 12 months ended in January, prices for final demand less foods, energy, and trade services moved up 2.5 percent.

Advance estimates of U.S. retail and food services sales for December, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $505.8 billion, a decrease of 1.2 percent (±0.5 percent) from the previous month, but 2.3 percent (±0.5 percent) above December 2017.

China International Trade Data for January

China international trade data in dollar terms showed exports rose 9.1 percent on the year in January, rebounding from a fall of 4.4 percent in December, while imports fell 1.5 percent, also strengthening from a decline of 7.6 percent previously.

The rebound in overseas sales is in part because companies shipped out goods ahead of the Lunar New Year holiday.

Exports to the U.S. dropped 2.4 percent.

Companies have of course been able to avoid quite a lot of the trade tariffs because trade tariffs are a policy that didn’t really work in the 18th century and certainly does not fit for purpose in the 21st century.

Japan GDP Growth

The Japanese economy advanced 0.3 percent quarter-on-quarter in the December, reversing from an upwardly revised 0.7 percent contraction in the previous period and compared to market expectations of a 0.4 percent growth, a preliminary estimate showed. Both household consumption and business investment rebounded following a string of natural disasters.

On an annualized basis, the economy grew 1.4 percent, after an upwardly revised 2.6 percent contraction in the September quarter and matching market consensus.

The growth percentages were in line with expectations overall, although capital spending was only fractionally stronger and consumer spending fractionally weaker than had been hoped for. The capital spending is too small a difference to get really excited about, but globally it’s going to be more important to keep eye on where there is a pick-up in capital spending because trade is generally skewed towards capital spending.

Germany GDP Growth Stalls in the 4th Quarter

German GDP growth disappointed in the 4th quarter and shows the German economy stalled, missing market expectations of a 0.1 percent growth rate and following a 0.2 percent contraction in the July-September period, which was the first time the German GDP growth rate shrank since 2015.

Positive contributions came from fixed investment, household consumption and government spending, while net foreign demand gave no contribution to growth.

GDP Growth in the Euro Area rises by 0.2 Percent during the 4th Quarter

The Eurozone economy grew 0.2 percent during the 4th quarter of 2018, unrevised from a preliminary estimate and matching the 3rd quarter rate, which had been the lowest since the 2nd quarter of 2014.

Compared with the same quarter of 2017, seasonally adjusted GDP rose by 1.2 percent in the euro area, after +1.6 percent in the 3rd quarter.

Over the whole year 2018, GDP rose by 1.8 percent in the Euro area, based on seasonally and calendar adjusted quarterly data. The annual GDP growth rate for 2017 was +2.4 percent for the Euro area.

Definitively, with the German economy stalling in the October-December period and Italy in recession for the first time since early 2013, things don’t look good in the Euro area, which is of course important for investors.

Meanwhile, the euro has come under the $1.13 per euro mark line

Etienne "Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

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For investors and for now at least, all by all, the U.S. economy remains attractive compared with the other main economic blocs as is the U.S. dollar.
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Thursday, 14 February 2019 11:01 AM
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