Better Economic Times Just Getting Started

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In the past year, there has been a major sea change in the US economic outlook following the election of President Trump. The main changes thus far have been twofold: an improved confidence in the economy and a major deregulatory push. The change in confidence began as early as November 2016 and is a key driver of the economy, it’s ‘animal spirits’. That pick-up can be seen in the NFIB Small Business Optimism Index (holding at 13-year highs); the Conference Board Consumer Confidence Index (holding at 15-year highs); and the University of Michigan Consumer Current Economic Index (holding at 15-year highs). ISM new orders are up some 10%. Since January, the Administration has gone on a deregulatory tear, reportedly withdrawing nearly 500 regulations per a Washington Post study, while promulgating virtually no new regulations.

And now the fruits of those labors are being seen. Real GDP has averaged 3.2% QoQ growth over the first two full quarters under the new Administration. Unemployment claims are at near 50-year lows, with the unemployment rate seemingly heading below 4%. Capital goods non-defense new orders (ex-aircraft) have risen by an annualized 9.6% rate over the past six months to October 2017. Capital goods shipments are up nine-straight months, and have melted up. Orders and capital goods shipments are the seed corn of an economic revival. Tax reform can be the fuel boost to lock it in. - Special Guest Blogger: Tim Kearney

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