Hopes for Global Growth Still Pinned to the U.S. Economy

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Special Guest Blogger: Tim Kearney

One swallow may not make a spring, but one tweet sure can prompt a rally. President Trump prompted one by tweeting that he will push the trade deadline past March 1, noting “substantial” progress in trade talks with China. This positive news comes at a good time, as the Dutch Bureau for Economic Policy Analysis recently reported that global trade volumes fell by 1.4% YoY — breaking a three-year run of positive readings. More importantly, it appears to be the largest drop in a decade. There are two takeaways: there is a big appetite for resolution of these trade tensions and this is a major known-unknown, an unpredictable issue that will require market participants to remain careful.

It helps that recent U.S. data have rebounded a bit. The February National Association of Home Builders Housing Market index unexpectedly moved up to 62 in January from 58 in December, a bit of ventilation following a yearlong decline. The index is about on its five-year average value. The February Dallas Fed Manufacturing index rebounded as well and outperformed expectations. Unemployment claims are dialing down and remain at 50-year lows. Markit Composite PMI hit 56 versus 54, which was expected.

This all is important to the global economy, as PMIs in Germany, Japan and the Eurozone aggregate all have slumped below 50, i.e., into contraction territory. Germany is now at 47.6; last winter, it was printing near 60. The United States has some heavy lifting ahead but the momentum remains positive.

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