EC Wondering About Stronger Growth Due To Trump

The new era formally begins next week, January 20, when Donald Trump is sworn in as President of the United States at 12 noon eastern. It’s clear that change is coming, on multiple fronts, including a refocusing of economic policy that’s widely expected to boost growth. The question is whether the generally upbeat expectations about the macro outlook are driven by sound economic logic vs. politically driven hype? Perhaps the answer lies somewhere between the two.

Regardless of what you’re anticipating, a transition period awaits that will roll on for months. Whatever the Trump administration can accomplish with its policy mix of tax cuts, lighter regulation, and infrastructure spending, the results won’t be obvious any time soon. In the interim, speculation and debate about what’s coming, with little if any hard data, will prevail.

In some corners, it seems, the debate is over—Trump’s economic policies will succeed in no uncertain terms. On the front line of this optimism is the dramatic resurgence of expectations in the small business sector, based on a sentiment benchmark published by the National Federation of Independent Business (NFIB). The group yesterday released its monthly update of the Small Business Optimism Index, which soared for a second month in December, rising to the highest level since 2004.

“We haven’t seen numbers like this in a long time,” said NFIB President and CEO Juanita Duggan. “Small business is ready for a breakout, and that can only mean very good things for the US economy.” NFIB’s chief economist, Bill Dunkelberg, added that “the December results confirm the sharp increase that we reported immediately after the election.”

nfib-11jan2017

The mood in the consumer sector has brightened, too, based on the University of Michigan’s Index of Consumer Sentiment, which rose to a 12-year high last month. “An all-time record number of consumers (18%) spontaneously mentioned the expected favorable impact of Trump’s policies on the economy,” said Richard Curtin, the chief economist for surveys. “This was twice as high as the prior peak (9%) recorded in 1981 when Reagan took office.”

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Norman Mogil 6 months ago Contributor's comment

You identify two very powerful factors. First, the great underlying forces of demography and productivity -- the Gross argument. Second, the chaotic nature of a Trump administration-- we are seeing that already before he even takes office.

Why the business community cannot appreciate the negative impact of these two factors on growth negates the value of all these sentiment indices.