Economic signals may be more powerful than tweets
- Politics rarely has a short-term impact. The plan to reverse the US "Dreamers' Act" on immigration in six months will have implications for US trend growth. However, there are three ways near-term economics may be affected.
- This decision questions the pro-business stance of the administration. This is another instance of the president (frustrated by Congress) acting in areas outside congressional oversight – which may raise questions about other such policies, e.g. trade. The immigrant community may choose to increase precautionary savings and cut consumption in response to this policy.
- The North Korean sideshow has thrown up a lack of unity between China and Russia on one side and the US on the other. Not a great negotiating stance. The rhetoric around US trade sanctions against non-Korean countries is likely to persist. Markets will price in trade risks, but not a risk of conflict.
- The ISM non-manufacturing opinion poll on business sentiment is due. Economists are left crying "make it stop", but the 24-hour news cycle has to be fed with something. The Fed's Beige Book of anecdotal evidence is also due. This, too, is a survey but does have the false illusion of precision.