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So long, farewell, auf Wiedersehen, goodbye

| Posted by: Paul Donovan | Tags: Paul Donovan

  • US White House economic adviser Cohn has resigned. Markets viewed Cohn as a voice of reason on trade policy. The departure signals the defeat of anti-protectionism, or reduces the influence of anti-protectionism. The Trump Twitter feed has denied "chaos" in the administration, but senior staff turnover has been unusually high. This undermines the policy continuity that markets crave.
  • Any tax on trade, in any country, means consumers are going to be purchasing goods they would not chose to buy, at prices that are higher than they should have to pay, to subsidize less efficient companies. However, Trump's taxes to date have not been especially visible to consumers, and so far the economic impact has been limited.
  • The Euro area publishes fourth quarter 2017 GDP, confirming that 2017 was a bounce back year after a mediocre 2016. This momentum should continue at the start of 2018. Exporters may complain about Euro strength, but real export growth is unaffected and domestic demand is good.
  • US productivity data is released. The average may be misleading. Productivity in good companies is likely to be very, very good. However, "zombie" companies, sustained by the low rate environment (when they normally would fail), drag down the average.