The green shoots of economic stabilization?

Posted by: Paul Donovan

11 Mar 2019
  • Last Friday's US employment report showed the broadest measure of unemployment at an 18-year low, and rising earnings. Companies may be struggling to increase their staff numbers owing to a lack of suitable candidates for vacant positions. The question is whether the subsequent labor cost increases squeeze profits or raise inflation.
  • German industrial production was weaker than expected in January, but in the grand tradition of dodgy data, the December figures were revised substantially higher. Weaker business investment spending has held back global production (and international trade). With uncertainties fading, companies are more likely to invest, helping production and improve trade.
  • The US and China continue to sound positive about a trade deal. The Chinese central bank governor said that China would not manipulate its currency for competitive advantage (it has not been doing that, so this is not a huge concession). There was also noise over the UK and EU divorce process. There is always noise over the UK and EU divorce process. Nothing is happening.
  • US Federal Reserve Chair Powell reiterated that policy is appropriate and inflation is muted. Inflation is muted for now, but the outlook depends on how companies react to the tight US labor market.

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