Growth games

Posted by: Paul Donovan

10 Feb 2020
  • US President Trump's budget proposals are due and are expected to signal US economic growth of over 3% this year. Markets are unlikely to believe this. Trade taxes have done too much damage to investment spending to make this realistic. Budget estimates in most economies are generally a polite fiction, but these growth numbers do underscore the structural problems of the US deficit.
  • China starts to return to work after the extended Lunar New Year holiday. How quickly production resumes signals how much global supply chains are likely to be damaged. Customers of China should have some stockpiles. Countries geographically close to China are likely to be the first to feel disruption.
  • Food prices pushed up Chinese consumer price inflation. This is a local, not a global, issue. Producer prices were almost unchanged on the month. These have slightly more global relevance, but are still not that significant to US or European consumer prices.
  • Ireland's general election produced an effective tie between the three main parties. Negotiations for a coalition now begin. Markets will pay some attention because of Ireland's bearing on the interminably tedious EU-UK divorce process. Several Fed speakers jostle each other for media attention.

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