Tax cut day (taxes still apply)

Posted by: Paul Donovan

14 Feb 2020
  • US retail sales are due. A strong labor market, low interest rates, and the unremitting hedonism of American consumers should give a firm number. There is also a consumer sentiment opinion poll –this may reflect the sensationalism of media (over the coronavirus) more than the reality of consumer spending.
  • US trade taxes are due to be cut today. This is good news compared to three months ago (Americans pay less tax), bad news compared to three years ago (Americans pay more tax, and there is considerable uncertainty about trade policy). Import price data will confirm the tax burden continues to fall on Americans.
  • The Eurozone trade surplus is due – it will be a surplus as Europe makes things other countries want to buy. In the context of the weaker euro, there is a risk that this provokes a response on the Trump Twitter Feed.
  • German GDP growth was broadly as expected. Remember that German growth will be affected by German demographics, and should be slower in the future than in the past. Spanish CPI will likely be overlooked by markets. The UK government reshuffle is taken as a signal of more fiscal stimulus measures, as that is what Prime Ministerial Adviser Cummings wants.

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