Inconsistency needs composure

US trade policy appears to be dominated by sentiment and electoral considerations and is characterised by a high degree of volatility. Within a few days, US President Trump announced tariffs of 10% on a volume of 300 billion US dollars and then partially postponed them again. To make matters worse, there was actually no reliable justification for either action. They appear to the observer as completely arbitrary actions of the US government or the president himself. The financial markets, especially the stock markets, have reacted violently to both announcements. However, nothing should be interpreted into these movements. The economic outlook will not be changed by these erratic actions. However, the reluctance of companies to invest is likely to increase even further, as uncertainty about the further development of the trade conflict should deepen. However, weak investment and stagnating world trade are the main reasons for the slowdown in growth momentum….

USA vs. China – Trump turns customs screw again

After a break of several weeks, trade talks between the USA and China took place again last week for the first time. Apparently, however, there was little willingness on the part of the Chinese delegates to accommodate American interests. Otherwise it is hard to understand that immediately after the end of the consultations there was talk of good talks, but the US President suddenly announced the introduction of further punitive tariffs on 1 September. Thus the trade conflict between the USA and China is now climbing a new escalation stage, after it had looked as if this cliff had been avoided at the G20 summit in Osaka. Even if Trump believes that China is paying the tariffs, the negative effects will ultimately hit the US economy. US exports to China have fallen sharply due to retaliatory measures and were 18 percent down on the previous year in the second quarter….

USA: Solid economic growth in Q2, thanks to consumer buying propensity

Thanks primarily to a strong boost from private consumption, the US economy grew by 2.1 percent over the year as a whole in the second quarter. Compared to the strong start to the year, the growth momentum has thus slowed down less than expected. On the other hand, the significant slowing effects of foreign trade and inventories are in line with our expectations. On the one hand, these had clearly supported growth in the first quarter. On the other hand, both factors have been reflecting the ups and downs of the trade conflict with China for about a year now and are therefore showing strong fluctuations. The latest figures show that private consumption continues to fulfil its role as a growth guarantor. Given the very good employment situation in the USA, this is not too much of a surprise. After two consecutive quarters of rather subdued growth rates in private…

USA: Further dwindling fiscal discipline enables budget deal

Shortly before the end of a countdown, for which the so-called debt ceiling was responsible, policymakers in the United States were able to agree on a spending deal. And now, above all, the further disappearance of fiscal discipline is securing the solvency of the US government until the end of July 2021, i.e. until well after the next congressional and presidential elections. The „Budget Control Act“ of 2011 is now finally history, the annual deficit in the federal budget is estimated to rise to about 1 trillion US dollars. In fact, the debt ceiling, as the legal maximum limit, is intended to keep the total amount of debt that the state is allowed to collect in check. In recent weeks, estimates had become known that the resources of the Minister of Finance would probably not last until October, as was initially assumed. Now Congress has begun the last week of…

USA: Moderate inflation – despite robust economy

An overall moderate outlook for inflation had given the US Federal Reserve the leeway to end its monetary policy normalization course at the turn of the year. This is mainly due to the subdued rise in wages, which has been recorded despite historically low unemployment. Fed Chairman Jerome Powell has also recently pointed out that the link between a good employment situation and wage growth rates has eased. The resulting boost in consumer prices is therefore also lower than in previous economic recovery phases. Nevertheless, inflation rates should pick up somewhat in the coming months. We expect inflation to average 2.0 percent in 2019 and 2.4 percent in 2020. The outlook for the coming year reflects not only a slight rise in wage demands but also a bearish effect and the existing penalties on imports from China on consumer prices. The oil price, on the other hand, will probably have…

The US Federal Reserve is determined to cut interest rates

Yesterday, Fed Chairman Jerome Powell, at a hearing before the House of Representatives Banking Committee, gave a relatively clear signal that the Fed intends to cut interest rates. Three rate cuts now appear possible and probable over the next twelve months; the first cut could take place as early as July. The Federal Reserve’s monetary policy minutes published yesterday evening indicate that the June Council’s monetary authorities generally assumed that economic activity would continue to grow at a moderate pace. In this context, the Fed representatives expect a sustained strong development in the labour market and an inflation rate in the range of the target value. However, according to the assessment of numerous Council members, the probability of a less favourable development had increased. Among other things, risks would emanate from the still unresolved trade dispute. From these different comments and assessments it can be deduced that the neutral key…

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