Weekly Economic Report
Two major reports on February activity – US jobs and Chinese trade – both suggested that the global economy is weaker than expected. We agree – but see both readings as in the rear view mirror, as they are coincident to lagging indicators. Meanwhile, Chinese stimulus is still building, the Federal Reserve and ECB are on hold and increasingly dovish, the trade war with China appears to be near resolution, and Brexit may go on hold forever. With the Ides of March coming next Friday, we are most of the way through an admittedly soft first quarter. We believe the second quarter will improve – but still potentially remain below 2% as employment continues its moderation. However, we expect US growth will return above trend in the second half of the year – while Chinese growth accelerates in response to substantial stimulus that started mid-2018. Even if Brexit is removed as an immediate threat in Europe, problems abound – with the greatest threat that the trade war shifts to a new battlefield. A weaker euro will continue to reduce Europe’s impact on the global stage – and make it easier for a rebounding China to buy its best and brightest as the Middle Kingdom seeks to diversify away from a US centric export policy. Bottom line, after a slight pause, life will remain good in the global suburbs, while the Sunbelt continues to gain on older less nimble Rustbelt competitors.