The advance GDP report shows one of the worst quarters post-crisis for business investment and one of the best for consumption. Personal consumption rose at a 4% annual rate quarter-on-quarter:
But the contribution of business fixed investment to GDP growth was effectively zero:
In the aftermath of a large corporate tax cut, that is an extremely disappointing result: It suggests that the tax cut is simply being returned to investors through share buybacks and dividend increases. After two consecutive months of declining capital goods orders, though, this result should not be a surprise.
Residential fixed investment also was a drag on GDP:
That is not surprising, given consistently weak housing and auto sales data. Strong retail sales, particular for food and beverages, and weak household investment is a sugar high economy. Households as well as corporations have failed to use to the tax cuts for investment.
A longer-term view of household investment items vs. retail sales is illuminating:
Noteworthy is that total vehicle sales are at the same level today that they reached in 2003, despite the fact that the average age of a vehicle on American roads is around 11.5 years, the highest in history. New home sales are at half the previous peak.
I believe that we are looking at a set of structural changes in the US economy brought on by demographics. One important change is the proportion of childless women aged 15-50, which has risen from the low 40% range in the early 2000’s to almost 50% today. That is an enormous change and surely affects the demand for homes.
The general fertility rate (births per 1,000 women) reached an all-time low of 62 in 2016.
Good data and analyasis (the babyboomers are taking their retirement investments increases and going out to dinner, not buying new cars).
Obviously, the tax cut was meant more to get Republicans reelected than a well thought out plan to expand US economy long term. Add to this that the second and third largest world economies just decided to increase use of the juan for inter country trade and the long term outlook for the US is not good. The weaponization of the US dollar may not be an effective form of power after all.
Good data and analyasis (the babyboomers are taking their retirement investments increases and going out to dinner, not buying new cars).
Obviously, the tax cut was meant more to get Republicans reelected than a well thought out plan to expand US economy long term. Add to this that the second and third largest world economies just decided to increase use of the juan for inter country trade and the long term outlook for the US is not good. The weaponization of the US dollar may not be an effective form of power after all.
So, tax cuts for the rich is correct.
So, tax cuts for the rich is correct.
Why is the dollar rising in value, then?
Why is the dollar rising in value, then?