ChartBrief 104 – Optimism Running High On The US Economy

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ChartBrief 104 – Optimism Running High On The US Economy

The June round of economic confidence surveys on the US economy is basically done and the results show optimism is still running high. I previously remarked that the initial surge may have been overstated or “too far, too fast” – but that it was probably in the right direction.  I remain of that view, and would point out that the signal is basically the same whether it’s the consumer, small business, manufacturing, services.  One thought that comes to mind is “animal spirits” – people tend to spend more, invest more, start businesses, change jobs, etc when they are confident on the economy and outlook, so it does have a self-reinforcing effect.

Eurozone vs USA, whose economy is doing better?

Of course the logical progression of better confidence and economic optimism - and the real activity it reflects and portends - is tighter capacity (and ultimately inflation).  And we are seeing that show up clearly in the surveys again, with small businesses finding it hard to fill jobs, and consumers finding it easy to get jobs.  So this says onwards and upwards with Fed rate hikes and balance sheet normalization as the monetary policy tightening cycle gets well underway in the USA.

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There is generally broad agreement across the surveys, and after the near-miss recession scare in 2016 economic optimism shows significant confidence, perhaps a sign of animal spirits finally starting to stir after a long recovery.

The improvement in confidence is reflected in real activity, and this chart is a good example. It shows an increasingly tight labor market as consumers find it easy to get jobs and small businesses find it difficult to fill jobs.  This is an important chart for the Fed.

US Economy

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Article by Callum Thomas, Top Down Charts

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Topdown Charts: "chart driven macro insights" Based in Queenstown, New Zealand, Topdown Charts brings you independent research and analysis on global macro themes and trends. Topdown Charts covers multiple economies, markets, and asset classes with a distinct chart-driven focus. We are not bound by technical or fundamental dogma, and instead look to leverage any relevant factor to capture the theme. As such, here you will find some posts that are purely technical strategy, some that just cover economics and data, and some posts that use multiple inputs to tell the story and identify the opportunities. Callum Thomas Head of Research Callum is the founder of Topdown Charts. He previously worked in investment strategy and asset allocation at AMP Capital in the Multi-Asset division. Callum has a passion for global macro investing and has developed strong research and analytical expertise across economies and asset classes. Callum's approach is to utilise a blend of factors to inform the macro view.
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