Trump speech could detail plans on economy, tax cuts
Giving business investment a shot in the arm by lowering taxes could be a centerpiece of President Trump’s speech to Congress on Tuesday.
A busy week of economic news will be highlighted by a familiar wild card: President Trump.
Trump is scheduled to address a joint session of Congress on Tuesday, and analysts are awaiting details of his economic plan, particularly tax cuts. A batch of other releases will shed light on business investment, consumer confidence and spending, the health of the manufacturing and service sectors and a revised estimate of Q4 economic growth.
Business investment has turned up in recent months after a prolonged slump. Credit a partial rebound in oil prices that has spurred more orders for drilling materials and a comeback in business stockpiling. Non-defense capital goods orders excluding aircraft — a proxy for business capital spending — has risen for three consecutive months, including sharp increases averaging more than 1% in late 2016. Nomura economist Lewis Alexander expects the Commerce Department’s durable goods report
Monday to reveal a more modest increase for January.
Giving business investment a shot in the arm by lowering taxes could be a centerpiece of Trump’s speech to Congress on Tuesday. But economists have lots of con- cerns. Lowering the corporate tax rate from 35% to 15% as Trump has proposed is likely to be viewed warily by Republicans worried about swelling the budget deficit. And many oppose a new border adjustment tax on imports that could help offset the corporate tax cut but raise prices for consumers. Some lawmakers are also skeptical of Trump’s belief government revenue losses from a tax cut would be made up by faster economic growth.
The economy slowed late last year after a breakout third quarter, growing at a 1.9% annual rate, as healthy gains in consumer spending, housing starts and business investment were partly offset by sluggish exports. That’s slightly below the recovery’s average 2% pace. Alexander expects upward revisions to all of those contributors. Overall, economists figure Commerce will upgrade its fourth-quarter growth estimate to a 2.1% annual rate.
Consumer confidence slipped a bit in January but remained close to the 15-year high reached the previous month. Economists expect the Conference Board to report that its consumer confidence index dipped marginally in February but remained high.
The same forces that have lifted consumers’ outlook have bolstered their spending, with consumption rising a sturdy 0.5% in December. Economists expect Commerce on Wednesday to report a 0.3% increase for January.
Overall, economists figure Commerce will upgrade its fourthquarter growth estimate to a 2.1% annual rate.