Grind for May 22nd, 2019
“Alimony is like buying hay for a dead horse.”
– Groucho Marx
Consumer sentiment surges to 15-year high
Economic surveys for the month of May suggest an increase in consumer sentiment in spite of higher gas prices.
The University of Michigan’s consumer sentiment index showed a reading of 102.4 (a jump of 5.2 compared to last month). Economists had predicted a much smaller increase.
Consumer sentiment is an important metric used to gauge the health of the US economy as determined by public opinion. In the US, consumer spending represents more than two-thirds of all economic activity.
“Consumers viewed prospects for the overall economy much more favorably, with the economic outlook for the near and longer term reaching their highest levels since 2004,” writes Michigan economist Richard Curtin.
Michigan’s survey also showed an increase in consumer expectations, which rose from 87.4 in April to 96 in May.
The gains were recorded early this month before Trump increased tariffs on Chinese goods in response to failed negotiations with Beijing.
Trump further irritated China this week by requiring US firms to obtain a special license in order to do business with Chinese telecom company Huawei.
Shares of Qualcomm and Micron Technology dropped 1.6% and 3.4%, respectively. Apple shares dropped 0.6%.
Analysts expect the friction with China to have a negative impact on consumer and business confidence that could slow the pace of consumer spending in late May and June.
“So the recent improvement in sentiment may turn out to be short-lived,” explains JPMorgan economist Daniel Silver. “While the ultimate response to tariffs is still unclear, the survey results suggest that consumer sentiment was upbeat before the developments on trade policy from the past couple of weeks.”
Survey results also suggest Americans are expecting higher inflation during the next 12 months, but a key measure tracked by the Federal Reserve shows inflation slowing below the agency’s target.
President Trump finally withdraws steel tariffs from Canada and Mexico
Officials from the US and Canada on Friday announced an end to the steel and aluminum tariffs Trump imposed last year on grounds of “national security.”
In return, Canada will lift the retaliatory tariffs it imposed on US goods.
The Trump Administration is expected to remove the metal tariffs from Mexico as well in order to facilitate the finalization of the US-Mexico-Canada-Agreement (USMCA), the trade deal that replaced NAFTA. Trump also said he would reduce taxes on steel produce in Turkey.
The USMCA does not impose limits on steel or aluminum imports, but it does give all three nations the opportunity to re-impose tariffs if one country is buying in too much.
“These tariffs were harming workers and consumers on both sides of the border,” says Canadian Prime Minister Justin Trudeau. “As we look at moving forward with the new NAFTA, it didn’t make a lot of sense to continue to have tariffs on steel and aluminum between our two countries.”
Trump is also expected to decrease (but not eliminate taxes) on steel produced in Turkey.
The EU will remain subject to the initial tariffs of 25% on steel and 10% on aluminum.
GOOD TO THE LAST DROP:
Did you know… Kissing actually has the biological purpose of passing on biological information and chemical signals to assess mating possibilities and status.