4 September 2017

USA : Upward trend

By Christophe Morel, Chief Economist

[Christophe Morel, Chief Economist]
The publication of the July figures for new orders of consumer durable goods in the United States, which is seen as a proxy for business spending plans, suggests that investment remains a very strong contributing factor for economic growth: investment growth for the third quarter of 2017, based on the annualized July figures, is above 4% (as a reminder, investment growth was 7% in the 1st quarter and almost 5% in the 2nd).

This figure gives us an opportunity to take a more global look at the current American economic situation. Overall, the “snapshot” of the US economy is even more favourable today than it was in spring:

– inventory, very clearly, has still not restocked! This point surprises us, since it is not consistent with certain other components of the analyses of the US economy.  However, it does suggest that we are very far from a situation of excess inventory, and so restocking will inevitably have a very positive impact on growth at some point in the future;

growth is healthy, with positive momentum in both consumer spending and investment;

– this upward trend of consumer spending will persist, given the continued improvement of the jobs market and the increasingly concordant indicators of growth in salaries;

– finally, the investment trend remains very positive, in view of the still very favourable economic surveys, such as the recently published Regional analyses and the 6-month investment outlook, which remains very high (see graph 1), including in the energy exploration sector.


This growth of the US economy is therefore balanced and self-sustaining, as witnessed by the return to a consistent pattern of employment and investment trends (see graph 2). Given that the US remains the driving force of the global economy, this is therefore good news for international trade. Under these conditions, any possible “spanner in the works” will not come from the economy itself. Reviewing the balance of risks in our scenario, the main downside risk factor at this stage remains the interaction between political risk and financial instability. In particular, it is important that the political situation in the United States does not give any further fuel to the impression that decision-making is impossible and that there is “no captain of the ship”. An increase in the doubt levels of foreign investors would be reflected in a drop in the value of the dollar. Even if this fall would support exports, it would also bump up risk premiums in response to uncertainties regarding the value of dollar assets, which could have an incidental negative impact on the directional trends of high-risk assets, thereby in turn putting pressure on financial conditions.


United States: outlook for investment decisions

Image 1

United States: investment and employment 

Image 2



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