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Is the US catching the sniffles?

International 26 Dec, 2018 Follow News

Is the US catching the sniffles?

A commentary by Mike Jarvis, London UK

 

The critical economic linkages between the Cayman Islands and other Caribbean countries with the United States could be severely tested in 2019.

 

Recent trends in the Trump-directed US economy suggest that a rethink might be necessary about the successes he so vociferously ‘trumpets’.

 

But will it last and are the cracks already beginning to show.

 

President Trump’s ‘winning’ economic stimulus package had shown some initial encouraging results.

 

The word ‘boom’ has even slipped into the conversation.

 

Unemployment has seen record highs, the stock market hit a growth spurt (for a while), business confidence spiralled on the back of a rollback of Obama and pre-Obama regulations, wages were rising - and for while President Trump could indeed blow his own trumpet…which he did to a deafening crescendo.

 

But is the economy now running out of steam or otherwise has to be reined in, ditto President Trump?

 

This past week the US Federal Reserve raised interest rates a sign that all the economic glitter might not be real gold.

 

That action to realign the domestic US economy has already started to have global repercussions with banks making corresponding adjustments to their rates.

 

The move by the Federal Reserve was, as expected, not to the liking of the US president.

 

But the Fed went ahead despite reports of “intense, and unprecedented, pressure from Donald Trump to leave rates unchanged” and nudged the rates up a quarter of a percentage point, to a range of 2.25% to 2.5%, the ninth such move since late 2015.

 

While the move is said to be mainly a response to global trends, factors within the US economy were also dominant drivers behind the decision.

 

In the past weeks the US stock market has nosedived raising fears about wider concerns about stability in the US economy, just how sustainable the Trump domestic economic policy really is and how susceptible it is to external shocks.

 

The Trump-initiated trade war with China is expected to intensify in the new year and will more than likely have a knock-on effect.

 

Oil prices are also dipping indicating loss of earnings for that sector - albeit good news for consumers. But with global precious metals and food prices also on a downward trend cutting into the profits of US corporations it’s left to be seen how this could and probably would affect hiring.

 

What one expert describes at ‘the sugar rush’ of consumer spending triggered by tax breaks offered to US business by President Trump are showing signs of having the somnolent after-effects.

 

Another point of concern is the US housing market where, despite the boom effect in the economy, house prices have been tumbling.

 

These developments will no doubt be keeping economic analysts occupied going into the new year.

 

Already, Goldman Sachs is forecasting that “US economic growth is expected to slow from 2.9% to 2.5% in 2019 due to tighter financial conditions and a fading fiscal stimulus.”

 

It further expects “multiple rate hikes as the Fed looks to keep the economy from overheating amid rising inflation and unemployment on a downward trajectory towards 3% by early 2020.”

 

While some economists and business experts are still divided over whether the combined effect of the latest hike in the interest rates, the plummeting stock market and increased doubts in President Trump’s economic strategy - plus the billowing crises around him, it’s clear that the US is getting a case of the sniffles.

 

However, Goldman Sachs for example is confident that “for now, neither overheating nor financial imbalances — the classic causes of recessions— appear worrisome, raising the likelihood that the economic expansion remains on track to become the longest in US history in 2019.”

 

However, something seems to be indeed shifting and countries like the Cayman Islands and others in the Caribbean which are heavily reliant on the US economy need to start considering stockpiling preventive policy medication.

 

As the saying goes, when the US sneezes, the islands catch a cold.


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