Optimism about President Trump's economic policy
There is mounting evidence that the election of Donald Trump for a second term is already having negative effects. economic acceleration.
S&P Global said Monday that service providers New orders and production volume have increased significantly since March 2022Employment in the sector increased for the first time in five months, and business confidence reached an 18-month high.
Seasonally adjusted S&P Global US Services PMI Business Activity Index The index rose for the second consecutive month in December, reaching 56.8, the highest level in 33 months, following November's 56.1. This was slightly lower than the previous “preliminary” number, but still shows the economy is gaining momentum following November's election results.
According to S&P Global, companies I started actively working on new projects. The election results cleared the air. Sequential growth in the services sector increased for the eighth consecutive month, confirming the sustained recovery in activity. In particular, new transactions from overseas continue to increase, although the pace was slower than in November.
A surge in new orders has left many companies scrambling to keep up, resulting in backlogs building up further in December, for the third time in four months. In response to the increased workload, the service provider has slightly increased its staffing levels, ending four months of layoffs. on the other hand, Employment growth is a positive developmentThe report notes that employment growth remained relatively slow.
It's encouraging. pace of inflation December was the third consecutive month of easing, with cost increases at the lowest rate since February. However, input prices still rose at a faster pace than the pre-pandemic average. Companies cite rising transportation costs and continued wage pressures as key drivers of rising costs.
Excitement about tax cuts, deregulation and tariffs
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said: emphasized the role of policy expectations. We are driving the rapid growth of the service sector. “Expectations for faster growth in the new year are based on expectations for more pro-business policies from the incoming Trump administration, including a favorable tax and regulatory environment alongside tariff protectionism,” he said. .
Williamson noted that this optimism has enabled the services sector to: This more than offsets the continued weakness in the manufacturing industry.. As a result, the US economy looks poised for strong growth in the fourth quarter, following the 3.1 percent GDP expansion recorded in the third quarter.
The Federal Reserve could be in a difficult position as services sector growth remains strong. Policymakers are eyeing the possibility of lowering interest rates to stimulate further economic expansion, but given the current pace of economic activity, they may have to reconsider. Mr. Williamson said the economy is looking to end 2024 in good shape. Vulnerability to changes in interest rate policy Financial services in particular will be in the spotlight in early 2025, as they play a key role in sustaining recent growth, primarily due to expectations of lower borrowing costs.
expectations of pro-business Trump administration Emotions are clearly heightened. But persistent inflationary pressures are causing the Fed to reconsider its recent enthusiasm for rate cuts, potentially complicating the path forward. As companies prepare for further expansion, all eyes will be on whether policymakers can stage a strike. The right balance between promoting growth and controlling inflation. Much attention will no doubt be focused on how quickly Congress can move to maintain and expand the pro-growth tax cuts that President Trump successfully introduced during his first administration.
