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Goldman Sachs expect up to another USD 4 trillion in stimulus from Biden

  
Analysis, Economy

Goldman Sachs say that ina addition to the $1.9tln approved last week

  • the next round of fiscal legislation … our economists (expect) a package that will include at least $2 trillion in infrastructure spending and could reach $4 trillion if it also funds health care, education, and child care initiatives. 
I do not know how the Fed can hold back rate hikes if another $4tln flows into the economy in fiscal aid.
GS do add though:
  • Our economists expect the next package will be paid for in part by higher tax rates
So that’ll be some subtraction.
More from GS:
  • The tax plan proposed by President Biden in his election campaign would raise the statutory corporate tax rate on domestic income from 21% to 28%, partially reversing the cut from a rate of 35% passed in the 2017 Tax Cuts and Jobs Act. The plan would also raise the tax rate on foreign income (also called the “GILTI” tax) and institute a minimum corporate tax rate. 

IMF economist Gopinath: US stimulus package may cause transitory inflation…

  
Analysis, Economy

IMF Gopinath speaks to US inflation

IMF Gopinath speak to US inflation saying:
  • US stimulus package may cause a transitory bump in inflation
  • But inflation is not going to last in the future
That is the $24,000 question that will have to play out over time.  The Fed is bullish on the economy and rebound, but the grand experiment is to let the transitory impact from year ago inflation effects, the recent move higher in commodities, the fiscal stimulus and the reopening to play out and then see where inflation lands.
The bond market will have a say in the storyline for the markets.  The 10 year is currently down marginally at an .7068%,. The high yield reached 1.7477% earlier

NY Fed’s Nowcast for 1Q GDP fell sharply to 6.3% from 8.6% last week

  
Analysis, Economy

Industrial production and Capacity Utilization lead to the sharp fall

The NY Fed’s Nowcast model for 1Q GDP growth fell sharply to 6.3% from 8.6% last week.
The biggest negative contributors to the sharp fall this week were from industrial production (-0.89%) and capacity utilization (-0.86%).  Retail sales also led to a -0.58% decline in the models GDP growth estimate.
The biggest positive contributor came from data revisions (+0.27%).  The Philadelphia Fed manufacturing business Outlook added 0.04%.
Industrial production and Capacity Utilization lead to the sharp fall

The fall in the NY Fed model, brings the estimate more in line with the Atlanta Fed model which pegs 1Q growth at 5.7%.  They will announce a new estimate on March 24.

The Feds central tendencies for GDP in 2021 are looking for growth to come in between 5.8% 6.6%.

S&P affirms the US sovereign rating at AA+, says the outlook remains stable

  
Analysis, Economy

Standard and Poors rating agency confirms Australia is higher rated than the US 😉

 

  • US ‘AA+/A-1+’ sovereign ratings affirmed; outlook remains stable
  • S&P says sovereign rating on the US is based on its strong institutions, diversified and resilient economy, extensive monetary policy flexibility
  • says sovereign rating on US is also based on unique status as the issuer of the world’s leading reserve currency
  • says stable outlook on US indicates view that negative and positive rating factors for the US will be balanced over the next three years
  • S&P also expect US’s institutional checks, balances, strong rule of law, free flow of information to contribute to stability in economic policies

 

More (these headline summary points are via Reuters)

  • outlook for US remains stable, reflecting expectation of rapid economic growth this year and next as the pandemic recedes
  • says ratings for US are constrained by high general government debt and fiscal deficits, both of which worsened in 2020
  • expect gradual withdrawal of unprecedented US fiscal stimulus to stabilize net general govt debt burden around 110% of GDP in next couple of years
  • says US dollar’s status as world’s premier reserve currency, and size and depth of the US financial market, should sustain policy flexibility
  • says expect US govt will enact countervailing measures to begin addressing longer-term fiscal challenges
  • ratings for US are constrained by fiscal weaknesses and high net general government debt, which is expected to reach 107% of GDP in 2021
  • says rapid economic policy response to pandemic illustrates the ability of u.s. governing institutions to undertake timely measures during crisis
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