Against the backdrop of the unprecedented challenges to the world economy in 2020, Finance For...
7 days of Economics: “Trump effect” or oil story?
- In the US, the rise in oil prices has something to do with the pick-up
- The so-called “Trump effect” is fading
The business climate still looks good in the US. The labour market has created half a million jobs over the past three months, bringing back the unemployment rate to 4.5%, a ten-year low. Housing starts picked-up, along with corporate investment, as suggested by the rise in capital goods orders. All of this can hardly be reduced to a simple “Trump effect”. In our view, the political environment has little to do with the actual pick-up in investment, which relies more on external factors.
First, US companies are likely responding to an increase in foreign demand. In the emerging countries, import volumes have surged, partly because of the expansionary policy followed by China… Second, the rebound in oil prices is benefiting to the shale oil industry, which is becoming more profitable. The US energy output is on the rise, as well as the number of wells. Better prospects also help corporate spreads to narrow, creating additional support for investment.
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