Macro of the Week – US confidence indicators soaring

The recent tumult in equity markets arrived despite robust macroeconomic data in the US, for example the latest earnings season saw 73% of companies beating expectations for earnings. Recent data for consumers and businesses appears to support this view. The NFIB Small Business Optimism index for February rose to 107.6 from 106.9 – the highest figure in its history. NFIB President and CEO Juanita Duggan said: “The historically high readings indicate that policy changes – lower taxes and fewer regulations – are transformative for small businesses.” All measures were up, aside from plans to increase employment. Meanwhile the University of Michigan Sentiment index for March rose to 102, up from 99.7. This was the highest level since 2004 due to a new an all-time record favourable assessment of current economic conditions. Perhaps even more encouraging was that all of the gain in the Sentiment Index was among households with incomes in the bottom third (+15.7), while the economic assessments of those with incomes in the top third posted a significant monthly decline (-7.3). Tax reforms were mentioned in positive terms, but offset by unfavourable references to tariffs.