Our Chief Economist, Kevin Lings shares his outlook on US business confidence and the impact Trump’s presidency has on the economy.

1. Scoring US confidence indicators
By Kevin Lings: STANLIB Chief Economist
The US business sector is still relatively confident, but cracks are starting to show. The
business sector's intention to invest is still not at the level that would result in a surge of
investment activity.
Many media stories still focus on the negative social and political aspects associated with
President Trump, and don’t monitor the sharp jump in US business confidence that occurred
immediately after Trump was elected. It seems clear that the boost in US business confidence
is linked to Trump’s promises regarding tax cuts, less business regulation, greater trade
protection and increased spend on economic infrastructure. Importantly, there is a strong
and positive correlation between US confidence and economic growth, hence a sustained rise
in business confidence should lead to a noticeable improvement in GDP growth.
Earlier this year, STANLIB introduced a new economic research product that aims to score US
business confidence on a monthly basis.
The confidence indicators we have chosen to monitor each month include the following:
• ISM manufacturing index
• ISM non-manufacturing index
• NFIB Business Confidence
• NFIB Hiring Plans
• Wells Fargo Small Business Confidence
• US consumer confidence (Conference Board)
• US prospective home buyers
• US leading indicator
Each of the above indicators are scored (subjectively) on a scale of 1 to 10, with 10 being
extremely high confidence. Currently (mid-May 2017), the average of all eight indicators
scored 7.4 out of 10, which is slightly below the previous month’s score of 7.5 and would
suggest that while the US is still experiencing a high level of confidence, the indices have
softened a little relative to the initial euphoria that followed the Trump victory.

2. Furthermore, the business sector’s intention to invest is still lagging the overall level of
confidence and is not at a level that would indicate a strong pickup in private sector fixed
investment spending. Instead, the index would suggest a modest improvement in investment
activity. It seems fair to argue that the business sector is still waiting to see if Trump can
deliver on his election promises, in particular a cut in corporate taxes and the de-regulation
of industry. This is also still no real progress on Trump’s $1 trillion infrastructure development
plan.
As mentioned above, if the current level of confidence can be sustained, US economic growth
would be expected. Please watch for the next update in June 2017.