Where Is The Economy Going? Look At Canada

Where Is The Economy Going? Look At Canada by Dennis Slothower – Outsider Club

Yellen Flips on Inflation & Economy

Janet Yellen concluded her latest testimony before the Senate giving mostly the same speech as she did in her previous testimony before Congress, but with some slight differences.

Yellen spun that she expected the economy to strengthen in 2018 and that inflation was expected to go higher next year, but in her testimony before the Senate she acknowledged that there may be other factors at work undercutting inflation and keeping the GDP growth below 3%.

Over the last five years U.S. productivity averaged only ½%, vs. 1% over the last 10 years, which has undercut the GDP with it averaging about 2%. She saw it as a real challenge to get the GDP averaging 3% for a given year, even under President Trump’s fiscal policy vision.

What Yellen avoided explaining is it is hard to improve U.S. productivity when wages are so low and so many people have to work two part-time jobs to make it. This is really the issue, which she never addressed. Obamacare as it exists now has undercut small business, where 70% of jobs are created.

Yellen expects the second quarter to see an improvement in the GDP from the 1.4% in the first quarter. Presently, the Bank of New York is forecasting a second quarter GDP at 1.9% and the Atlanta Fed at 2.6%, but it has been consistently lowering it. I think given how much the U.S. dollar has fallen this year, we should see some improvement.

Energy – The Weak Wild Card

Yet the wild card undercutting growth is the persistent weakness in the energy sector.

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Crude oil prices remain in a bear market, along with other commodities. In this chart, we see a pattern of lower highs and lower lows, with oil prices trending below the 50- and 200-day moving averages. Oil stocks also remain in a bearish market.

It is naïve to think we should see the economy expanding when commodity prices are deteriorating. What’s more, crude oil prices are pegged to the U.S. dollar. Therefore, a falling dollar should lift energy prices whereas a rising dollar would pressure oil prices.

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Jimmy is a managing editor for Outsider Club and the Investment Director of the personal finance advisory The Crow's Nest. You may also know him as the architect behind the wildly popular finance and investing website Wealth Wire, where he's brought readers the stories behind the mainstream financial news each and every day. For more on Jimmy, check out his editor's page.