Highlights of the week
Economist insights: The ISM surveys and the employment report confirmed the robustness of the US economy, inflation slowed in Switzerland
- The US purchasing managers survey for the non-manufacturing sector published by the ISM surprised positively in September, hitting its highest level since 1997 at 61.6, and the unemployment rate reached 3.7%, a 48-year low
- These surveys support our scenario according to which growth should remain robust over the coming months. We continue to anticipate further gradual key rate hikes by the Fed
- In Switzerland, the appreciation of the franc over the past few months weighed on inflation in September, which was down from 1.2% to 1.0% y-o-y, and could slow price momentum over the medium term...
- … which supports our scenario according to which the SNB should not hasten the exit from its accommodative monetary policy
Focus United States: Mid-term elections – could the Democrats curb Donald Trump’s economic policy?
- According to the polls, the Democrats have a 74.9% chance of winning the majority in the House of Representatives in the mid-term elections on 6 November. The Republicans would keep the Senate
- In this scenario, which is the most probable, the tax reform introduced in January 2018 should remain in place, and President Trump could continue to increase trade tariffs…
- …however, the Republicans could be restricted in the deployment of their programme, notably the Tax Reform 2.0, additional tax cuts or deregulation, which would tarnish earnings prospects
- The mix in the two chambers would thus lead to greater uncertainty with regard to the implementation of the economic policy, which could slightly accentuate the slowdown in GDP growth that we anticipate in 2019
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