Goldman Says Trade Worries Aren't a Drag on Business Investment
Goldman Says Trade Worries Aren't a Drag on Business Investment
(Bloomberg) -- Goldman Sachs economists are skeptical that trade policy uncertainty is a major drag on business investment at the moment. Instead, they’re pointing to other economic indicators, which they say are still okay.
“The link between economic policy uncertainty and capex weakens sharply when taking into account financial conditions and company investment spending expectations, which both still signal a decent outlook,” Daan Struyven and Blake Taylor wrote in a note.
That’s “particularly relevant” right now, they said, as financial conditions are still “quite easy,” and capital expenditure expectations are positive. For the latter, they cite surveys conducted by the New York Fed, Philadelphia Fed, Richmond Fed, Dallas Fed and National Federation of Independent Business.
Read more: NFIB Survey Shows Domestic Economy Remains Resilient: Bloomberg Intelligence
Goldman’s equity analysts also regard the recent trade war escalation as having little effect on capital expenditures, the economists said, citing a survey of 15 of the firm’s sector analysts. Only one reported their sector’s capital expenditure outlook had worsened because of tariffs, trade tensions or trade policy uncertainty, and no one reported hiring was hurt. Instead, they were worried about how trade policy might affect input costs, sales and profits.
Bank executives at a recent industry event sounded less sanguine. Several at Morgan Stanley’s financials conference -- including speakers from Citizens Financial Group and Fifth Third Bancorp -- said that corporate borrowers are becoming more cautious due to uncertainty about trade and interest rates, along with "overall economic unease." That might point to pressure on loan growth.
U.S. equity futures were slipping Friday morning, along with European stocks, following a mixed session in Asia, while 10-year Treasury yields erased a decline after U.S. retail sales were broadly higher in May, and March and April numbers were revised higher.
To contact the reporter on this story: Felice Maranz in New York at fmaranz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Scott Schnipper
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