Strong consumer confidence, which surged to a near 17-year high in November reading at 129.5, is being supported by a robust labour market, while house prices rose sharply in September. It appears to us that consumers are entering the holiday season on a strong note as they expect the economy to expand at a healthy pace in 2018. Our 4Q2017 GDP projection for now is at a 2.5% annualized rate.

We believe the December rate hike by the US Fed is almost cemented. The question now is not only how many rate hikes the Fed will institute in 2018 but also how far the tightening cycle will go. We are looking at 3 rate hikes in 2018, each by 25bps should the broad package of tax cuts go through despite worries about persistently low inflation.

• Consumer confidence surged to a near 17-year high in November supported by a robust labour market, while house prices rose sharply in September. The consumer confidence index rose 3.3 points to 129.5 in November, reflecting a fifth consecutive month of gain.

• It appears to us that consumers are entering the holiday season on a strong note as they expect the economy to expand at a healthy pace in 2018. Besides, we feel the strong optimism is also being supported by the healthy stock market amid expectations the Republicans in Congress will push through hefty corporate tax cuts. Congressional Republicans have unveiled a broad package of tax cuts, including slashing the corporate income tax rate to 20% from 35%.

• In a separate report, the S&P Case-Shiller composite index of house prices in 20 metropolitan areas jumped 6.2% y/y in September from 5.8% y/y in August. Meanwhile, the goods trade deficit surged 6.5% to US$68.3 billion in October, boosted by rising imports of industrial supplies, consumer and other goods. Exports fell 1.0% as shipments of food, motor vehicles, capital and consumer goods decreased. Wholesale inventories fell 0.4% in October after edging up 0.1% in September. Retail inventories slipped 0.1% in October after declining 0.9% in September.

• Our 4Q2017 GDP projection for now is at a 2.5% annualized rate. Trade added four-tenths of a percentage point to the economy's 3.0% growth in the third quarter while inventory investment contributed 0.73 percentage point.

• As such, we believe the December rate hike by the US Fed is almost cemented. The question now is not only how many rate hikes the Fed will institute in 2018 but also how far the tightening cycle will go. We are now looking at 3 rate hikes in 2018, each by 25bps should the broad package of tax cuts go through despite worries about persistently low inflation.

Source: AmInvest Research - 29 Nov 2017