In conjunction with the bounce [to lower-highs] in U.S. equities, we’ve been getting a lot of questions about what’s driving our dour U.S. growth outlook (in RoC terms) for 2H18 and our response is as simple as the unorthodox forecasting processes underpinning it:
- Steepening base effects;
- Key high-frequency soft data – which led on the way up – is rolling over on a trending basis; and
- The corporate profit outlook is more challenging than consensus believes due to rising wage pressures and traversing peak rates of contribution to sales and EPS growth from a falling U.S. dollar. Recall that corporate profit growth leads hiring and capex.