Something for your Espresso – It all depends on inflation
Morning from Copenhagen.
The NFIB Survey was released yesterday, and we saw the exact same “Trump effect” as in 2016, with the Business Optimism Index rebounding sharply.
While the increase is significant, it’s unclear how much of it is driven by small companies expecting Trump to solve their problems versus actual changes in their expectations independent of Trump. This makes it difficult to interpret, but the increase in the index—8 points now versus 3-4 points back in 2016—is notable. Additionally, our nowcast on US growth has ticked higher in late November and early December, suggesting there could be substance to the optimism.
Chart 1.a: The Trump effect strikes back!
For the first time since early 2023, markets are starting to price a marginal risk of re-accelerating inflation, marking a major shift. Everything hinges on inflation being resolved, and things could get ugly if it climbs back towards 4%.
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