The federal government this January ran a surplus while collecting record total tax revenues for that month of the year, according to the Monthly Treasury Statement released today. January was the first month under the new tax law that President Donald Trump signed in December. During January, the Treasury collected approximately $361,038,000,000 in total tax revenues and spent a total of approximately $311,802,000,000 to run a surplus of approximately $49,236,000,000. Despite the monthly surplus of $49,236,000,000, the federal government is still running a deficit of approximately $175,718,000,000 for fiscal year 2018. That is because the government entered the month with a deficit of approximately $224,955,000,000. The $361,038,000,000 in total taxes the Treasury collected this January was $11,747,870,000 more than the $349,290,130,000 that the Treasury collected in January of last year (in December 2017 dollars, adjusted using the Bureau of Labor Statistics inflation calculator). The Treasury not only collected record taxes in the month of January itself, but has now collected record tax revenues for the first four months of a fiscal year (October through January). So far in fiscal 2018, the federal government has collected a record $1,130,550,000,000 in total taxes. However, despite the record tax collections so far this fiscal year, and despite the one-month surplus in January, the federal government is still running a cumulative deficit in this fiscal year of $175,718,000,000. That is because while the Treasury was collecting its record $1,130,550,000,000 in taxes from October through January, it was spending $1,306,268,000,000. The levels of federal taxes and federal spending fluctuate from month to month, and it is not unusual—but not always the case—for the federal government to run a surplus in January. Over the last twenty fiscal years, going back to 1999, the federal government has run surpluses in the month of January 13 times and deficits 7 times.
On January 31, Hostess Brands Inc. announced that not only would their employees receive monetary bonuses this year, but that they would also get a year’s worth of free baked goods! After enacting tax legislation, Hostess will be rewarding its 1,036 bakery and corporate employees bonuses of $750 in cash, a 401(k) contribution of $500, and a year’s worth of free product. “The recent tax reform changes have given us the opportunity to review our benefit and compensation structure with an eye toward further investing in our workforce — our extraordinary team of employees who have and continue to help make Hostess so successful,” said executive chairman C. Dean Metropoulos in a press release by the baked goods brand. “As we have done in the past, the company’s management and board take great pleasure in sharing the company’s success with our employees.” No, employees will not have to fill their cars with a year’s worth of Twinkies and Ding Dongs. On a weekly basis, a representative from each bakery location will choose a “product of the week” for the bakery and all eligible employees will be able to take home one multi-pack of the chosen item every week for an entire year.
The U.S. service sector picked up momentum in January, reversing a slowdown at the end of 2017. The Institute for Supply Management on Monday said its nonmanufacturing index rose by more than four points to 59.9 in January, a far stronger reading than the 56.6 expected by economists. In December, the index slipped to 55.9. January’s figure is the highest in 13 years. A reading above 50 indicates that non-manufacturing business is expanding, while a reading below signals contraction. The survey tracks the performance of service-oriented companies, such as banks and restaurants, as well as real estate and construction. Fifteen of the 18 business sectors tracked by ISM experienced growth in January. ISM’s gauge of non-manufacturing employment rose to an all-time high of 61.6, up from 56.3 in December. Its index of new orders surged 8.2 percentage points to 62.7. The survey shows that the economy is off to a strong start in 2018.
Senators delivered a show of confidence in Jerome Powell, President Trump’s pick for chairman of the Federal Reserve System, voting overwhelmingly Tuesday to confirm him to the position. Mr. Powell, who’s been part of the Fed’s board of governors, will replace Janet Yellen, whom Mr. Trump declined to nominate for a second term. As chairman, Mr. Powell will be the most important voice in deciding how the Federal Reserve moves forward with the economy appearing to be humming yet again, even as banks chafe against restrictions imposed in the wake of the 2008 Wall Street collapse. Tuesday’s 85-12 vote saw just four Republicans and eight members of the Democratic Caucus vote against Mr. Powell, who had enjoyed bipartisan support before. “He has served as a steady voice and thoughtful leader,” Majority Leader Mitch McConnell said in urging his confirmation. The U.S. Chamber of Commerce called Mr. Powell the “right man at the right time.” The Federal Reserve is an independent government agency charged with keeping inflation in check and supporting job growth. It took on an outsized role in the Wall Street collapse, sparking criticism from some quarters that it had overstepped. More recently the Fed has raised some key interest rates, hoping to keep the economy growing without overheating. Mr. Trump had criticized Ms. Yellen’s performance during the presidential campaign, but in office he changed his tone, even calling her tenure “excellent.” But he did not give her a second term, making her the first chair in decades to be ousted after one four-year period. Her predecessor, Ben Bernanke, served for two terms, and before that Alan Greenspan served for nearly two decades.
The Trump administration’s tax reforms will accelerate global economic growth, according to the latest forecast of the International Monetary Fund (IMF). Total economic output for the world will grow 3.9 percent in 2018 and 2019, after adjusting for inflation. That would be the strongest year for global growth since 2011 and represents an upward revision of 0.2 percent since the IMF’s forecast in October. When the IMF released its Global Economic Outlook in October, it assumed that U.S. tax policies would remain unchanged. In other words, it assumed Republican efforts to pass tax reform would fail. The changes to the U.S. tax code are expected to be responsible for “about half” of the upward revision, the IMF said. Much of that will arise from lower corporate income tax rates. The IMF estimates that lower rates will lead to an acceleration of business investment. As well, a larger federal budget deficit will stimulate the economy and boost U.S. growth, according to the IMF. The boost to U.S. growth will be significant. In the IMF’s previous forecast, it saw the U.S. economy expanding by 2.3 percent in 2018 and 1.9 percent in 2019. Now those figures have been revised up to 2.7 percent in 2018 and 2.5 percent in 2019. A stronger U.S. economy will also boost the economies of America’s trading partners, especially Mexico and Canada. According to the IMF, Mexico’s economy will experience an additional 0.4 percent growth this year and 0.7 percent growth next year, thanks to the changes in U.S. taxes. Canada’s growth will be 0.2 percent higher this year and 0.3 percent higher next year. The IMF says that the economic growth benefits of the tax overhaul will fade after 2022, largely because many of the tax cuts are scheduled to expire. If those tax cuts are extended or made permanent, however, that could extend the period of accelerated growth.
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The Dow closed above 26,000 for the first time in its history, as bank earnings, Boeing (BA) and IBM (IBM) drove the blue-chip index higher Wednesday. The Dow Jones Industrial Average surged 322 points to 26,115. The S&P 500 and Nasdaq Composite also hit all-time highs. The S&P 500 advanced 26 points to 2,802. The Nasdaq gained 74 points to 7,298. An early rally Tuesday morning pushed the Dow past 26,000, clinching the fastest 1,000-point climb for the Dow. Although Wall Street pared its gains later in the session, the rally picked back up a day later. Brad McMillan, chief investment officer for Commonwealth Financial Network, said the brief pullback after the Dow first cracked 26,000 on Tuesday was a healthy sign for the market. “With the economy growing at a healthy rate, with corporate earnings rising, and with the Fed still stimulating, there is simply no trigger for a pullback,” McMillan wrote in a note to clients. “Even if we did get a pullback, as we did in early 2016, it would be unlikely to last, and for the same reasons.” On Wednesday, Boeing jumped more than 4% on news that the aircraft maker will partner with automotive supplier Adient (ADNT) to create an exclusive supplier of high-end aircraft seats. Shares of IBM, another Dow component, rose about 3% after analysts at Barclays (BCS) upgraded the stock to overweight from underweight. UnitedHealth (UNH) also continued to march higher, with shares up 2.4%. The health insurer on Tuesday beat Wall Street’s expectations for fourth-quarter earnings and raised its outlook for 2018, citing federal tax reform.
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The first year of President Donald Trump’s administration produced the strongest level of confidence in America’s small business owners on record. The NFIB Index of Small Business Optimism came in at 104.9 for December, slightly lower than the near-record November reading but still an indicator of high levels of confidence in the economy. With the December number released Tuesday, the full year 2017 is now officially the strongest year ever in the nearly halft-century history of the survey. “2017 was the most remarkable year in the 45-year history of the NFIB Optimism Index,” said NFIB President and CEO Juanita Duggan. “With a massive tax cut this year, accompanied by significant regulatory relief, we expect very strong growth, millions more jobs, and higher pay for Americans.” Small business confidence soared following the election of 2016 and has remained in the “stratosphere” ever since, the NFIB said in a statement. “We’ve been doing this research for nearly half a century, longer than anyone else, and I’ve never seen anything like 2017,” said NFIB Chief Economist Bill Dunkelberg. “The 2016 election was like a dam breaking. Small business owners were waiting for better policies from Washington, suddenly they got them, and the engine of the economy roared back to life.” Two of the December components posted gains, five declined, and three remained unchanged, according to the NFIB. The downward pressure on the index came from a moderate decline in expected conditions, a volatile number, and plans for inventory. These were somewhat offset by a dramatic, 14-point improvement in “Actual Sales” for December, likely reflecting the robust holiday shopping season fueled by booming consumer confidence. Some of the things that register as a negative for small business confidence are actually indicators of a strong economy. A tighter labor market, for example, makes hiring more challenging and pushes up wages, which increase costs and cut into margins for businesses. “There’s a critical shortage of qualified workers and it’s becoming a real cost driver for small businesses,” said Dunkelberg. “They are raising compensation for workers in order to attract and keep good employees, but that’s a positive indicator for the overall economy.” “The lesson of 2017 is that better policies make for better economic results,” said Duggan. “The evidence is overwhelming that small business owners pay close attention to Washington, and that federal policies affect their decisions on whether to hire, whether to invest, whether to grow inventory, and whether to seek capital.”
More great news in this Trump economy!! 🙂