Christmas and New Year holiday will render this week one of the calmest for the markets. The flow of economic data will be slow and weak, and financial activity is expected to be minimal as most agencies will be on holiday break.
- - Last week
The most important development of the last week in the country was the enactment of GOP’s long-awaited tax bill. The $1.5 trillion overhaul bill that contains the most significant changes in the American tax system for the last 30 years, passed from Congress in the middle of the week. President Trump signed the bill on Friday, marking his administration’s first significant legislative victory.
With the new tax law, the corporate tax rate for American companies will fall to 21 percent from 35 percent by 2018.
Individual tax rates will also be reduced by a few percentage points over the next 10 years.
Currently, the individual tax rates are 10, 15, 25, 28, 33, 35 and 39,6 percent according to different income groups. From the beginning of the new year they will be revised to 10, 12, 22, 24, 32, 35 and 37 percent.
The Congressional Budget Office (CBO) estimated that these tax cuts will reduce the federal tax revenues by a total of $ 1.5 trillion over the next 10 years. The Republicans' tax package will also repeal mandatory health insurance, enacted by former President Barack Obama. Economists expect the new tax law to accelerate economic growth by a quarter percentage points in the next few years.
- - PCE index up at 8-month high
Last week was quite busy in terms of data releases. Markets kept a close eye on inflation and growth data.
According to official reports, the third quarter growth rate was revised from 3.3 percent to 3.2 percent due to negative updates in consumer spending and exports.
Personal Consumption Expenditures (PCE) price index rose to 1.8 in November, the highest level in the last 8 months. During the same period, consumer spending rose by 0.6 percent exceeding market expectations. Personal income also increased by 0.3 percent in November.
Positive data from the housing sector showed American housing demand continues to rise. New home sales rose 17.5 percent in November, marking the highest jump and level in the last 10 years. The existing home sales increased by 5.6 percent in November, reaching the highest level in 11 years.
Finally, the University of Michigan Consumer Confidence Index (UMICH) fell to 95.9 in December, the lowest level in three months.