US election stymies growth prospects: Survey

OREANDA-NEWS. August 23, 2016. Uncertainty about the shape of policies after the US presidential election is already affecting prospects for economic growth, according to a survey by the National Association for Business Economics.

Democratic candidate Hillary Clinton and Republican nominee Donald Trump have promised very different sets of economic policies in key sectors, including energy, finance and healthcare. Uncertainty over which candidate and policies will prevail is holding back economic growth, according to 52pc of the respondents in the business economists' survey. A further 10pc believe growth prospects are significantly affected.

The US economy slowed down considerably this year, with real GDP growing by an estimated 1.2pc in the second quarter, down from 2.6pc a year earlier, according to the US Bureau of Economic Analysis. Real GDP is projected to grow by 2pc both this year and in 2017, according to the Federal Reserve's June summary of economic projections.

"There are signs that some businesses hesitate to make investments," the business association's economic policy survey committee chair LaVaughn Henry said today. "Consumers may be hesitating with consumption because of fear of uncertainty, and production levels may adjust to that."

The energy sector showcases the difficulty of assessing the post-election economic effects. Energy has been among the key drivers of US economic growth from 2009 to 2015 because of the massive investments in shale exploration and production. But since mid-2014 the pace of investment has fallen significantly because of the decline in oil prices. Lower prices used to be viewed as an "unmitigated blessing" for the US economy, Federal Reserve vice chairman Stanley Fischer said yesterday. But the decline in energy investment "mitigated the blessing, as did the decline in US oil production," he said.

Clinton has promised to require oil and gas producers to cut methane leaks from pipelines and other equipment and to better protect groundwater, keeping up the pace of upstream regulations under President Barack Obama. Trump, by contrast, has promised to cut back regulations and open more federal land to oil and gas drilling.

The upstream focus of the Republican platform may be welcome news to the industry, but federal lands account for only a portion of oil and gas drilling, and producers' plans would depend on the trajectory of oil prices globally.

Clinton and Trump agree on some economic points however. Both candidates have spoken in favor of local bans on hydraulic fracturing, a key technology behind shale exploration. And both have spoken out against the Trans-Pacific Partnership free trade agreement that the US administration has negotiated with 11 other countries in the Asia-Pacific region. Both promised to push for a significant increase in infrastructure spending, making the construction industry a potential winner regardless of the outcome of the election, analysts with US bank group BBVA said earlier this month.

The candidates have more traditional, opposite views on financial regulation and tax reform, where Trump's stated positions reflect the policy preferences of the pro-business Republicans in Congress. But a majority of respondents in the National Association for Business Economics survey — 55pc — believed that Clinton would do a better job of managing the economy. Only 14pc backed Trump's potential management of the economy, while 15pc supported Libertarian candidate Gary Johnson. The majority of the economists viewing Clinton as a better leader on economic issues said she had the better policies to stimulate economic growth.

"There is no politics behind the survey, it is just what the industry sees," Henry said. The association surveyed 415 members from all sectors of the economy.

Clinton as of today has a 74pc chance of winning the election, according to analytical outlet FiveThirtyEight, which bases its conclusion on an analysis of polls, historical trends and economic projections.