Posthaste: 'Yellow flags' signal cracks forming in Donald Trump's economy

Donald Trump has “big” plans for the U.S. economy — a smaller public sector, overhauling global trade so that it benefits Americans and new tax policies that aim to spur growth.

But as the president himself admitted recently, the challenge is getting there. “There’ll be a little disturbance, but we’re OK with that,” Trump told Congress last week.

What that disturbance develops into is the question, and over the past month the economists at Royal Bank of Canada have noticed several “yellow flags” popping up in the data.

Here are “the cracks forming in the U.S. economy,” RBC chief economist Frances Donald and senior economist Mike Reid say are worth keeping an eye on.

Consumer and business surveys are flashing growing signs “economic discomfort,” said the economists. The University of Michigan consumer confidence survey fell in January after rising for five months in a row and the Conference Board’s study dropped in December and January after hitting a near record jump in October. The NFIB survey of small business reported that only 15 per cent of businesses were planning on creating new jobs.

However, this is “soft data” and doesn’t necessarily translate into a decline in the “hard data” of consumer spending, they said. What RBC thinks is happening is that lower- and middle-income Americans are struggling with higher interest rates and inflation, while higher-income groups remain in better shape.

The wealthier Americans, who account for a larger share of spending, are the ones to watch as far as the economy is concerned. “A pullback among high-income consumers would merit a shift in our U.S. consumer outlook,” said Donald and Reid.

What could trigger such a pullback? A stock market meltdown for one thing, and there have