Markets Await Q1 US GDP Data
Markets Await Q1 US GDP Data: Insights and Implications
Q1 GDP data is set for release on Thursday in the US, providing a crucial measure of the economy’s performance. Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
This report provides a comprehensive view of economic growth and could influence market sentiment ahead of the PCE data. Expectations are for revised GDP figures to remain steady at 1.3%.
A stronger GDP might indicate the economy's resilience despite higher interest rates, complicating the Fed's decisions. Conversely, a weaker GDP could bolster expectations for a dovish Fed, especially if inflation data comes in soft.
The US economy grew at a sluggish 1.3% annual pace from January through March, the weakest quarterly rate since the spring of 2022. The government downgraded it from its previous estimate. Consumer spending rose but at a slower pace than previously thought, a sign that high interest rates and lingering inflation are pressuring household budgets.
The first quarter’s GDP growth marked a sharp slowdown from the vigorous 3.4% rate in the final three months of 2023.
While the latest reading marks the slowest growth since Q2 2022, economists won't be overly concerned, as the Fed has been trying to pour cold water on the economy for two years in its continued efforts to tame inflation.
PCE heated up in the first three months of 2024
The more worrying outcome was the fact that the price index for personal consumption expenditure (PCE), the Fed's preferred inflation gauge, heated up in the first three months of 2024, dampening hopes of any imminent rate cuts. The PCE price index increased at an annual rate of 3.3 percent in Q1 2024, up from just 1.8 percent in the fourth quarter of 2023. The core PCE index, excluding food and energy, increased 3.6 percent in the first quarter, up from the Fed's target level of 2.0 percent in the past two quarters.
Investors forecast no more than two rate cuts by the end of 2024
Investors in contracts tied to the Fed's policy rate slightly added to just about even odds that the central bank could begin to cut rates in September, but still forecast no more than two rate cuts by the end of 2024.
The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.
Q1 GDP data is set for release on Thursday in the US, providing a crucial measure of the economy’s performance. Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific period. As a broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.
This report provides a comprehensive view of economic growth and could influence market sentiment ahead of the PCE data. Expectations are for revised GDP figures to remain steady at 1.3%.
A stronger GDP might indicate the economy's resilience despite higher interest rates, complicating the Fed's decisions. Conversely, a weaker GDP could bolster expectations for a dovish Fed, especially if inflation data comes in soft.
The US economy grew at a sluggish 1.3% annual pace from January through March, the weakest quarterly rate since the spring of 2022. The government downgraded it from its previous estimate. Consumer spending rose but at a slower pace than previously thought, a sign that high interest rates and lingering inflation are pressuring household budgets.
The first quarter’s GDP growth marked a sharp slowdown from the vigorous 3.4% rate in the final three months of 2023.
While the latest reading marks the slowest growth since Q2 2022, economists won't be overly concerned, as the Fed has been trying to pour cold water on the economy for two years in its continued efforts to tame inflation.
PCE heated up in the first three months of 2024
The more worrying outcome was the fact that the price index for personal consumption expenditure (PCE), the Fed's preferred inflation gauge, heated up in the first three months of 2024, dampening hopes of any imminent rate cuts. The PCE price index increased at an annual rate of 3.3 percent in Q1 2024, up from just 1.8 percent in the fourth quarter of 2023. The core PCE index, excluding food and energy, increased 3.6 percent in the first quarter, up from the Fed's target level of 2.0 percent in the past two quarters.
Investors forecast no more than two rate cuts by the end of 2024
Investors in contracts tied to the Fed's policy rate slightly added to just about even odds that the central bank could begin to cut rates in September, but still forecast no more than two rate cuts by the end of 2024.
The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.
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