• Analytics
  • News and Tools
  • Market News
  • U.S. GDP won’t explain the Fed’s dovishness - RBC
U.S. GDP won’t explain the Fed’s dovishness - RBC
22.07.2019, 14:15

U.S. GDP won’t explain the Fed’s dovishness - RBC

Analysts at Royal Bank of Canada (RBC) suggest that the markets attention this week will be on US data which is headlined by Friday’s Q2 GDP release.

  • “Normally, the first cut of US GDP would have important policy implications, especially in the week ahead of an FOMC meeting. But with markets now fully anticipating a 25 basis point cut on July 31 (and even pricing in some odds of a 50 basis point reduction) it’s hard to envision an upside surprise on GDP that would have the Fed hold rates steady.
  • In fact, this report should highlight that a rate cut is less about the state of recent economic data and more about providing insurance against trade tensions and slowing global growth (better embodied in sentiment data and activity indicators abroad).
  • Consumer spending was the standout performer in Q2. Last week’s data confirmed US core retail sales grew at an 8% annualized rate in the quarter, the best pace since 2005. This will contribute to household spending rebounding to a 3.8% pace, among the best gains in recent years and sufficient to dispel any concerns about the health of US consumers following a slow start to the year.
  • All told, domestic demand is expected to post a 3.4% gain, the strongest in a year.
  • Headline GDP growth will be less impressive—we expect a 2.2% annualized increase as inventories swing from Q1 add to Q2 drag (i.e. some of the increase in Q2 spending came out of goods produced in earlier quarters and thus doesn’t count toward Q2 output).Net exports, which provided a nice add in the previous quarter, will have subtracted modestly from growth. The end result should be the opposite of Q1 when headline growth was strong but domestic spending soft. Again, this won’t be a report that explains why the Fed looks set to lower interest rates the following week, though it could lead those looking for a 50 basis point cut to reassess.”

© 2000-2020. All rights reserved.

This site is managed by Teletrade D.J. Limited 20599 IBC 2012 (First Floor, First St. Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines).

The information on this website is for informational purposes only and does not constitute any investment advice.

AML Website Summary

Risk Disclosure

Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.

Privacy Policy

Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.

Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.

Live Chat E-mail
Choose your language / location