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Strong Growth In US GDP

James Boston
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Strong Growth In US GDP

The much anticipated second quarter GDP figures for the US have just been released in preliminary format by the Department of Commerce. The headline annualized GDP number is now reading at 4.0%, this is a strong reversal from the unexpected -2.9% fall experienced in the first quarter of this year, the market consensus estimate for today’s GDP release was for 3.0% expansion. The Q2 GDP Price Index for the second quarter has been reported at 2.0%, this compares to the Q1 print of 1.3% and the market consensus estimate of 1.8%.

The Department of Commerce also took the opportunity to release the preliminary quarterly Personal Consumption Expenditure (PCE) figures for Q2. The PCE Prices number is now reading at 2.3% quarter on quarter, this compares to a showing of 1.4% in Q1 and a market consensus estimate of 2.0%. The Core PCE reading for the quarter has been announced as 2.0%, the first quarter final number was 1.2% and the market anticipated figure today was 1.9%.

While this important growth data was being issued the Federal Open Market Committee (FOMC) was preparing to meet in advance of tonight’s monetary policy statement release. There is no anticipation that the FOMC will make any adjustment to the Fed Target interest rate of 0.25% and it is also likely that the pace of reductions in asset purchases will be maintained in line with the expectation that the program is wound down to zero by October of this year.

There has been a growing chorus of regional Federal Reserve Presidents calling for a truncation of the timeline leading to an inevitable interest rate hike some time next year. These regional Fed presidents are members of the FOMC, although only one is in the voting rotation on this occasion, and it will make the minutes of this meeting interesting from the perspective of any signs of an impending change in the Feds ‘accommodative’ stance.

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