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US economy grew at its fastest pace in almost 4 years

Jul 30 • Morning Roll Call • 68 Views • No Comments

Last Friday all eyes were on the advanced GDP reading from the US, where the results have shown that the United States economy had accelerated in the 2nd quarter, where the seasonally-adjusted annual rate of 4.1% in the period April-June was almost double the expansion we have seen in the first quarter of the year, which was 2.2%. In addition, President Trump has predicted ahead of the news release, that the US economy will be seen as in ‘terrific’ shape, which obviously did come true. According to Bloomberg during his speech in Illinois on Thursday, Trump expressed his doubts that the expansion would come to 5.3% as some economists have predicted, however he has stated that 4% would be satisfactory.

The strong reading that came from the US, supports the expectation that Fed will have additional two rate hikes in 2018. As Fed Chairman Jerome Powell has testified to Congress on the 17th of July, with a strong job market and inflation that is close to the Fed objective, as well as the risks to the outlook being balanced, the best way to proceed is to gradually raise the federal funds rate. Nevertheless, with the trade war with China round the corner placed pressure on the economy and some analysts are not so optimistic that the current acceleration would last. As a reminder, Trump has placed 25% duties on $34 billion worth of Chinese goods that has commenced on the 6th of July, which has provoked a response from China, where Beijing stated targeting US made cars, soybeans and some other agricultural products.

On the other continent, UK is facing a problem with insolvency, where between April and June this year, almost 29k people have registered as insolvent and according to the Office for National Statistics, households surpassed their income last year for the first time since 1988. The numbers have risen concerns regarding debt problems that consumers are facing and it appears that they were influenced by high inflation that have occurred in 2016 with the fall of the pound after the Brexit vote. Furthermore, looking at the overall economy of the UK, it seems it is doing rather well, however the expected BoE interest rate rise may cause even more problems to the consumers. According to the Insolvency Service, one out of 433 people have registered as insolvent in England and Wales, which is the high majority of Britain’s population.

ECONOMIC CALENDAR EVENTS FOR JULY 30th

JPY Retail Sales y/y
GBP Nationwide HPI m/m
GBP Net Lending to Individuals m/m
GBP Mortgage Approvals
EUR German Prelim CPI m/m
CHF KOF Economic Barometer

 

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