OPINION
Market Rating Before FOMC MeetingJan 31
USA: GDP Report Points to the Potential Soft Landing
The Bureau of Economic Analysis (BEA) of the US Department of Commerce released its second pre-reading data for the second quarter, showing that the US Gross Domestic Product (GDP) decreased by 0.6% from the previous quarter. The market anticipated a contraction of minus 0.8% in this time frame after minus 0.9% in the first reading. GDP increased by 1.7% annually.
Looking at the details of BEA's data; The GDP price index rose 9.0% this quarter, after 8.3 % in the first quarter, while GDP sales rose 1.3%. Data contracted 1.2% in the first quarter.
Based on the report, the core PCE fell to 4.4% from 5.2% in the previous quarter, while the personal consumption expenditures price index (PCE), which is the US Federal Reserve's (FED) inflation indicator, increased by 7.1% in line with market expectations.
According to BEA, the decline in private inventory investment, housing investment, and federal government spending were the main causes of the real GDP decline. Conversely, increases in personal consumption spending and exports were partially offset.
In addition to the effects of the conflict in Ukraine on the world's largest economy's supply chains and the fluctuations in the commodity market, the second pre-reading data for the second quarter shows that the country can avoid recession despite the Federal Reserve's monetary tightening. Since the first reading's decline was revised from 0.9% to minus 0.6% , it is possible to get even closer to the 0 level in the final reading on September 29.
By the end of the week, investor risk appetite on international markets had significantly improved due to hopes in this direction. However, the composite purchasing managers index (PMI) registered its lowest level with 45.0 points in the data for August released by IHS Markit and S&P Global. It should be remembered that dramatic data can be seen in GDP in the third quarter.
Looking at the details of BEA's data; The GDP price index rose 9.0% this quarter, after 8.3 % in the first quarter, while GDP sales rose 1.3%. Data contracted 1.2% in the first quarter.
Based on the report, the core PCE fell to 4.4% from 5.2% in the previous quarter, while the personal consumption expenditures price index (PCE), which is the US Federal Reserve's (FED) inflation indicator, increased by 7.1% in line with market expectations.
According to BEA, the decline in private inventory investment, housing investment, and federal government spending were the main causes of the real GDP decline. Conversely, increases in personal consumption spending and exports were partially offset.
In addition to the effects of the conflict in Ukraine on the world's largest economy's supply chains and the fluctuations in the commodity market, the second pre-reading data for the second quarter shows that the country can avoid recession despite the Federal Reserve's monetary tightening. Since the first reading's decline was revised from 0.9% to minus 0.6% , it is possible to get even closer to the 0 level in the final reading on September 29.
By the end of the week, investor risk appetite on international markets had significantly improved due to hopes in this direction. However, the composite purchasing managers index (PMI) registered its lowest level with 45.0 points in the data for August released by IHS Markit and S&P Global. It should be remembered that dramatic data can be seen in GDP in the third quarter.
