- US Q4 GDP reveals a strong and resilient economy, growing 2.9% QoQ vs 2.6% expected.
- Markets appear to grapple with what this means for the path of future rate hikes and when exactly existing rate hikes are likely to show broader signs of stress
US GDP Data Beats Estimate
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The first look (advance) estimate of US GDP continues the growth trend after Q3’s amazing rebound. The report points to increases in private inventory investment, consumer and government spending while a drop in imports suggest signs of constrained demand.
Source: US Bureau of Economic Analysis, prepared by Richard Snow
Further boosting hopes of a ‘soft landing’ is the encouraging jobs data as initial jobless claims drop below 190k for the first time since April 2022.
Source: Refinitiv, prepared by Richard Snow
Are Conditions Improving for a Soft Landing?
Earnings season thus far has been a mixed bag with most of the mega-cap tech companies due to release their respective trading updates next week. On a positive note, two thirds of companies that have reported updates have beaten EPS estimates while many company heads have expressed concern over a low to no growth environment up ahead. Further warning signs appeared as the major US banks, on the whole, increased their credit loss provisions in anticipation of non-performing loans and the tech sector announces more job cuts in a bid to retain their margins. So far, the more concrete data suggests that a soft landing has gained in probability although the FOMC meeting later will be extremely important should we hear any forward guidance relating to a faster end to the rate hiking cycle based on lower inflation and an improved economic outlook.
Market response to come. Please refresh your window…
— Written by Richard Snow for DailyFX.com
Contact and follow Richard on Twitter: @RichardSnowFX
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