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US economy slows to 2.1% annual GDP growth in second quarter – business live US economy slows to 2.1% annual GDP growth in second quarter – as it happened
(30 minutes later)
Pangloss or Cassandra: is the world economy doing just fine or about to seriously hit the buffers?
The views of economists are varied, and the spread of opinion on what central banks should do about it is even broader. But like with the European Central Bank yesterday, hawks and doves alike have something to play with after today’s US GDP release, which showed that the US economy slowed down, but slower than expected.
The American consumer delivered the economy from further deceleration, but business investment fell.
US real #GDP +2.1% in Q2:- #consumer spending surged +4.3% w/ services +2.5%- #business investment -0.6% on weak equip & large struct drop - resid invest -2.0% (6th consecutive Q drop!) - net #trade -0.7ppt as exports fell sharply - inventories drag -0.9ppt - gov spend +5% pic.twitter.com/LIRUdlNRmL
The mixed picture should leave the way open for the Federal Reserve to go ahead with rate cuts next week, economists said.
James Knightley, chief international economist at ING, an investment bank, said:
We expect the Federal Reserve to pull the trigger on a precautionary 25 basis point rate cut next Wednesday with a further 25 basis point move likely in September.
The market continues to look for four rate cuts in total by the end of 2020, but we believe the catalyst for such action would have to be a significant ratcheting up in trade tensions.
US President Donald Trump said on Friday that he was presiding over “the greatest Economy in US history”, but ignored the GDP figures in favour of attacking usually friendly TV channel Fox News.
The moderate slowdown helped US stock market indices to gains in early trading in New York.
Alphabet and Twitter are among the big movers on US stock markets, after they posted better-than-expected earnings.
US Movers: Alphabet (GOOG, GOOGL) +8.7%, Twitter (TWTR) +7.2%, Starbucks (SBUX) +4.9%, Intel (INTC) +2.2%; Amazon (AMZN) -1.7%, Mohawk Industries (MHK) -17.5% (approx)
In the UK Vodafone’s decision to float its mobile masts division has seen shares rise by almost 10% – helping the broader FTSE 100 to a 0.65% gain as the trading day approaches its end.
And there’s still no Sports Direct announcement. What on earth could Mike Ashley be doing?
Thanks for joining us for today’s coverage of business, economics and the markets. I’ll be back bright and early on Monday as we build up to the Federal Reserve and the Bank of England later in the week. JJ
The US GDP figures might suggest that a Fed rate cut can’t address the real problem holding back the world’s biggest economy.The US GDP figures might suggest that a Fed rate cut can’t address the real problem holding back the world’s biggest economy.
Ronald Temple, head of US equities, Lazard Asset Management, said:Ronald Temple, head of US equities, Lazard Asset Management, said:
Today’s GDP report reaffirms the Fed narrative that the US consumer is in good shape, but business confidence has weakened. A Fed rate cut appears to be a done deal next week, but the unfortunate reality is that rate cuts will not resolve uncertainties over trade policy.Today’s GDP report reaffirms the Fed narrative that the US consumer is in good shape, but business confidence has weakened. A Fed rate cut appears to be a done deal next week, but the unfortunate reality is that rate cuts will not resolve uncertainties over trade policy.
And another angle: US President Donald Trump has so far kept his counsel this morning, but the figures do not appear to back up the rationale for his tax cuts.And another angle: US President Donald Trump has so far kept his counsel this morning, but the figures do not appear to back up the rationale for his tax cuts.
Business investment remained meagre in the quarter, suggesting the growth boost given by the cuts may be unsustainable.Business investment remained meagre in the quarter, suggesting the growth boost given by the cuts may be unsustainable.
Not to sound like a broken record, but this is pretty much the exact opposite of what corp tax reform was supposed to do. Either tariffs/uncertainty really are undermining that expectation, or... https://t.co/ULLcT8x2Y9Not to sound like a broken record, but this is pretty much the exact opposite of what corp tax reform was supposed to do. Either tariffs/uncertainty really are undermining that expectation, or... https://t.co/ULLcT8x2Y9
Wall Street gains at the opening bell after US GDP figures that had something for everyone.Wall Street gains at the opening bell after US GDP figures that had something for everyone.
The Nasdaq is storming ahead, up by 0.7%, while the S&P 500 opened up 0.37% and the Dow Jones industrial average was up by 0.1%.The Nasdaq is storming ahead, up by 0.7%, while the S&P 500 opened up 0.37% and the Dow Jones industrial average was up by 0.1%.
Meanwhile, we’re not wanting to sound like a broken record, but Sports Direct has delayed its results yet again after that 2pm BST deadline came and went.Meanwhile, we’re not wanting to sound like a broken record, but Sports Direct has delayed its results yet again after that 2pm BST deadline came and went.
The delay has left some in the City with a bit of time on their hands on a sultry Friday afternoon.The delay has left some in the City with a bit of time on their hands on a sultry Friday afternoon.
We hear that the new deadline is 4pm BST. Maybe don’t hold your breath.We hear that the new deadline is 4pm BST. Maybe don’t hold your breath.
Sports Direct auditors as they look to get their latest numbers out of the door... pic.twitter.com/ZsNEiDKZoKSports Direct auditors as they look to get their latest numbers out of the door... pic.twitter.com/ZsNEiDKZoK
Still nothing from Sports Direct pic.twitter.com/hQ24MV42eaStill nothing from Sports Direct pic.twitter.com/hQ24MV42ea
https://t.co/jVAG73nNkA pic.twitter.com/ppTPZ39NZfhttps://t.co/jVAG73nNkA pic.twitter.com/ppTPZ39NZf
The Fed’s Jerome Powell should make it a “one-and-done” rate cut next week, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.The Fed’s Jerome Powell should make it a “one-and-done” rate cut next week, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
This economy is not broken, and it does not need Fed action to fix it (but it will get it).This economy is not broken, and it does not need Fed action to fix it (but it will get it).
So much for the first half rollover in the US economy. Growth averaged 2.6% in the first half, slightly better than the 2.4% average for the previous five years, despite the end of the boost from the tax cuts and the manufacturing recession.So much for the first half rollover in the US economy. Growth averaged 2.6% in the first half, slightly better than the 2.4% average for the previous five years, despite the end of the boost from the tax cuts and the manufacturing recession.
It might be enough for the Fed to stick to its guns and follow through on the widely expected rate cut next week.It might be enough for the Fed to stick to its guns and follow through on the widely expected rate cut next week.
Paul Ashworth, chief US economist at Capital Economics, said:Paul Ashworth, chief US economist at Capital Economics, said:
This slowdown just about justifies a 25 basis point cut by the Fed next week, but the chances of a bigger 50 basis point reduction just receded further.This slowdown just about justifies a 25 basis point cut by the Fed next week, but the chances of a bigger 50 basis point reduction just receded further.
Despite the weaker headline gain, consumption growth actually accelerated to 4.3% in the second quarter, from 1.1%. But business investment declined by 0.6%.Despite the weaker headline gain, consumption growth actually accelerated to 4.3% in the second quarter, from 1.1%. But business investment declined by 0.6%.
It looks like it might be a Goldilocks US GDP release for Wall Street: not too hot, not too cold.It looks like it might be a Goldilocks US GDP release for Wall Street: not too hot, not too cold.
Art Hogan, chief market strategist at National Securities in New York (via Reuters), said:Art Hogan, chief market strategist at National Securities in New York (via Reuters), said:
This is just what the market needed, not so soft that the economy is slowing down precipitously and not so strong that the Fed is going to reverse course.This is just what the market needed, not so soft that the economy is slowing down precipitously and not so strong that the Fed is going to reverse course.
We expected bad earnings and bad GDP numbers, but an upside on both is something markets are going to embrace today.We expected bad earnings and bad GDP numbers, but an upside on both is something markets are going to embrace today.
US stock market futures have given up some of their earlier gains, but still point to a rising tide on Wall Street.US stock market futures have given up some of their earlier gains, but still point to a rising tide on Wall Street.
Futures prices are pointing to increases of about 0.3% on the S&P 500, the Dow Jones industrial average and the Nasdaq.Futures prices are pointing to increases of about 0.3% on the S&P 500, the Dow Jones industrial average and the Nasdaq.
US economic growth slowed in the second quarter of 2019 as ongoing trade disputes and a global slowdown took their toll.US economic growth slowed in the second quarter of 2019 as ongoing trade disputes and a global slowdown took their toll.
But, writes the Guardian’s Dominic Rushe, the decline was less than expected – thanks to a consumer spending spree – and the report showed signs that there is continuing momentum in the US’s decade-long economic expansion.But, writes the Guardian’s Dominic Rushe, the decline was less than expected – thanks to a consumer spending spree – and the report showed signs that there is continuing momentum in the US’s decade-long economic expansion.
You can read the full report here:You can read the full report here:
US economic growth slows in second quarter as trade disputes take tollUS economic growth slows in second quarter as trade disputes take toll
The inflation figure in the GDP data is fairly striking: it shows that consumer prices rose by an annual rate of 2.3%, according to the personal consumption expenditures price index, one of the Federal Reserve’s preferred measures of inflationary pressures.The inflation figure in the GDP data is fairly striking: it shows that consumer prices rose by an annual rate of 2.3%, according to the personal consumption expenditures price index, one of the Federal Reserve’s preferred measures of inflationary pressures.
That represented a large jump from the 0.4% rate seen in the first quarter.That represented a large jump from the 0.4% rate seen in the first quarter.
The figures also confirmed that the US economy missed the 3% growth target set by US President Donald Trump for 2018.The figures also confirmed that the US economy missed the 3% growth target set by US President Donald Trump for 2018.
US GDP expanded by 2.9% during the calendar year, the Bureau of Economic Analysis said, despite Trump’s unfunded tax cuts. The cuts were criticised for targeting wealthier Americans.US GDP expanded by 2.9% during the calendar year, the Bureau of Economic Analysis said, despite Trump’s unfunded tax cuts. The cuts were criticised for targeting wealthier Americans.
Already the doubts over the pace of the Federal Reserve’s purported plans to cut rates are coming through.Already the doubts over the pace of the Federal Reserve’s purported plans to cut rates are coming through.
US Q2 GDP beats at 2.1%Personal Consumption 4.3%Core PCE Q2 1.8% - good numbers.Remind me why the Fed needs to cut again?US Q2 GDP beats at 2.1%Personal Consumption 4.3%Core PCE Q2 1.8% - good numbers.Remind me why the Fed needs to cut again?
#GDP above forecast mostly due to consumer spending. +4.3%, in Q2, fastest since Q4 2017 and +1.1% in Q4. Bad news was contraction in biz investment, the 1st since Q1 2016. Still, these prints likely reduce expectations of 50bp ##Fed rate cut next week even further ^KO#GDP above forecast mostly due to consumer spending. +4.3%, in Q2, fastest since Q4 2017 and +1.1% in Q4. Bad news was contraction in biz investment, the 1st since Q1 2016. Still, these prints likely reduce expectations of 50bp ##Fed rate cut next week even further ^KO
Here’s the Bureau of Economic Analysis’s graph showing the US GDP growth slowdown.Here’s the Bureau of Economic Analysis’s graph showing the US GDP growth slowdown.
The 2.1% annualised rate of GDP growth was the second slowest since the end of final quarter of 2016 – but it may cause something of a headache for the US Federal Reserve given that it came in ahead of economists’ expectations.The 2.1% annualised rate of GDP growth was the second slowest since the end of final quarter of 2016 – but it may cause something of a headache for the US Federal Reserve given that it came in ahead of economists’ expectations.
The Bureau of Economic Analysis said:The Bureau of Economic Analysis said:
The deceleration in real GDP in the second quarter reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending.The deceleration in real GDP in the second quarter reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending.
US economic growth slowed to an annualised rate of 2.1% in the second quarter – although that was faster than the 1.8% economists had expected.US economic growth slowed to an annualised rate of 2.1% in the second quarter – although that was faster than the 1.8% economists had expected.
The US Bureau of Economic Analysis previously reported annualised GDP growth of 3.1% in the first three months of the year.The US Bureau of Economic Analysis previously reported annualised GDP growth of 3.1% in the first three months of the year.
The Federal Reserve’s monetary policymakers had given signs that they think US growth is slowing, weighed down in part by the trade war between Donald Trump’s White House and China.The Federal Reserve’s monetary policymakers had given signs that they think US growth is slowing, weighed down in part by the trade war between Donald Trump’s White House and China.
Investors have dialled back their bets on a shock and awe 0.5 percentage point cut from the Federal Reserve next week, says IG Group’s senior market analyst, Joshua Mahony.Investors have dialled back their bets on a shock and awe 0.5 percentage point cut from the Federal Reserve next week, says IG Group’s senior market analyst, Joshua Mahony.
US GDP up in 15 minutes. Expectations of a 50bp rate cut now down to 17.5% (BBG) after ECB inaction. A big miss on GDP could see calls for such a move ramp up againUS GDP up in 15 minutes. Expectations of a 50bp rate cut now down to 17.5% (BBG) after ECB inaction. A big miss on GDP could see calls for such a move ramp up again
A strong GDP print in 10 minutes could make the Fed less willing to cut interest rates as quickly as some expect.A strong GDP print in 10 minutes could make the Fed less willing to cut interest rates as quickly as some expect.
The US dollar hit a two-month high on Friday as investors awaited GDP figures which are expected to show a slowdown in the American economy.The US dollar hit a two-month high on Friday as investors awaited GDP figures which are expected to show a slowdown in the American economy.
The dollar index, which measures its performance against a trade-weighted basket of currencies, hit a high of 97.938 on Friday, a level not seen since the end of May.The dollar index, which measures its performance against a trade-weighted basket of currencies, hit a high of 97.938 on Friday, a level not seen since the end of May.
While most investors are expecting the figures to confirm the Federal Reserve’s intentions to cut interest rates – usually a negative for the dollar’s value – the European Central Bank is also preparing to lower borrowing costs.While most investors are expecting the figures to confirm the Federal Reserve’s intentions to cut interest rates – usually a negative for the dollar’s value – the European Central Bank is also preparing to lower borrowing costs.
The dollar edged up against the euro on Friday.The dollar edged up against the euro on Friday.
With just over half an hour to go until US GDP data is released, Wall Street futures prices are pointing to gains on stock markets: the S&P 500 and Dow Jones industrial average are both set to rise by 0.3% and the Nasdaq is set for a 0.4% gain.With just over half an hour to go until US GDP data is released, Wall Street futures prices are pointing to gains on stock markets: the S&P 500 and Dow Jones industrial average are both set to rise by 0.3% and the Nasdaq is set for a 0.4% gain.
Amazon and Google owner Alphabet both posted mixed earnings results last night, but Twitter beat analyst forecasts in results published today.Amazon and Google owner Alphabet both posted mixed earnings results last night, but Twitter beat analyst forecasts in results published today.
Reuters reported: Twitter posted better-than-expected second-quarter revenue on Friday and an uptick in daily users who see advertisements on the site, driven by changes to show users more relevant content, sending its shares up by 5% in pre-market trading.Reuters reported: Twitter posted better-than-expected second-quarter revenue on Friday and an uptick in daily users who see advertisements on the site, driven by changes to show users more relevant content, sending its shares up by 5% in pre-market trading.
However, the company forecast third-quarter revenue below many Wall Street estimates and said revenue growth would lag the first two quarters, partly due to ending some older ad formats.However, the company forecast third-quarter revenue below many Wall Street estimates and said revenue growth would lag the first two quarters, partly due to ending some older ad formats.
The UK car industry lobby group has welcomed Boris Johnson as prime minister – and reminded him that it is implacably opposed to his key policy.The UK car industry lobby group has welcomed Boris Johnson as prime minister – and reminded him that it is implacably opposed to his key policy.
Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders (SMMT) said that a no-deal Brexit – an option backed by Johnson and several senior cabinet members – “presents an existential threat to our industry”.Mike Hawes, the chief executive of the Society of Motor Manufacturers and Traders (SMMT) said that a no-deal Brexit – an option backed by Johnson and several senior cabinet members – “presents an existential threat to our industry”.
Some extracts from the letter:Some extracts from the letter:
Above all, we must ensure the sector continues to enjoy – without interruption – preferential trade with critical markets around the world, including the EU.Above all, we must ensure the sector continues to enjoy – without interruption – preferential trade with critical markets around the world, including the EU.
[...] when automotive succeeds, so does the UK. We cannot, however, continue to deliver these benefits, or take advantage of new opportunities, if the UK leaves the EU without a deal. A no-deal Brexit presents an existential threat to our industry.[...] when automotive succeeds, so does the UK. We cannot, however, continue to deliver these benefits, or take advantage of new opportunities, if the UK leaves the EU without a deal. A no-deal Brexit presents an existential threat to our industry.
We are highly integrated with Europe, and a no-deal Brexit would result in huge tariff costs and disruption that would threaten production, as well as further undermining international investors’ confidence in the UK. We need a deal with the EU that secures frictionless and tariff free trade. No-deal Brexit is simply not an option.We are highly integrated with Europe, and a no-deal Brexit would result in huge tariff costs and disruption that would threaten production, as well as further undermining international investors’ confidence in the UK. We need a deal with the EU that secures frictionless and tariff free trade. No-deal Brexit is simply not an option.