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Is The Economy Growing?


Posted on April 28, 2017

The 1Q GDP is announced today, and many are interested to see if consumer spending has returned. This may be a short lived headline, as most will turn their attention back to Washington where today's also the deadline for Congress to pass a Continuing Resolution to fund the government. Should be an interesting day!

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Good morning!

  • This morning it was announced 1Q GDP was 0.7% versus the projected 1.0%...GDP was 2.1% in the 4Q16
    • oThe quarter-over-quarter PCE measure was unchanged at 2.0% (this is the Fed's favorite inflation gauge)…still inflation under control
    • o Most analyst believe we will see a rebound in the second quarter, due to higher consumer spending and inventories
  • • All eyes are on DC today
    • o Seems like Congress will pass a weeklong stopgap plan today (many believe) so they have more time to prepare/approve a more thorough spending bill next week
      • • They also are back to work on a healthcare plan, which won't be voted on this week
    • o Not that the markets need any more stress
      • • The President told Rueters last night, "There is a chance that we could end up having a major, major conflict with North Korea. Absolutely, we'd love to solve things diplomatically, but it's very difficult."  "
    • o The continued uncertainty in DC will have the markets trading sideways until there is more clarity
  • • Yesterday
    • o Pending home sales pulled back 0.8% in March after a decent gain last month
      • • The index remains at a healthy level consistent with further gains in existing home sales
    • o The March durable goods report showed some momentum as March orders rose 0.7%, on top of a revised 2.3% gain in February
      • • However, core capital goods orders, which are a good proxy for future business investment, missed expectations increasing only 0.2%, below projections
    • o The White House released a statement late yesterday saying it will not immediately initiate the process for a NAFTA withdrawal, a reversal from comments in the afternoon
      • • Stayed tuned…a lot going on in DC!
  • • For next week:
    • o The ISM manufacturing report, FOMC meeting, and April employment report will be the key focus next week
    • o The FOMC is likely to stay on hold after raising rates in March, and there is no pre-scheduled press conference or updated economic projections…should be uneventful
    • o On Friday, many expect payrolls to bounce back from a low reading in march
      • • The consensus is now looking at over 200k jobs created in April with the unemployment rate unchanged at 4.5%
  • • In other news:
  • • Oil and gold up slightly this morning
  • • Treasuries
    • o 2-yr: 1.28%
    • o 10-yr: 2.33%
    • o 30-yr: 2.99%
  • • LIBOR
    • o 1-month: 1.00%
    • o 3-month: 1.17%
  • • Fed funds effective was 0.91%

Have a great weekend!!!

Fred

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