{"id":146494,"date":"2019-04-26T07:45:42","date_gmt":"2019-04-26T11:45:42","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=146494"},"modified":"2019-04-26T06:36:41","modified_gmt":"2019-04-26T10:36:41","slug":"optimism-rises-as-q1-us-gdp-forecasts-higher","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2019\/04\/optimism-rises-as-q1-us-gdp-forecasts-higher\/","title":{"rendered":"Optimism Rises As Q1 US GDP Forecasts Higher"},"content":{"rendered":"
April 26, 2019<\/div>
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By <\/strong>Orbex<\/strong><\/a><\/p>\n

The markets will be getting a preliminary glance into how the US economy performed as the\u00a0first quarter GDP report<\/strong>\u00a0will be coming out later this afternoon.<\/p>\n

The report from the Department of Commerce is forecast to show a\u00a02.2% increase in the quarterly GDP growth rate<\/strong>.<\/p>\n

While on one hand, this would be the same pace of growth seen in the previous quarter, the estimates have increased significantly. At the start of the year and into the first quarter, a slower GDP growth rate was a possibility.<\/p>\n

\"US
U.S. GDP Growth<\/figcaption><\/figure>\n

This came as the US economy started Q1 amid economic uncertainties.\u00a0The Washington administration was in a trade battle with China and this led to prospects of lower growth<\/strong>. The temporary shift in the yield curve also spooked investors.<\/p>\n

Various other economic indicators which started the year on a bleak note further added to the downside. Eventually, with inflation also easing,\u00a0the Federal Reserve eased its foot from the pedal as it promised\u00a0no rate hikes<\/a>\u00a0for the remainder of the year.<\/strong><\/p>

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As a result, investors were more or less convinced that economic growth would sputter in the first three months of the year. However,\u00a0data since February and March began to show a rebound in the economic activity.<\/strong><\/p>\n

Here\u2019s a recap of some of the major economic releases that have shifted the expectations to a more optimistic outlook on the GDP growth.<\/p>\n

Consumer Spending Remains Key Growth Driver<\/strong><\/h2>\n

The most recent retail sales report saw the\u00a0US consumer spending bouncing back<\/strong>. Retail sales for March rebounded strongly.\u00a0Headline retail sales grew 1.6% on the month<\/strong>. This beat the modest estimates of a 1.0% increase. The March retail sales rebound was the strongest monthly gain since September 2017.<\/p>\n

\"Adusted
Adusted Retail Sales (m\/m)<\/figcaption><\/figure>\n

Besides the solid headline, the retail sales control group which excludes autos, building materials and gas\u00a0rose 1.0% on a month over month basis<\/strong>. Given the fact that this sub-report feeds directly into the GDP report, it reflects the total consumption on the consumer side.<\/p>\n

When assessing the retail sales control group\u00a0on a quarterly period, this grew 2.6% on a seasonally adjusted basis<\/strong>. The gains in consumer spending come amid a higher saving rate with the Fed funds rate at 2.50%.<\/p>\n

Thus, in a way, with US interest rates slightly higher and with the promise of no further rate hikes for the rest of the year, this has translated into higher spending.<\/p>\n

Investors currently view this as another upbeat business cycle and this evidently pushes back fears of a recession which\u00a0plagued the markets earlier<\/a>\u00a0at the start of the year.<\/p>\n

GDP Trackers Are Positive<\/strong><\/h2>\n

The latest end of week assessment of the various GDP trackers has shown a significant increase.<\/p>\n