The fallout from right this moment’s first have a look at Q1 GDP continues to reverberate with the US greenback stronger and equities weaker due to scorching inflation numbers.
Goldman Sachs highlights that the composition of development wasn’t as gentle because the headlines (+1.6% vs +2.4% exp).
“The contribution from inventories (-0.4pp vs. GS +0.2pp) and foreign trade (-0.9pp vs. -0.4pp) accounted for the bulk of the miss,” economists at Goldman write. “Indeed, domestic demand growth proceeded at a strong pace of +2.8% annualized. This reflected a double- digit pace of residential investment growth (+13.9%) and solid growth in consumption (+2.5%) and business fixed investment (+2.9%), the latter reflecting gains in two of the three capex subcategories (equipment +2.1%, intellectual property +5.4%, structures -0.1%).”
Goldman additionally highlights that authorities spending slowed greater than they anticipated with federal spending contributing negatively to GDP.
Nevertheless it was the pricing numbers within the PCE report that caught the market most off guard. The WSJ’s Nick Timiraos calculates that it implies +0.48% core PCE in tomorrow’s report versus the +0.3% consensus. Goldman Sachs would not look like satisfied as they solely boosted their core estimate to +0.33% from 0.30%. That will put core at 2.84% y/y, in comparison with the two.7% consensus.
The numbers are due out Friday at 8:30 am ET.
