You have to look at the numbers behind the numbers......
Friday 31st July 2015
You have to look at the numbers behind the numbers......
"Trading Post" , The Financial Times p.29
US 2nd quarter GDP data released yesterday showed growth of 2.3 %,
slightly lower than the 2.5% generally expected and considerably lower than the
2.8% consensus we were looking at. On the face of it, one might think the
number a mite disappointing but the market took the news completely in its
stride. Why ?
These revisions can be infuriating and can certainly
complicate matters, but are a fact of life. More to the point, what should we
be looking out for next ? The Fed's main issues at this time are jobs and
inflation. With oil so cheap and most other commodity prices tumbling, and also
with the US$ so strong, inflation is unlikely to hit the Fed's target of 2.0%
anytime soon but the Fed seems relaxed about that, perhaps hoping that once the
huge fall in the price of oil falls out of year-on-year numbers a little
healthy inflation will be revealed. So really, we need to focus on jobs.
A significant part of yesterday's growth figure was put down
to a rise in consumer spending, which suggests not just a rise
in confidence but also in disposable income. Today will see the release of
the Employment Cost Index, expected to show a quarter-on-quarter rise of 0.6%
(2.6% year-on-year). Any number larger than expectations would support the
argument for raising rates in September. But as ever, the big one regarding
jobs is the July Non-Farm Payrolls report, due next Friday Aug 7th. The Fed
will have the opportunity to also weigh up the August Non-Farm Payrolls
report before its September meeting, and as things stand it looks as though
those two numbers will go a long way to dictating whether the Fed
will pull the trigger or not.
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