March 1, 2018
U.S. Fourth-Quarter Growth Revised Down to 2.5% Annual Pace
The U.S. economy’s growth rate last quarter was revised slightly downward as inventories subtracted more than previously estimated, Commerce Department data showed Wednesday. The latest results for GDP, the value of all goods and services produced in the U.S., show the economy ended the year on a solid note, despite the downward revision. Household and business spending remained robust. Consumer spending, which accounts for about 70 percent of the economy, was the biggest contributor of growth in the fourth quarter, adding 2.58 percentage points. The report also showed wages and salaries were revised higher for the third and fourth quarters. Pay increased $97.4 billion in the third quarter, an upward revision of $18.3 billion. Fourth-quarter wages were revised up to $91.3 billion. Business outlays were also solid, contributing 0.82 percentage point to growth. The latest results were boosted by residential investment and government spending as well. Final sales to domestic purchasers, which strip out trade and inventories — the two most volatile components of the GDP calculation — climbed an unrevised 4.3 percent, the strongest since the third quarter of 2014. Price data in the GDP report showed inflation near the Federal Reserve’s 2 percent goal. Excluding food and energy, the Fed’s preferred price index tied to personal spending rose an unrevised 1.9 percent.
Euro-Area Factories’ Slower Pace Hints That Growth Is Peaking
Euro-area factories maintained their robust pace of output last month, but there are mounting signs that growth momentum may have reached its limit. The Purchasing Managers’ Index for manufacturing fell for a second month in February, and its decline since the end of 2017 has been the steepest in two years. A slowdown in export orders to the weakest in almost a year means growth could cool further, IHS Markit said on Thursday. The reading is one of a cluster in the past week suggesting exuberance in economic activity and trade may be cooling off even as euro-area and global growth remains solid. Economic confidence in the region has slipped to a four-month low, Chinese manufacturing is barely growing and Japanese factory activity cooled in February. “We’ve probably seen a peak in growth rates,” said Florian Hense, European economist at Berenberg in London. “We shouldn’t see a considerable slowdown, but rather a moderation throughout the year.” Another report showed Spanish consumers tightened their belts at the end of 2017 and export growth cooled sharply, though the overall expansion of euro area’s fourth-largest economy was unrevised at 0.7 percent in the fourth quarter. U.K. manufacturing also lost a bit of steam in February, with growth slipping to an eight-month low. Markit said its figures suggest a “marked downshift” in the pace of growth so far this year. For now, the picture in the euro area is still one of growth, and the decline in the PMI last month was less than initially estimated. At 58.6, the measure is also well above its five-year average.
Asia Stocks Extend Losses as Strong Dollar Hurts Materials Firms
Asian shares dropped for a third day, with materials companies tumbling, as the dollar rose ahead of Federal Reserve Chairman Jerome Powell’s second congressional appearance this week on Thursday. The MSCI Asia Pacific Index slid 0.7 percent to 176.08 as of 4:31 p.m. in Hong Kong, set to close at a two-week low. Japan’s Topix fell 1.6 percent, the most since February 9. Markets in South Korea and Thailand were closed for a holiday. Concern about a faster pace of U.S. rate hikes weighed on equities, providing a good opportunity to buy at lower prices, said Nader Naeimi, head of dynamic markets at AMP Capital Investors Ltd., who oversees about $120 billion. “Markets seem to be keen to force Mr. Powell’s hand into the FOMC meeting,” which will happen later this month, Naeimi said. “Another leg down in equities would be a great entry point in EM” stocks. The Asian benchmark’s material sub-gauge dropped 1.6 percent, the most among all industry groups. Sumitomo Metal Mining Co. slumped 4.4 percent in Tokyo, the most in three weeks. Australia’s Orica Ltd. lost 3.5 percent after the company said it expects impairment charges of A$300 million ($232 million). Chinese property shares offset some of the region’s losses after research house CRIC forecast strong February home sales for large developers. Shimao Property Holdings Ltd. jumped 4.3 percent in Hong Kong.