U.S. Economic Growth Revised Higher on Spending, Inventories
The U.S. economy grew in the fourth quarter at a faster pace than last estimated, helped by an upward revision to household spending on services and a smaller drag from inventories, according to Commerce Department data released Wednesday. The revisions to GDP, the value of all goods and services produced in the U.S., indicate the economy was on a solid footing coming into the current quarter. The report also included the first look at the health of corporate America toward the end of 2017. The gain in fourth- quarter profits from a year earlier, together with lower corporate taxes following the tax overhaul signed by President Donald Trump late last year, bodes well for business investment and employment. Household purchases, which account for about 70 percent of the economy, also are likely to be supported in coming months by bigger after-tax paychecks and the robust labor market. Continued gains in consumer spending and business investment will help to sustain the expansion even as GDP growth is projected to cool somewhat in the first quarter. The Federal Reserve Bank of Atlanta’s GDPNow tracking estimate for the current quarter was at 1.8 percent as of March 23. The median forecast in a Bloomberg survey of economists showed a 2.5 percent pace. While the survey shows consumer spending slowing to a 2.1 percent rate, Fed officials remain upbeat about the prospects for households.
Inflation Could Give ECB Summer Surprise With Rate Exceeding 2%
Upside inflation surprises have become a rare phenomenon in the euro area. Yet one may be in the cards for the European Central Bank just as it debates its next steps toward scaling back unprecedented support. Christoph Weil, an economist at Commerzbank AG, predicts euro-area consumer-price growth will top 2 percent in the summer. Even though the jump would come primarily on the back of more expensive energy — rather than the long-awaited pickup in goods and services — it may still play into the hands of those policy makers in favor of finally announcing an end to asset purchases. Already in March, the rate jumped to 1.5 percent, according to Weil’s forecasts, as the timing of the Easter holidays and unusually cold weather skewed prices for vacations and fresh foods. That’s the level the ECB sees inflation hovering around for much of the rest of the year. Eurostat will publish March data next week.
Clouds Gathering Above European Stocks After Dismal Quarter
This was supposed to be the year when a raft of good news would send the Stoxx Europe 600 Index within flirting distance of 2015’s record high. So far, investors have gotten the opposite. February’s rout –sparked by a quick surge in U.S. bond yields and fueled by a sudden tech selloff — rolled into fears of a global trade war. Strategists who advocated “buying the dip” are starting to recommend “selling the rebounds” as a strengthening euro and disappointing economic indicators and darkening the outlook. The euro’s rise above $1.24 this week amid trade war concerns has brought currency jitters back onto traders’ radar screens. European companies get roughly half their sales from abroad, so the direction of the euro matters, and the currency’s strength last year curbed the gains in stocks. According to a Goldman Sachs Group Inc. strategy note published in January, a 10 percent rise in the single currency takes about 1.5 percentage points from the region’s earnings growth.
Vietnam’s Economy Expands More Than 7% in First Quarter
Vietnam’s economy continued to post stellar growth in the first quarter, fueled by an export boom. Gross domestic product rose 7.38 percent in the first quarter from a year earlier, the General Statistics Office said in Hanoi on Thursday. Vietnam has outperformed most of its Southeast Asian peers as export growth remained resilient on the back of a global trade recovery last year. And even though the trade outlook has turned more gloomy this year amid rising tensions between the U.S. and China, the world’s two largest economies, Vietnam expects to sustain growth of about 7 percent. Exports increased 22 percent in the first quarter from a year earlier, while imports rose 13.6 percent Consumer prices rose 2.66 percent in March from year earlier
Japan’s Retail Sales Rebound to Modest Gain in February
Japan’s retail sales rebounded in February following a sharp decline a month earlier, with the increase was driven mostly by higher prices, particularly for energy and vegetables. A sustained, robust rise in consumer spending is needed for Japan’s export-driven economic recovery to become self-sustaining. While wages and spending have improved, the pay raises needed to drive inflation higher have eluded workers for some time. The results of this year’s spring wage negotiations point to slightly bigger raises than last year, but they are unlikely to spur significantly stronger consumption. “I think the pace of consumption growth will be a bit slower in fiscal 2018,” said Hiroaki Muto, chief economist at Tokai Tokyo Research Center, who cited falling stock prices as one possible factor. “Consumer spending is likely to pick up somewhat as the prices of fresh produce stabilize and smaller companies are pressed more to give raises due to the labor shortage,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Consumer spending won’t be strong enough to spur growth, but it will provide a floor for it,” Minami said, referring to gross domestic product.