U.S.:
U.S. Growth Not So Bad After Revisions to Spending, Investment
The U.S. economy’s first quarter wasn’t so miserable after all, as consumption contributed more to growth and business investment was even stronger than thought, Commerce Department data showed Friday.
HIGHLIGHTS OF FIRST-QUARTER GDP (SECOND ESTIMATE)
- Gross domestic product rose at 1.2% annualized rate, revised from 0.7% (economist est. 0.9%)
- Consumer spending, the biggest part of the economy, rose 0.6%, revised from 0.3% (economist est. 0.4%)
- Revisions were led by utilities consumption, intellectual-property investment, government and private construction
Key Takeaways
While the revisions were more positive than economists generally expected, the report reinforces that 2017 got off to a relatively weak start, a trend that’s plagued the U.S. economy for several first quarters. Still, business investment was even brighter than previously estimated, thanks to fresh data on construction spending and companies’ research and development expenses. Economists and Federal Reserve policy makers are betting on a second-quarter rebound with the consumer leading the way, as Americans remain confident amid steady job growth and the promise of fatter paychecks.
Part of the revision to consumption spending was due to electricity-usage data for February, indicating that heating bills during the unusually warm weather weren’t as low as thought. That drag from low spending on energy is one of the reasons that economists view the first-quarter slowdown as transitory.
Europe:
Undercurrent of risk pushes euro zone bond yields lower
An undercurrent of political and policy risks pushed down euro zone government bond yields on Friday, discouraging investors from putting too much faith in improved economic data. Despite a market-friendly result in the French presidential election and strong recent inflation and private sector activity numbers from the bloc, most euro zone bond yields are well below recent highs. Germany’s 10-year government bond yield, the benchmark for the region, fell 3 basis point to a one-week low of 0.33 percent — comfortably above the 0.20 percent level at the start of the year but well below the 0.51 percent March high. Other euro zone yields were 2-4 bps lower on the day, with Belgium’s 10-year yield hitting a three-month low of 0.695 percent. Investors took their cue from policymakers staying cautious on the brightening political and economic picture in Europe and its implications for monetary policy. “We have had a few positive political outcomes, but we still have Brexit negotiations to come, Italian and German elections, a potential Catalonia (independence) referendum and the unpredictable factor of Donald Trump’s presidency,” ING strategist Padhraic Garvey said.
http://www.reuters.com/article/eurozone-bonds-idUSL8N1IS23P
Asia:
China’s reforms not enough to arrest mounting debt: Moody’s
China’s structural reforms will slow the pace of its debt build-up but will not be enough to arrest it, and another credit rating cut for the country is possible down the road unless it gets its ballooning credit in check, officials at Moody’s said. The comments came two days after Moody’s downgraded China’s sovereign ratings by one notch to A1, saying it expects the financial strength of the world’s second-largest economy to erode in coming years as growth slows and debt continues to mount. In announcing the downgrade, Moody’s Investors Service also changed its outlook on China from “negative” to “stable”, suggesting no further ratings changes for some time. China has strongly criticized the downgrade, asserting it was based on “inappropriate methodology”, exaggerating difficulties facing the economy and underestimating the government’s reform efforts. In response, senior Moody’s official Marie Diron said on Friday that the ratings agency has been encouraged by the “vast reform agenda” undertaken by the Chinese authorities to contain risks from the rapid rise in debt.
http://www.reuters.com/article/us-china-economy-rating-idUSKBN18M06Z