U.S.:
U.S. Growth at Above-Forecast 3% on Consumer, Business Spending
The U.S. economy expanded at a faster pace than forecast in the third quarter, indicating resilient demand from consumers and businesses even with the hit from hurricanes Harvey and Irma, Commerce Department data showed Friday.
Highlights of Third-Quarter GDP (First Estimate)
- Gross domestic product grew at a 3% annualized rate (est. 2.6%) following a 3.1% gain in 2Q, best back-to-back quarters since 2014
- Consumer spending, biggest part of the economy, grew 2.4% (est. 2.1%) after 3.3% in 2Q
- Business fixed investment rose 1.5%, adding 0.25 ppt to growth; spending on nonresidential structures fell, equipment and intellectual property gained, residential dropped
- Trade, inventories added a combined 1.14 ppt to growth
- Commerce Dept. said it can’t estimate hurricanes’ impact on GDP; disaster losses on fixed assets, private and public, totaled about $131.4b
Key Takeaways
While GDP grew more than anticipated, analysts look to another key measure to assess the true health of the economy. Final sales to domestic purchasers, which strip out trade and inventories — the two most volatile components of the GDP calculation — climbed 1.8 percent, the slowest since early 2016, after rising 2.7 percent in prior quarter. The fallout from the hurricanes was mixed, probably depressing some figures while lifting others. The storms inflicted extensive damage on parts of Texas and Florida, though the effect is likely to be transitory as economic activity is expected to rebound amid rebuilding efforts.
Europe:
Euro set for biggest weekly loss in 2017 as ECB strikes dovish stance
The euro fell on Friday and was on track for its biggest weekly loss of the year, weakened by falling core bond yields as investors added to bets that interest rates in the U.S. would rise faster than in Europe. Carry trades were back in fashion as strong U.S. corporate earnings and a growing view that more rate hikes in the U.S. pushed the dollar to parity with the Swiss franc for the first time in five months. Investors played the diverging monetary policy outlook between the U.S. and Europe, where some market watchers were taken by surprise by the degree of dovishness in comments by European Central Bank policymakers at a policy meeting on Thursday.“(President Mario) Draghi’s discussion of the ECB’s reinvestment strategy has hammered home the message that the “flow component” of the recalibrated QE (asset purchase) program will remain sizeable,” said Valentin Marinov, head of G10 FX research at Credit Agricole in London.
Asia:
China’s focus on quality of growth to be positive for its ratings: Moody’s
China’s focus on the quality of its growth rather than on the pace of its expansion will boost productivity and reduce financial vulnerability, developments that would be positive for the country’s ratings, Moody’s Investors Service said. China said this week that it will not set a goal of doubling its gross domestic product starting in 2021 so it can focus more on higher-quality, long-term growth, in a break from past practice. The world’s second-largest economy is already on course to reach its target of doubling GDP by 2020 from 2010. But the pursuit of rapid growth has led to soaring corporate and local government debt, regional economic disparities and a host of environmental problems. “China (A1 stable) will likely reach its target of doubling per capita income by 2020 from the level in 2010,” said Lillian Li, a senior analyst at Moody‘s. “The government, therefore, has more policy space to achieve its other goals, such as the sustainability of growth and the reduction of economic inequalities across Chinese society.” In a report released on Friday, Moody’s said further consolidation of power under President Xi Jinping, following the conclusion of the 19th Communist Party congress this week, could advance economic reform and rebalancing.
