PFM Trading: Big Miss For US Second Quarter GDP

PFM Trading: The US economy grew by a disappointing 1.2% in the 2nd quarter of the year.
PFM Trading: US economic growth in the three months to June fell markedly short of consensus estimates according to the official first read on the measure released last Friday. The US Commerce Department said the world's largest economy grew by an annualized rate of just 1.2% in the second quarter of 2016, far short of expectations for an expansion of 2.6%.
Further disappointment came in the form of a slew of downward revisions to the readings in previous quarters. Q1 GDP was revised down to 0.8% from 1.1% while the fourth quarter of 2015 was downwardly revised to 1.6% to just 0.9%.
Most of the damage to the reading was done by weak business spending and inventory investment declined. The only silver lining to the data was consumer spending which picked up by 4,2%, the most since the fourth quarter of 2014 but even that was misleading according to Brian Solus, Chief Economist at PFM Trading.
"The supposed surge in consumer spending was an overhang from the fourth quarter which, as we all know, always receives a boost from the holidays and all the various sales. To find a similar surge in consumer spending in any quarter other than a 4th, you need to go back a decade," he explained
The GDP read reduced expectations for a September rate hike as investors reasoned that the Federal Reserve would be reticent about any rate rise's effect on economic growth.
"I think we can almost certainly rule out a rate hike in September and we don't think it will be long before all bets are off for a hike at the Fed's December meeting too," said Solus.
PFM Trading reiterated its advice to investors urging them to position themselves for low interest rates for longer, warning that there was as much chance of a rate cut as a rate hike as the year unfolded.