US OUTLOOK/OPINION: GDPNow Eyes Downside GDP Risk But Stronger Consumption
Jan-30 12:02
- Consensus sees real GDP growth at 2.6% annualized in today’s Q4 advance release (0830ET) following a strong 3.1% in Q3 and 3.0% in Q2.
- Being an advance release, it will have the expenditure breakdown but won't have details for GDI or historical revisions for GDP.
- Yesterday’s Atlanta Fed GDPNow, which has in recent quarters outperformed the median analyst forecast, was revised notably lower in its last estimate for the release from 3.2% to 2.3%.
- The latest downward revision was driven by what had looked like a small net trade boost to a sizeable drag (from 0.1pp to -0.6pp) after a much larger than expected trade deficit for December and the drag from inventories being scaled up to -0.6pps.
- The GDPNow model is however pointing to what could look like stronger underlying details, with personal consumption projected at 3.8% annualized (cons 3.2%) for a marginal firming from an already very strong 3.7% in Q3 (strongest since 1Q23).
- The projected 2.5pp contribution from consumption to real GDP growth drives the 2.8pp for final domestic demand, although the latter would be down from a particularly strong 3.7pp in Q3.
- Also, note that whilst Q4 GDP growth of 2.3% annualized would be a dovish surprise to latest expectations, it would still see GDP growth of 2.5% Y/Y in Q4, matching the median FOMC forecast from the December SEP.
- Turning to the price details, Bloomberg consensus sees the GDP price deflator rising 2.5% annualized in Q4 after 1.9%. Core PCE inflation meanwhile is seen rising 2.5% annualized after 2.2%, which appears consistent with unrounded estimates for core PCE in December averaging slightly below 0.20% M/M.
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GILTS: Extending gains ahead of the close
Dec-31 11:50
- Overall it is a fairly decent move in Gilt, the contract continues to gain, the lower volume has been helping, but there's been a pick up in the past few minutes with just under 30 minutes left for the trading session.
- Around 2k cumulative lots have been bought in the past few minutes, multiple clips.
US TSYS: Yields Slip to 10D Lows Into Year End, Early Cash Close
Dec-31 11:39
- Treasuries added to Monday's rally overnight -- back near December 20 levels before drawing some sell interest in early London trade. Average to small year-end duration extensions: US +0.07Y, EU: +0.04Y, UK -.02Y (Bbg).
- The Mar'25 10Y contract trades 109-03 last (+4) vs. -06 high on modest year end volume of just over 135k. Tsy 10Y yield tapped 4.5027% low overnight, curves are looking modestly flatter: 2s10s .966 at 28.317, 5s30s -1.864 at 37.011.
- Projected rate cuts into early 2025 look steady to slightly higher vs. late Monday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -21.3bp (-19.5bp), Jun'25 -30.8bp (-28.8bp).
- Today's economic data (prior, est) limited to FHFA House Price Index MoM (0.7%, 0.4%) and S&P CoreLogic CS 20-City MoM SA (0.18%, 0.20%) at 0900ET, followed by Dallas Fed Services Activity (9.8, --) at 1030ET.
- Reminder: early cash Tsy close at 1400ET, futures at normal time of 1600ET.
- For next week: the NYSE Group markets will close on January 9 in observance of the National Day of Mourning for President Carter (New York Stock Exchange, NYSE American Equities, NYSE American Options, NYSE Arca Equities, NYSE Arca Options, NYSE Chicago and NYSE National), while the CME Group has opted for early close, link HERE. FI open outcry will close at 1300ET, GLOBEX shortly after at 1315ET next Thursday.
EUROPEAN INFLATION: Irish HICP Accelerates in December, Core Also Higher
Dec-31 11:38
Irish HICP rose by 0.5pp to 1.0% Y/Y in December, its highest rate since August and the third consecutive acceleration. This comes as energy price deflation tapered off amid base effects, to -4.6% Y/Y vs -7.7% in November.
- The core rate (excl. energy and unprocessed food) meanwhile accelerated slightly this month, to 1.6% Y/Y vs 1.5% November.
- Food inflation stands unchanged at 1.7% Y/Y in December.
Looking more broadly at the December Eurozone inflation round, the prints released so far (Spain, Belgium, Portugal) generally underpin calls for energy-driven headline upticks this month. However, core rates also appear to have accelerated a bit so far - analysts were rather looking for a broadly unchanged print for the overall Eurozone.
- Heavy-weighted Germany, France, Italy and the Netherlands, which are all scheduled to release their national-level prints next week, do not necessarily have to tilt in the same direction, however, and it might be that some acceleration for the countries which released so far was indeed expected - so the signal for the overall core print might not be clear for the time being.
