OIL: Mid-Day Oil Summary: Crude Rises

GDP tracking has been even more closely watched ever since a surge in the January goods trade deficit saw a huge import drag on implied GDP growth, with questions over the extent to which this was driven by gold imports that won’t filter into GDP data. Ahead of today’s GDPNow update, a post from Atlanta Fed’s GDPNow has already suggested Q1 GDP was more recently tracking at -1.6% rather than -2.4% in the last main update, or +0.4% on a gold-adjusted basis. 

• The advance trade report on Feb 28 suggested industrial supplies were the culprit behind the import surge before the full release on Mar 6 showed it was specifically driven by another jump in imports of “finished metal shapes” (to $34.2bn from $13.75bn in Jan and $4.6bn in Dec for almost 10x recent averages).
• Gold is assumed to have played a large role here, with the category including gold bars as opposed to the separate category of non-monetary gold within industrial supplies (which was elevated by recent standards at $3.8bn in January but only increased from $3.25bn in Dec).
• This is backed by the surge seen in imports from Switzerland, which Bloomberg (see here) has linked to gold traders scrambling to send gold to New York depositories, reflecting arbitrage and unlikely to be used in production, which won’t impact GDP data. As for why the gold shows as coming from Switzerland: “That’s because in London, 400-ounce bars are the standard. So traders who have to deliver physical bullion to Comex in New York need to first ship the gold to Switzerland. There, refiners melt it down and recast into the 100-ounce bars required by the US commodities exchange.”
• The last GDPNow update on Mar 6 put Q1 real GDP growth at -2.4% annualized although a post from Atlanta Fed’s Patrick Higgins suggests this would have been -0.4% on a gold-adjusted basis.
• The same post suggested that this would have been -1.6% or +0.4% gold-adjusted if publicly adjusted after payrolls on Mar 7, with the next public update due later today to reflect retail sales and business inventories data.
• As for today’s update, GDPNow updates will continue as normal but “will add at least some occasional updates from the gold adjusted version as well.”
• Of course, whilst 0.4% gold-adjusted GDP growth in Q1 is far stronger than the -2.8% originally tracked after that trade hit, it would still mark a significant pullback after 2.35% in Q4 and 3.1% in Q3, or more broadly 2.5% in 2024 and 3.2% in 2023.

• US TSY 13W AUCTION: NON-COMP BIDS $2.130 BLN FROM $76.000 BLN TOTAL

• US TSY 26W AUCTION: NON-COMP BIDS $1.775 BLN FROM $68.000 BLN TOTAL