As expected, US GDP for the first quarter was revised down to a modest decrease in today’s update from the Bureau of Economic Analysis. Economic activity slumped 0.7% in the first three months of the year in seasonally adjusted annualized terms, below the mild 0.2% rise previously reported. The negative revision certainly adds a bit more gloom to the macro outlook. But for the moment it’s still reasonable to reserve judgment. The headline data for the quarterly comparison looks troubling, but it’s not yet a definitive signal that the economic recovery is dead.
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The recent stumble in US economic data raises new questions about the timing of the Fed’s plans for raising interest rates. The earliest forecast for the first round of tightening monetary policy has been pushed up to September, although some analysts say that the turning point for rates will come later, perhaps early next year. Much depends on the incoming data, of course. Meantime, what is the Treasury market telling us? One way to cut through the noise in search of signals is to calculate a series of moving averages on Treasury yields. By that standard, the market’s sending mixed messages these days. The 2-year yield—considered to be the most sensitive spot on the yield curve for rate expectations—is trending up. The 5- and 10-year yields, by contrast, continue to trend lower, although there are some clues that suggest that the slide has run its course in longer-term maturities.
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● US Jobless Claims Rise, But Job Growth Still Seen Strong | WSJ
● US pending home sales race to nine-year high in April | Reuters
● Consumer Comfort in US Slumps on Views of Buying Climate | Bloomberg
● Eurocoin Business Cycle Indicator Rises Further In May | RTT
● German retail sales rebound in April | Reuters
● French Consumer Spending Rebounds Less Than Expected In April | RTT
● Weak Household Spending, Inflation Dampen Japan Economic Outlook | RTT
● Is China easing losing its mojo? | CNBC