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Atlanta Fed Lowers Second-Quarter GDP View Below 4 Percent

Atlanta Fed Lowers Second-Quarter GDP View Below 4 Percent
(Dollar Photo Club)

By    |   Thursday, 26 July 2018 01:08 PM

The U.S. economy is growing at a 3.8 percent annualized rate in the second quarter following the latest data on domestic durable-goods orders, business spending and trade, the Atlanta Federal Reserve’s GDPNow forecast model showed on Thursday.

The latest estimate on gross domestic product growth was slower than the 4.5 percent pace estimated on July 18, the Atlanta Fed said.

By comparision, the New York Fed forecasts have been running much lower than Atlanta. The New York Fed Staff Nowcast stands at 2.7% for the second quarter and 2.4% for the third quarter. That would follow just 2 percent growth in the first three months of the year.

According to a Reuters survey of economists, GDP growth likely increased at a 4.1 percent annualized rate in the April-June period, which would be double the 2.0 percent pace notched in the first quarter. The government will publish its advance estimate of second-quarter GDP growth on Friday.

Meanwhile, new orders for key U.S.-made capital goods increased more than expected in June and shipments surged, pointing to solid growth in business spending on equipment in the second quarter.

Expectations of robust economic growth in the April-June period were, however, tempered somewhat by other data showing a widening in the goods trade deficit last month and no change in retail and wholesale inventories.

The Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.6 percent last month after an upwardly revised 0.7 percent increase in May.

Economists polled by Reuters had forecast the so-called core capital goods orders rising 0.4 percent last month after a previously reported 0.3 percent gain in May. Core capital goods orders increased 6.8 percent on a year-on-year basis.

Shipments of core capital goods jumped 1.0 percent last month after an unrevised 0.2 percent gain in May. Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

Business spending on equipment has risen since the fourth quarter of 2016. It is expected to have combined with robust consumer spending to boost second-quarter GDP growth.

But second-quarter GDP growth could miss expectations as the Commerce Department reported in another report on Thursday that the goods trade deficit shot up 5.5 percent in June to $68.3 billion.

Goods exports declined by $2.2 billion to $141.9 billion last month. Imports of goods rose by $1.3 billion to $210.3 billion. The department also said both wholesale and retail inventories were unchanged in June.

The latest data signal business investment remains firm even as President Donald Trump widens a global trade war beyond steel and aluminum and into a growing range of products from China, as well as potential levies on autos.

Business spending on equipment is being supported by the Trump administration's $1.5 trillion income tax cut package, which came into effect in January. But there are worries that trade tensions between the United States and its major trade partners, including China, Canada, Mexico and the European Union, could offset the fiscal stimulus.

At the same time, the uncertainty over trade policy may spur some companies to slow investment, resulting in a hit to economic growth in the second half or later. Companies including General Motors are citing higher prices for steel and aluminum - - the metals subject to import levies -- as impacting their business.

At the same time, the uncertainty over trade policy may spur some companies to slow investment, resulting in a hit to economic growth in the second half or later. Companies including General Motors are citing higher prices for steel and aluminum — the metals subject to import levies — as impacting their business.

After the report on durable-goods orders, along with data showing a wider merchandise-trade deficit in June and weaker-than-expected inventories, several estimates of second-quarter GDP growth declined. JPMorgan Chase & Co. cut its projection to 3.9 percent from 4.4 percent, while the Federal Reserve Bank of Atlanta’s GDPNow tracker fell to 3.8 percent from 4.4 percent. The median estimate in Bloomberg’s survey remained at 4.2 percent.

(Newsmax wire services contributed to this report).

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The U.S. economy is growing at a 3.8 percent annualized rate in the second quarter following the latest data on domestic durable-goods orders, business spending and trade, the Atlanta Federal Reserve’s GDPNow forecast model showed on Thursday.
atlanta, fed, gdp, economic, growth
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2018-08-26
Thursday, 26 July 2018 01:08 PM
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