The Atlanta Fed's GDPNow model just lowered its estimate for Q2 2024 U.S. GDP growth (annualized) to 3.5%, down from 3.8% previously. This represents a small pullback in economic momentum—however, growth is still quite strong overall! 💪Let's drill down into the main factors responsible for this change and what they mean for the markets. 🚀
Reasons for GDP Growth Revision Lower
1️⃣Consumer Spending Slowdown 🛒
Retail sales growth has dulled after a robust Q1.
PCE (Personal Consumption Expenditures) growth is slightly lower after inflation adjustments.
2️⃣Manufacturing Softness 🏭
ISM Manufacturing PMI has slipped to contraction (<50) in the most recent readings.
Industrial production growth has stalled.
3️⃣Housing Market Drag 🏡
Interest rates remain high (near 7%) leading to weak home sales.
Growth of residential investment remains sluggish.
📈 Important Charts to Monitor
GDPNow vs. Bloomberg Consensus 📉—Shows where real-time growth sits by tracking Wall Street projections.
Retail Sales MoM Growth🛍️️—Indicates consumer strength (or weakness).
ISM Manufacturing PMI 🏗️️—Indicates expansion (>50) or contraction (<50)
Fed Rate Hike Probabilities 📊—Will impact stock & bond markets
💡 Market & Fed Implications
✅ Still Strong Growth – 3.5% GDP is robust, keeping Fed cautious on rate cuts.
✅ Stocks (SPX) Reaction? 📉➡️📈 – Markets may see this as a "Goldilocks" scenario (not too hot, not too cold).
✅ Bond Yields (10Y Treasury) 🏦 – Could edge lower if growth fears rise.
🔮 What Comes Next?
Next update for GDPNow: We will watch for revisions after jobs and inflation data do out.
Federal Reserve's next move: strong GDP = hold rates longer; market is pricing in 1-2 rate cuts in 2024).
🔥 Final Takeaway
The US economy is still growing at a healthy pace but is starting to show some cracks. Is the Fed going to hold rates higher for longer? Stay tuned! 🔥
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