While the US has a historically low unemployment rate and strong GDP growth, bond yields suggest growth in the future will be less than what it is now. A rate cut is partially priced into December federal funds futures and the yield curve is fairly flat and almost bordering on inversion. However, the latest US GDP figures for the March quarter have not provided any hint of coming weakness, at least on the surface.
The US Commerce Department has released March quarter “advance” GDP estimates and they indicate the US economy grew at an annualised growth rate of 3.2%.
The growth figure was almost double the 1.8% median of market estimates and a jump from the December quarter’s 2.2%. However, Westpac’s AM Finance team noted “more than half the increase came from volatile inventories and trade…consumer spending and business investment slowed; final sales to private domestic purchasers, a better gauge of underlying momentum…cooled to a 1.3% annual pace, the slowest since 2013.” In other words, the “quality” of what would otherwise be seen as a strong growth figure was debatable.
