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As the week unfolds, investors are eagerly awaiting the impending release of the U.S. gross domestic product growth rate for the first quarter of 2024, set for this Thursday, ahead of the highly anticipated Personal Consumption Expenditure (PCE) price index report – the Fed’s preferred inflation gauge – on Friday.
The U.S. economy showed a robust 3.4% growth rate in the last quarter of 2023, following another spectacular 4.9% growth in the third quarter, according to the final estimates from the Bureau of Economic Analysis.
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Chart: Could The US Economy Continue To Defy Soft-Landing Scenarios?
Goldman Sachs economist Spencer Hill presents a more optimistic view, projecting a 3.1% growth rate. This forecast exceeds the consensus by 0.6 percentage points and edges out the Atlanta Fed's expectations by 0.2 points. Key factors underpinning this upbeat forecast include:
Looking beyond the first quarter, Goldman Sachs anticipates a slight deceleration in economic growth.
The forecast suggests a 2.4% expansion in Q2, with an average growth rate of 2.5% for the second half of the year.
This outlook is supported by high levels of immigration, robust real personal income growth, and a modest uplift from financial conditions.
A stronger-than-expected Q1 GDP result may reinforce the perception of a resilient U.S. economy capable of withstanding high interest rates, potentially keeping the Federal Reserve focused on controlling inflation.
This could positively impact the U.S. dollar, while possibly leading to downward pressure on bonds and rate-sensitive sectors like real estate and technology.
Conversely, a GDP figure below expectations might prompt closer examination of how inflationary pressures are impacting consumer spending. This scenario could weaken the dollar, as reduced spending may lessen the likelihood of persistently high interest rates in the future. In such a case, bonds and gold could be positioned for a rally.
In the last advance estimate for Q4 2023 GDP, released on Jan. 25, the U.S. economy expanded by 3.3%, exceeding forecasts of a 2% increase. On that day, the SPDR S&P 500 ETF Trust (NYSE:SPY) saw a 0.5% rise.
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Posted In: SPY