LOOK AHEAD: The Week Ahead: 2nd Q4 GDP and January PCE Reports
Feb-21 20:05
- The upcoming US economic calendar is backloaded, with the second release for Q4 national accounts on Thursday before the January PCE report on Friday. Real GDP growth is seen confirming what was at the time a softer than expected 2.3% annualized in Q4, whilst there will also be a first estimate for real GDI growth after 2.1% in Q3.
- Much of the relative GDP weakness in Q4 after two quarters averaging 3.0% came from a large drag from inventories. It should continue to show signs of robust domestic demand after personal consumption increased 4.2% annualized in the advance release.
- However, January’s monthly report is likely to show consumption got off to a much weaker start of 2025. Recall that retail sales were far weaker than expected in January as they slid -0.9% M/M (cons -0.2) along with an even larger miss for the control group at -0.8% M/M (cons 0.3) to more than unwind the previously strong 0.8% M/M increase in December. Early days for the Bloomberg consensus currently see real personal spending growth of -0.1% M/M in Jan after 0.4% in Dec.
- As for inflation, Governor Waller cited estimates for core PCE inflation of around 0.25% M/M and it likely rounding to 2.6% Y/Y with some help from modest upward revisions.
- Base effects will have helped it drop from the 2.8% Y/Y averaged in Q4 whilst recent run rates should look a little more favorable (2.1% and 2.4% annualized over three and six months assuming no revisions). Note that revisions will go back to Q4, reflecting the new seasonal adjustment factors for both CPI and PPI, but longer dated revisions will have to wait for the comprehensive national account revisions due in September.
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COMMODITIES: Gold Extends Gains, Crude Edges Down
Jan-22 19:49
- Spot gold has risen by a further 0.4% to $2,756/oz on Wednesday, bringing the yellow metal to its highest level since October 31.
- The gains come as President Trump widened his tariff threats to include China and the EU, with talk of a 10% tariff being imposed on China.
- The clear break of key short-term resistance at $2,726.2, the Dec 12 high, this week strengthens a bullish theme and signals scope for an extension near-term. Sights are on $2,790.1, the Oct 31 all-time high.
- Meanwhile, WTI lost some ground on the day, with outages on the US gulf coast bearish for oil. However, it has struggled for clear direction, with earlier movement driven by Trump comments towards the war in Ukraine.
- WTI Mar 25 is down by 0.5% at $75.4/bbl.
- The prospect of 25% tariffs on imports from Canada starting February 1 is an upside risk to US fuel prices.
- The trend structure in WTI futures remains bullish despite the latest pullback, with attention on $79.48, the Apr 12 ‘24 high.
- Support to watch is the 20-day EMA, at $74.20.
- Henry Hub has surged today, supported by updated weather forecasts of colder temperatures ahead.
- US Natgas Feb 25 is up by 5.8% at $3.97/mmbtu.
