Talking Points:
- Atlanta Fed GDPNow fell on Personal Cconsumption Expenditures data.
- Real Personal Spending contacted and Personal Spending was flat.
Q2’16 US GDP was just revised up to +1.4% from a primary reading of +1.2%. But that revision was accompanied by a tickdown in Personal Consumption for Q2, from 4.4% to 4.3%. Today’s Personal Consumption Expenditures data showed a flat reading in Personal Spending, below the expected 0.1% and the strong previous reading of 0.3%. The Atlanta Fed’s GDPNow fell from expecting 2.8% for Q3 GDP growth to expecting 2.4%, a marked drop in just two days.
Personal Consumption makes up close to 70% of GDP and has been the primary driving force of GDP growth in recent months. A slowdown in spending by consumers would be especially problematic for a Federal Reserve already finding it difficult to justify an increase in borrowing costs. Investment, the next largest portion of growth, has lagged despite low interest rates, fiscal spending has not been a large boon to growth, and with dollar strength, net exports have not helped. A slowdown in spending and therefore growth would only complicate matters further for an already divided Fed.
See the DailyFX economic calendar for Friday, September 30, 2016
--- Written by Omar Habib
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