AUGUST 20, 2018 – ECONOMY HOLDS STEADY AS WE AWAIT A SEPTEMBER RATE HIKE
The release of economic data last week is showing what we can expect for Q3 US economic growth expectations.
July retail sales softened from Q2, but rising 0.5 percent versus an expected 0.1 percent increase. We can’t expect consumer spending to rise markedly until wage pressures advance household income; but consumer spending will remain the primary driver for GDP growth. Housing starts lagged due to supply shortages and the lack of workers in certain parts of the country. The good news last week was the euro-area economy grew faster in Q2 than initially reported, indicating worries may have been exaggerated, making prospects for H2 more hopeful.
The consensus is for Q3 growth to be around 3 percent, this is down from the 4.1 percent experienced in Q2, which was seen as unsustainable. For a year as a whole, Bloomberg economists predict a 2.9 percent expansion, versus 2.6 percent in 2017. Regardless of the slight slowdown, the data continues to support a Fed rate increase next month. Take advantage of the opportunity to lock in the low rates still available through the use of interest rate swaps.