GDP Beats Forecasts And Consumer Spending Is Strong

Gold has posted slight losses on Thursday, continuing the downward trend which has marked the previous two sessions. In North American trade, the metal is trading at a spot price of $1318.09 per ounce. Gold has slipped 1.4 percent this week. On the release front, Final GDP gained 1.4%, edging above the forecast of 1.3%. Unemployment Claims edged up to 254 thousand, beating the forecast of 260 thousand. Pending Home Sales declined 2.4%, much weaker than expectations and the weakest monthly reading in six months.

The US economy expanded 1.4% in the second quarter, revised from the preliminary estimate of 1.1%. Consumer spending has been strong, making up for sluggish business investment and weaker demand for US exports. The US consumer is optimistic about the economy, as underscored by recent CB consumer confidence surveys, which have been above the 100-level for two months running. On the labor front, unemployment claims came in at 254 thousand, marking the eighth straight week that jobless claims have come in below the forecast. On Friday, the important UoM Consumer Sentiment will be released, with the markets expecting a strong reading of 90.1 points.

The Federal Reserve opted for the sidelines in September, and with the November meeting taking place just before the US election, any rate move is unlikely before December at the earliest. Last week’s policy statement was generally upbeat and broadly hinted at a December rate hike. However, the markets can be forgiven for remaining somewhat skeptical, as the Fed has previously talked about a strong US economy and failed to follow up with a rate hike. Currently, a rate hike is priced in at 48 percent, but plenty can happen before the December policy meeting. The Fed has been sending out mixed messages about a rate hike, and this was underscored in the September decision, in which three FOMC members dissented and voted for an immediate hike. This lack of clarity has been disconcerting to the markets, which are looking for some clarity about the Fed’s monetary plans. The markets haven’t forgotten that last December, the Fed projected a series of hikes in 2016, and has yet to deliver even one hike this year. As we approach December, the Fed will need to send out a more uniform message in order to restore its credibility with the markets.

Thursday (September 29)

  • 8:30 US Final GDP. Estimate 1.3%. Actual 1.4%
  • 8:30 US Unemployment Claims. Estimate 260K. Actual 254K
  • 8:30 US Final GDP Price Index. Estimate 2.3%. Actual 2.3%
  • 8:30 US Goods Trade Balance. Estimate -62.6B. Actual -58.4B
  • 10:00 US FOMC Member Jerome Powell Speaks
  • 10:00 US Pending Home Sales. Estimate -0.1%. Actual -2.4%
  • 10:30 US Natural Gas Storage. Estimate 57B
  • 16:00 US Federal Chair Janet Yellen Speaks

Friday (September 30)

  • 10:00 US Revised UoM Consumer Sentiment. Estimate 90.1

*Key releases are in bold
*All release times are EDT