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The return of the GDP

| Posted by: Paul Donovan | Tags: Paul Donovan

  • US GDP is due. This number will be revised massively in the coming months, years and decades. GDP is an economic concept that was designed a long time ago in an economy far, far away from the sort of economy that we have today. Nonetheless, markets will pay undue attention to this data (the least accurate) and less attention to the later revisions (more accurate).
  • The data should show the US economy slowing from the sugar high of the Trump tax cuts, without showing the negative effects of the Trump trade tax increases (yet). The market is looking for 3.3% annualized.
  • Could equity volatility cause a US growth problem and force Fed policy to change? Equities will react more than the economy to trade taxes. The Fed focuses on the economy. Fed President Mester and Fed Vice-Chair Claridan signaled they find investors' lack of faith in the Fed disturbing, and there is no reason to change the policy path.
  • The interminably tedious process of separating the EU and the UK seems to be going nowhere fast. Media reports suggest the UK has given up negotiating for now, owing to deep divisions in the government. Perhaps PM May is the only hope.