Upcoming U.S. Economic Data Release

by Warren Seah

Next week, the financial market anticipates another set of robust U.S. data, sparking concerns regarding the economy’s ability to withstand the pressure of soaring interest rates.

GDP Revision and Inflation Update

The first revision to the fourth-quarter Gross Domestic Product (GDP) is scheduled for release on Wednesday. Following this, on the next day, we can expect January’s report on the Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve’s preferred inflation gauge.

Projections by Leading Institutions

JPMorgan Chase & Co. has increased its estimate for GDP growth in the final quarter of 2023 to 3.3%, in line with the government’s initial estimate. Economist Daniel Silver shared this projection. On the other hand, analysts at Morgan Stanley foresee a rise in January’s core PCE by around 0.4% monthly, compared to December’s 0.2%. They also expect inflation to continue on a volatile path, reaching a 2.3% year-over-year core rate in 2024.

Market Analysis: Strong Economy and Higher Interest Rates

Tom Graff, the chief investment officer at Baltimore-based Facet, managing $2.7 billion in assets, expressed concerns about the strength of the economy amidst high interest rates. He suggested that the Federal Reserve might consider the current interest rates as the new norm, placing the burden on earnings for stocks and indicating potential upside risk for longer-term yields in bonds.

Positive Economic Indicators

Recent surveys by S&P Global revealed that the economy expanded at an above-average rate, supported by a decrease in weekly initial jobless-benefit claims to a five-week low. Consequently, the 10-year Treasury yield remained near its highest level in almost three months. Investor enthusiasm in the technology sector was evident as the Nasdaq Composite approached a record close, with a 2.9% increase in afternoon trading.

Strong U.S. Data

February has seen a series of positive U.S. economic data releases, including January’s surprising nonfarm-payroll gain of 353,000 and a consumer-price index report that surpassed expectations. These indicators point towards a robust economy, although concerns linger about sustaining growth amidst higher interest rates. Economic Growth Predictions

In a recent statement, Graff expressed optimism regarding economic growth, stating that it benefits everyone involved. Despite potential concerns about inflation reaching 3% or 4%, Graff remains bullish on stocks as long as earnings continue to show strength. He emphasized that if inflation remains around 2.5% by the end of the year and is accompanied by robust economic growth, stocks are likely to perform well.

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