First-Quarter GDP Growth Revised From Forecast
In a shock to investors, the biggest piece of economic news came from the U.S.’s first-quarter GDP revision this week. After being first reported as 1.3%, GDP was revised by the Commerce Department to a much higher annualized pace of 2%, far ahead of the Dow Jones estimate of 1.4%. The revised number comes shortly after the Federal Reserve warned of continuous economic growth despite tighter rates. In the previous quarter, however, the larger growth rate of 2.6% shows some steady decline without taking into account holiday spending. The news of the higher-than-expected revision did send US treasury yields higher, with the 10-year Treasury at 3.83% and the 2-year Treasury at 4.88%.
On a broader level, the signs of robust economic growth have acted to cool off any recessionary fears investors may have held for the past several months. After a stellar retail sales report for May, it seems consumers have a long way to go until they lose any steam. The labor market, the underlying driver for consumer purchasing power, has also remained strong. This week, jobless claims fell to the lowest level since May at 239,000, far below the expected 264,000. With several areas of the economy performing at maximal levels, it will be interesting to see how far the Fed will need to raise the federal funds rate in order to stunt the escalating growth 2023 has brought to the nation.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
