Take Two: US GDP revised up; Canada inflation unexpectedly rises
- 01 July 2024 (3 min read)
What do you need to know?
US economic growth was revised up to 1.4% in the first quarter (Q1), from the 1.3% previously estimated. Among other factors, the upward revision reflected higher fixed investment and government spending, but it was still significantly slower than Q4’s 3.4%. Meanwhile Federal Reserve (Fed) officials emphasised the need for patience on interest rate cuts; Fed Governor Michelle Bowman said she expected rates to remain steady “for some time” with “a number of upside inflation risks”. Meanwhile UK Q1 GDP was also revised up, to 0.7% from the 0.6% earlier estimated.
Around the world
Canada’s inflation rate unexpectedly increased in May, raising questions over the Bank of Canada’s (BoC) monetary policy path. Inflation accelerated to 2.9% from 2.7% in April on an annual basis, driven by rising services prices. The rise dampened hopes that the BoC will cut interest rates further in July with market expectations of a rate cut now below 50%. The BoC was the first G7 central bank to cut interest rates, lowering its benchmark rate by 25 basis points to 4.75% in June. AXA IM continues to expect the BoC to cut rates twice this year, with inflation making the next cut coming as soon as July more difficult.
Figure in focus: 4.3%
Growing demand for Chinese goods has lifted expectations for the country’s exports. According to a Bloomberg survey of economists, it is anticipated that exports will rise by 4.3% this year on an annual basis, up from an earlier forecast of 2.8%. The prediction comes after exports beat expectations in both April and May. Meanwhile China hosted the World Economic Forum’s Annual Meeting of the New Champions last week, which gathered more than 1,500 leaders from governments, businesses and other organisations. The agenda included the global economy, China’s growth trajectory, artificial intelligence and climate change, among other topics.
Words of wisdom
Swiftonomics: A term coined to highlight the economic influence of musician Taylor Swift, who has been credited with providing a short-term boost to multiple economies through her 21-month global tour. The current UK leg of the megastar’s Eras tour is predicted to generate almost £1bn for the UK economy, having already made its way through North America where fans were spending an average of $1,325 on accommodation, travel, food and drink. Last year, the Fed noted Swift helped fuel the US tourism industry as Philadelphia hotel revenues saw their strongest month since the pandemic in May 2023 when the singer performed in the city.
What’s coming up?
On Tuesday, the Eurozone releases flash June inflation figures and its latest unemployment data. The Fed publishes the minutes from its latest monetary policy meeting on Wednesday, while a spate of final Purchasing Managers’ Indices are also issued, including numbers for Japan, China, the Eurozone, US and UK. On Thursday, the UK holds its general election and on Friday the US issues unemployment figures for June. On Sunday, the French Parliamentary election will come to a close.
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