Latest / Markets with Megan: A Quick Financial Markets Update / Revised GDP Figures: What They Mean for Inflation Fears | Episode 138 | 05-30-24

Transcript

Revised GDP Figures: What They Mean for Inflation Fears | Episode 138 | 05-30-24 · Markets with Megan: A Quick Financial Markets Update

• 0:01
  Megan Horneman: We've already known that the first quarter of 2024 was off to a rocky start, and we got some of that validation today with the second reading on first quarter GDP.
• 0:11
  Megan Horneman: It is Thursday, may 30th, and this is your regular segment of Markets with Megan.
• 0:15
  Megan Horneman: We're going to discuss the reading that we got today from the GDP and break it down into what was revised lower.
• 0:22
  Megan Horneman: So, first of all, the first quarter was revised lower, from 1.6% growth in the advanced reading to 1.3% growth.
• 0:31
  Megan Horneman: Some of the weakness came from when you look in personal consumption Remember, the consumer makes up the majority of GDP, so we saw consumption be downgraded from 2.5% to 2%, and that was primarily led by durable goods.
• 0:46
  Megan Horneman: And then, from a service perspective, we did see just a modest downward revision to services.
• 0:54
  Megan Horneman: When you look at fixed investment, though so this includes non-residential CapEx spending as well as residential spending that actually moved slightly higher from 5.3% to 6%, but again, that downward revision to personal consumption outweighed that.
• 1:11
  Megan Horneman: We also saw an increase in imports from the first reading, and that means we're importing more goods.
• 1:19
  Megan Horneman: That is actually, if you import more than you export, that takes away from GDP.
• 1:24
  Megan Horneman: It subtracts from GDP.
• 1:25
  Megan Horneman: Since that was upgraded and the exports were not upgraded as much.
• 1:30
  Megan Horneman: We actually saw the first time in about two years that net exports actually subtracted from GDP.
• 1:36
  Megan Horneman: When you look at some of the other details, federal spending was a little bit weaker than was originally anticipated, specifically from the defense side, and then the inventory build was not as big this reading.
• 1:49
  Megan Horneman: When you look at the core PCE price index, though, this was what really concerned investors when the first reading came out it was up 3.7%.
• 1:59
  Megan Horneman: So definitely not what the Fed was looking for.
• 2:02
  Megan Horneman: It's basically unchanged.
• 2:03
  Megan Horneman: It still was up about 3.6%.
• 2:05
  Megan Horneman: So again a slower consumer.
• 2:08
  Megan Horneman: Some concerns about inflation here.
• 2:10
  Megan Horneman: The equity market did not like this.
• 2:12
  Megan Horneman: Today we're seeing another sell-off here in the equity market.
• 2:16
  Megan Horneman: Bond yields are down slightly and that's primarily because this was a weak reading on GDP.
• 2:21
  Megan Horneman: We're still in the camp that the inflation is more of a concern than growth for the Federal Reserve.
• 2:28
  Megan Horneman: So tomorrow we'll be back.
• 2:29
  Megan Horneman: We'll have the Fed's preferred inflation indicator, which is the PCE.
• 2:33
  Megan Horneman: We need to see some indication that we're not seeing a resurgence here in inflation if we are going to make any adjustments to our forecast that the Fed's likely on hold for the remainder of this year.
• 2:45
  Megan Horneman: That's all we have.
• 2:46
  Megan Horneman: If you have any questions or comments.
• 2:48
  Megan Horneman: Please feel free to reach out to podcasts at verdence.
• 2:50
  Megan Horneman: com.
• 2:50
  Megan Horneman: Thank you.