FXStreet (Guatemala) – Analysts at BNP Paribas explained that US GDP growth markedly slowed in the final quarter of 2015: +0.7% versus 2% in Q3 (quarterly annualized rate).
Key Quotes:
“Households’ spending remains strong, but business cut on expenditures (investment and inventory building), while the global slowdown weighed on US exports. Details of the report, even if confirming the slowdown, provide a more nuanced diagnosis: final domestic demand excluding oil-related investment was up 2.9% (y/y) in Q4, just slightly down from the 3.2% average of the first nine months of 2015, and still more robust than in 2014 (+2.5%).”
“When they met earlier this week, FOMC members knew GDP would be disappointing in Q4 and they noted that “household spending and business fixed investment [had] been expanding at moderate rates”. This is a downgrade from December assessment when that pace was qualified has “solid”. More strikingly, they chose not to qualify the balance of risks to the outlook, after stating it was balanced in December.”
“These sent a dovish signal, even if the FOMC statement starts with a rather positive assessment of labour market conditions. As a consequence, the expectations for a rate hike in March, and additional ones later this year, have been diminishing.”
“The appearance of Janet Yellen before the House Financial Services Committee on February 10th will have to be closely monitored. If the Fed is to change its view that rates will be increased four times this year, it would be the moment it chooses to signal it.”
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