US GDP Preview: No revision to third quarter pace

US GDP to maintain 3.5% growth in Q3.
China-US trade dispute escalating ahead of G-20.

Joseph Trevisani FXStreet

The first revision to the third quarter annualized gross domestic product figure will be released by the Bureau of Economic Analysis, a division of the Commerce Department on Wednesday November 28th at 8:30 am EST, 13:30 GMT

Forecast

American economic growth in the third quarter is expected to remain at 3.5% when the Bureau of Economic Analysis (BEA) issues its first revision, the second or 'preliminary' release of the GDP numbers. The BEA revises the GDP figures twice after the initial release, at one month intervals, as more information on the economy becomes available.

The US economy expanded smartly in July, August and September though moderating from the 4.2% growth of the second quarter. A strong labor market with 3.7% unemployment, good job creation and rising wages supported a healthy consumer sector. Manufacturing employment continued its excellent run. Personal spending and income expanded steadily in the quarter though at a slightly slower pace than in the second quarter. None of these factors have changed substantially since the original BEA calculation.

International trade and growth

One source of potential revision is international trade. The BEA includes a net import/export number in its GDP estimate with imports subtracting and exports adding to GDP. If imports were higher than the original forecast or exports lower that could drag down GDP, with the reverse true if imports were weaker and exports stronger.

The trade dispute between the US and China has become more vocal ahead of the G-20 meeting in Argentina this weekend. President Trump has said that his administration plans to increase existing tariffs on $200 billion of Chinese goods and will add tariffs to the remaining $267 billion of Chinese imports if the two nations cannot come to an agreement. An initial Chinese report of a deal has been disavowed. Mr. Trump also noted to the Wall Street Journal that he does not expect these measure will be postponed, suggesting that an agreement is not near.

Economic growth in the US is thought to have dropped substantially into the final quarter. The Atlanta Fed’s GDPNow model posits a 2.5% expansion in the last three months of the year. That could change as preliminary retail sales numbers become available. Spending figures from the traditional start of the holiday shopping season this past Friday were robust.

Federal Reserve and the dollar

The Federal Reserve’s anticipated 25 basis point increase to Fed Funds rate in December will not be affected by this GDP revision though higher US economic growth will give the bank a larger cushion for its policy. Stronger than expected GDP will tend to support the US Dollar but it is not a large immediate factor.

Author

Joseph Trevisani

FXStreet

Joseph Trevisani began his thirty-year career in the financial markets at Credit Suisse in New York and Singapore where he worked for 12 years as an interbank currency trader and trading desk manager.

USD/JPY stays below 160.50 as markets assess BoJ decision

USD/JPY fluctuates in a relatively narrow range above 160.00 on Tuesday as markets assess the Bank of Japan's (BoJ) decision to raise the policy rate by 25 at the June meeting. Meanwhile, investors keep a close eye on news coming out of the Middle East, while preparing for the critical Fed meeting.

AUD/USD struggles for direction, still below 0.7100

AUD/USD looks to extend Monday’s recovery, although a challenge to the 0.7100 barrier remains elusive ahead of the opening bell in Asia. The Aussie Dollar was unable to take advantage of the RBA's relatively cautious message, which included keeping its OCR unchanged at 4.35% and leaving the possibility of further tightening in the future.

Gold: $4,000 or $4,500? The Fed may decide Gold’s next big move

Gold now surrenders part of its initial advance and recedes to the vicinity of the $4,350 mark per troy ounce on Tuesday. The early enthusiasm sparked by the US-Iran peace deal has faded somewhat, prompting investors to adopt a more prudent stance as they await further details of the agreement and key guidance from the Fed.

XRP pulls back as subdued ETF inflows, layered resistance cap upside

Ripple (XRP) remains elevated above $1.23 at the time of writing on Tuesday, struggling amid a capped upside. Despite an improved overall market sentiment driven by news of a peace agreement between the United States and Iran to end the war in the Middle East, capital inflows remain notably subdued.

1% rate, 160 Yen: Why Japan’s historic hike changed little

The Bank of Japan (BoJ) pushed its short-term policy rate to 1% on Tuesday, the highest setting since 1995 and a 31-year milestone in a normalization cycle barely two years old. It is the kind of number that should mark a turning point for the Yen, and it did almost nothing.

Why a hawkish RBA is no longer enough to lift the Australian Dollar

The Reserve Bank of Australia delivered more than what markets expected: a hawkish hold that should have supported the Aussie. But markets widely ignored it, focusing instead on slowing economic growth and proving that central bank messaging alone isn’t always enough to drive currencies.