US Q2 GDP revised higher on stronger consumer spending

Q2 US GDP was revised higher in the second estimate, rising to 3% q/q on a seasonally adjusted annualized basis, from 2.8% in the initial print. The improvement in the headline measure was driven by a higher estimate for the growth in consumer spending, which was revised to 2.9% q/q annualized from 2.3%.

The pace of growth in German consumer prices fell sharply in the provisional August CPI print, slowing to 2.0% y/y from 2.6% in July. The outturn was lower than consensus expectations for a 2.2% y/y growth rate and left German inflation at its lowest level since 2021. A separate report showed inflation in Spain had also moderated, slowing to 2.4% y/y from 2.9% the month prior. Inflation prints, due to be published on Friday, for both Italy and France are also widely expected to show slower inflation in those markets, potentially adding to expectations for a further rate cut from the ECB in September.

US initial claims for unemployment benefits fell marginally in the week ending 24 August, declining 2k from the week prior, to 231k. Continuing claims remained on an upward trend, rising 13k to 1.87mn in the week ending 17 August, potentially indicating that while the US labour market isn’t yet experiencing mass layoffs, workers who have recently become unemployed are finding it harder to find new employment opportunities.

A measure of inflation in Tokyo rose by more than expected in August, rising to 2.6% y/y, up from 2.2% in July. The city’s CPI print is regarded as a leading indicator of national inflation, with the latest outturn adding to the case for a further rate hike by the Bank of Japan.

Today’s Economic Data and Events

• 13:00 EC CPI (Aug). Forecast: 2.2% y/y
• 13:00 EC unemployment rate (Jul). Forecast: 6.5%
• 16:30 US personal income (Jul). Forecast: 0.2% m/m
• 16:30 US personal spending (Jul). Forecast: 0.5% m/m
• 16:30 US core PCE (Jul). Forecast: 2.6% y/y
• 18:00 US University of Michigan sentiment (Aug). Forecast: 68.0

Fixed Income

• US Treasury yields rose on Thursday, on the back of an unexpected upward revisions to second quarter GDP estimates. The yield on both the 2yr and 10yr bonds gained 3bps to 3.894% and 3.861%, respectively.
• There were also broad-based gains across European bond yields. The 10yr German Bund rose just over 1bps to 2.269%, while the 10yr Gilt gained almost 2bps to 4.016%.

FX

• Upward revisions to Q2 US GDP, saw the dollar gain against a basket of major peer currencies, rising 0.25%. EURUSD fell 0.4% to 1.1077, while GBPUSD dropped 0.17% to 1.3168. USDJPY rose 0.3%, closing at 144.99. Despite the recent strength in the dollar, the currency remains on track for its weakest month this year, with the spot index dropping around 2.6% since the beginning of August.
• Commodity currency moves against the dollar were more mixed on Thursday. AUSUSD rose 0.2% to 0.6798, NZDUSD gained 0.2% to 0.6258, and USDCAD ticked up 0.03% to reach 1.3485.

Equities

• US equity markets moves were mixed on Thursday, despite the better-then-expected GDP figures. The Dow Jones gained 0.6%, while the S&P 500 was unchanged. The tech-NASDAQ lost 0.23%, driven by Wednesday’s disappointing Nvidia earnings call.
• European equity indices made further gains on Thursday, fueled by a combination of strong earnings and rising expectations of a rate cut by the ECB. The Eurostoxx 50 rose 1.08%, the CAC 40 gained 0.84%, and the DAX added 0.7%. The UK’s FTSE 100 gained 0.43%.
• Locally, the DFM rose 0.23% and the ADX declined 0.36%.

Commodities

• Oil prices gained on Thursday, reversing some of the declines seen earlier in the week, driven by news of resilient US consumer spending data and supply disruptions in Libya. Brent futures rose 1.64% to USD 79.94/b, while WTI declined by 1.87% to USD 75.91/b.