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Market News Gold jumps $12 as U.S. GDP unexpectedly shrinks in Q1, core PCE subpar
Gold jumps $12 as U.S. GDP unexpectedly shrinks in Q1, core PCE subpar
GMT+8 At 20:30 on Thursday (April 28), the first-quarter GDP data released by the United States unexpectedly contracted, and the core PCE also fell short of expectations. At press time, spot gold jumped nearly $12 to $1,894.98 an ounce. But first-quarter economic data is unlikely to change the Fed's policy course.
2022-04-28
7385
GMT+8 At 20:30 on Thursday (April 28), the first-quarter GDP data released by the United States unexpectedly contracted, and the core PCE also fell short of expectations. At press time, spot gold jumped nearly $12 to $1,894.98 an ounce.
Specific data shows that the initial value of the annualized quarterly rate of real GDP in the United States in the first quarter fell by 1.40%, the first negative value since the second quarter of 2020. The market had expected an increase of 1.10%; in the fourth quarter of last year, it increased significantly by 6.90%.
The data released in the same period also showed that the initial value of the annualized quarterly rate of the core PCE price index in the first quarter of the United States was recorded at 5.20%, which was lower than the expected 5.40%, and the previous value was 5%; An increase of 180,000 as scheduled, lower than the previous increase of 184,000.
The economic recovery has been slowed by supply disruptions, labor shortages and high inflation. U.S. business inventories grew at a slower pace, reflecting a new wave of COVID-19 cases and a surge in imports, rising trade imbalances and rising inflation, with strength in consumer spending offset by a widening trade deficit.
Some economists believe the risk of a further slowdown is growing, with high inflation at the top of the list. U.S. growth is under threat from the highest inflation in 40 years as Russia's invasion of Ukraine pushes up commodity prices. Rising interest rates are also weighing on growth as the Fed battles inflation.
High inflation is eroding household purchasing power. Consumer prices rose 8.5% in March from a year earlier, a four-year high. High inflation is wiping out wage gains for many workers: Average hourly earnings rose 5.6% over the same period.
Rapidly rising prices also pose challenges for many businesses. Cratex Manufacturing Co. is a 100-employee manufacturer that manufactures and sells industrial abrasives for other manufacturers for the production of steel, jet engine blades and metal castings.
Cratex president Ricker McCasland said the San Diego-based company has seen prices for materials such as resin and rubber that it source increase by 5% to 30% since last fall.
Meanwhile, Cratex has had to raise wages to retain workers. McCasland added that raw material prices are rising faster than the company's ability to recover costs through its own price increases.
George Lewis, co-owner of the Brass Lan tern Inn in Stowe, Vermont, said it's unclear where inflation will go, and the prices of heating oil and cheese the inn buys have risen rapidly.
But first-quarter economic data is unlikely to change the Fed's policy course. The Fed raised its benchmark interest rate by 25 basis points from near zero in March, and has indicated that it will accelerate by 50 basis points in May. Investors in the futures market now expect the Fed to raise its key interest rate to 2.7% by the end of the year, from just over 0.25% today.
The U.S. economy as a whole continued to see gains, citing very strong household balance sheets, household consumption and business investment. Other data, including a 3.6% unemployment rate, strong ongoing job growth and debt levels relative to household income, also point to continued strength in the economy.
Despite recognizing that the risks of an economic downturn are rising, most economists surveyed by The Wall Street Journal in April said they still believe the Fed can control inflation without triggering a recession. They say the economy is well-positioned to withstand higher interest rates, given near-record low unemployment, steadily rising incomes and relatively low levels of consumer debt.
The labor market is now a key area of the U.S. economy's strength. Unemployment claims are hovering near record lows as employers hold on to hiring amid a shortage of available workers. Businesses are hiring and raising wages to support consumer spending, the main driver of the economy.
While Americans are buying less big-ticket items, they are spending more on services as the total number of Covid-19 cases dwindles and travel restrictions are lifted. Hotel occupancy rates began to rise in January, and more people began boarding flights.
Specific data shows that the initial value of the annualized quarterly rate of real GDP in the United States in the first quarter fell by 1.40%, the first negative value since the second quarter of 2020. The market had expected an increase of 1.10%; in the fourth quarter of last year, it increased significantly by 6.90%.
The data released in the same period also showed that the initial value of the annualized quarterly rate of the core PCE price index in the first quarter of the United States was recorded at 5.20%, which was lower than the expected 5.40%, and the previous value was 5%; An increase of 180,000 as scheduled, lower than the previous increase of 184,000.
The economic recovery has been slowed by supply disruptions, labor shortages and high inflation. U.S. business inventories grew at a slower pace, reflecting a new wave of COVID-19 cases and a surge in imports, rising trade imbalances and rising inflation, with strength in consumer spending offset by a widening trade deficit.
Inflation threat tops list
Some economists believe the risk of a further slowdown is growing, with high inflation at the top of the list. U.S. growth is under threat from the highest inflation in 40 years as Russia's invasion of Ukraine pushes up commodity prices. Rising interest rates are also weighing on growth as the Fed battles inflation.
High inflation is eroding household purchasing power. Consumer prices rose 8.5% in March from a year earlier, a four-year high. High inflation is wiping out wage gains for many workers: Average hourly earnings rose 5.6% over the same period.
Rapidly rising prices also pose challenges for many businesses. Cratex Manufacturing Co. is a 100-employee manufacturer that manufactures and sells industrial abrasives for other manufacturers for the production of steel, jet engine blades and metal castings.
Cratex president Ricker McCasland said the San Diego-based company has seen prices for materials such as resin and rubber that it source increase by 5% to 30% since last fall.
Meanwhile, Cratex has had to raise wages to retain workers. McCasland added that raw material prices are rising faster than the company's ability to recover costs through its own price increases.
George Lewis, co-owner of the Brass Lan tern Inn in Stowe, Vermont, said it's unclear where inflation will go, and the prices of heating oil and cheese the inn buys have risen rapidly.
Fed not worried about rate hikes triggering recession
But first-quarter economic data is unlikely to change the Fed's policy course. The Fed raised its benchmark interest rate by 25 basis points from near zero in March, and has indicated that it will accelerate by 50 basis points in May. Investors in the futures market now expect the Fed to raise its key interest rate to 2.7% by the end of the year, from just over 0.25% today.
The U.S. economy as a whole continued to see gains, citing very strong household balance sheets, household consumption and business investment. Other data, including a 3.6% unemployment rate, strong ongoing job growth and debt levels relative to household income, also point to continued strength in the economy.
Despite recognizing that the risks of an economic downturn are rising, most economists surveyed by The Wall Street Journal in April said they still believe the Fed can control inflation without triggering a recession. They say the economy is well-positioned to withstand higher interest rates, given near-record low unemployment, steadily rising incomes and relatively low levels of consumer debt.
The labor market is now a key area of the U.S. economy's strength. Unemployment claims are hovering near record lows as employers hold on to hiring amid a shortage of available workers. Businesses are hiring and raising wages to support consumer spending, the main driver of the economy.
While Americans are buying less big-ticket items, they are spending more on services as the total number of Covid-19 cases dwindles and travel restrictions are lifted. Hotel occupancy rates began to rise in January, and more people began boarding flights.
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