GDP Disappointments Circle the Globe

Weekly Report - 27/12/2015

Risk Assets Rebounded While Economic Data Missed the Mark

The Santa Claus rally saw risk assets such as American equities rise while the dollar remained under pressure thanks largely to profit-taking and weak fundamental indicators.  GDP from other regions such as Canada and the United Kingdom also failed to meet forecasts, showing the outlook for the global economy remains concerning.

Weekly Review

The shortened holiday week saw limited global news with the main focus on GDP measures from across the globe.  The final third quarter GDP figure from the United States printed at 2.00%, beating expectations of 1.90% but dropping below the earlier estimate of 2.10% as concerns linger about the pace of inventory build across the economy.  The United Kingdom also experienced a downtick in quarterly GDP which fell to 0.40% expansion versus 0.50% recorded in earlier estimates.  Although still one of the fastest growing G7 nations, this alleviates pressure on the Bank of England to adjust policy near-term as they try and boost languishing inflation.  Canada saw monthly GDP flat at 0.00% versus the prior month which experienced a -0.50% contraction.  Most of the market volatility centered on commodities with both precious metals and energy prices rising after touching recent multi-year lows.  Softness in the US dollar saw gold close the week at $1075.60 per troy ounce while Brent crude oil rose off multi-year lows to rally nearly 5.00% over the course of the week. 


The Week Ahead

Limited data is set to be released in the coming week ahead of the New Year’s holiday.  With 2015 wrapping up, the main focus will be on macroeconomic indicators from the United States.  Pending home sales and the Case-Shiller home price index composite will round out other recent housing data such as existing and new home sales released last week.  Forecasts show pending home sales are expected to rise by 0.50%, likely driven by the delays from increased regulation and paperwork that have slowed the sales process.  The home price index composite of 20 cities measures by S&P Case-Shiller is estimated to fall to 5.40% expansion year over year on a non-seasonally adjusted basis, an indication that the post-crisis rebound might be reversing as home prices see a deceleration in gains.  Other important US data includes Conference Board Consumer Confidence figures for December which are expected to rise from 90.4 to 93.6 namely due to a boost in holiday sales.  Finally, a Chinese Manufacturing PMI figure is set to be released on Friday, with Thursday and Friday seeing abbreviated holiday trading hours.


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