US Economic Activity Revised Higher

Weekly Report - 25/12/2016

Gross Domestic Product Climbs at Fastest Pace in Two Years


In keeping with the positive momentum witnessed since the middle of the year, third quarter US GDP was revised higher in the final reading.  Adding to the optimism was US existing home sales rising to the highest point on an annualized basis in 10-years.


Last Week

In another surprising upgrade of US economic activity, third quarter GDP was revised to 3.50% growth on an annualized basis versus the 3.20% reported a month earlier.  The main contributors of these gains were rising exports of soybeans and better consumer spending alongside stronger business investment and government expenditures.  Adding to the positive sentiment was existing home sales which rose to 5.61 million homes sold on an annualized basis, the best print in 10-years. Japan released critical figures relating to trade along with the latest decision on monetary policy.  Exports narrowed by the slowest pace in months, contracting by only -0.40% on an annualized basis through the end of November while imports also improved, falling only -8.80%.  The Bank of Japan opted to leave monetary policy on hold, reiterating its intentions to target yields on 10-year bonds.  Meanwhile, the Riksbank in Sweden decided to expand its own accommodation, adding SEK 60 billion in quantitative easing through the first half of 2017.  In China, upside momentum in housing prices has accelerated to 12.60% year over year despite government measures designed to curb speculation.  As citizens look to hedge against the falling Yuan, Bitcoin has also surged higher alongside housing, nearly doubling from 2016 lows.


The Week Ahead

Financial markets will be closed on Monday for Christmas before reopening late in the day.  The week ahead will likely be quieter as portfolio managers and larger investors abstain from adding new positions, leading to lower seasonal trading volumes.  As a result, financial markets might be slightly more volatile over the coming sessions as liquidity falls heading into 2017.  The week will be absent of many significant market moving events, with only minor fundamental announcements due throughout the week.  The major data will come in the form of Japanese inflation figures due on Monday evening.  Core annualized inflation is expected to rise to -0.30% during the month of November versus -0.40% in October.  Other data will include household spending figures which are forecast to continue improving.  The United States is also set to release figures pertaining to housing in the form of pending home sales and consumer confidence numbers from the Conference Board.  Consumer confidence is expected to rise alongside pending home sales during the latest measuring period.  The week will also see the release of the latest figures pertaining to US crude oil inventories which have remained at historically elevated levels for weeks.


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