Chapter 8 August 17th Financial News
[Quick Facts]
1. Atlanta Fed GDPNow model raises forecast for U.S. Q3 GDP.
2. Fed minutes: The staff no longer judged that the economy would enter a mild recession toward the end of the year.
3. San Francisco Fed: U.S. households will run out of excess savings in this quarter.
[News Details]
Atlanta Fed GDPNow model raises forecast for U.S. Q3 GDP
The U.S. economy is likely growing at a 5.8% annualized rate in the third quarter, compared to a 5.0% increase last quarter, the Atlanta Federal Reserve's GDPNow forecast model showed. This suggests that the U.S. economy is far from being in a recession.
The model's nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth increased from 4.4% and 8.8%, respectively, to 4.8% and 11.4%.
Fed minutes: The staff no longer judged that the economy would enter a mild recession toward the end of the year
Most Fed officials still view high inflation as a continuing threat to the U.S. economy and believe that further interest rate hikes may be needed, according to the minutes of the Federal Reserve's July meeting.
The minutes showed that most participants believe there are serious upside risks to inflation that might require further tightening of monetary policy. In addition, participants no longer judged that the economy would enter a mild recession toward the end of the year.
The staff still expected real GDP growth in 2024 and 2025 to be lower than their estimates of potential output growth, which would lead to a modest increase in the unemployment rate relative to current levels.
Participants also expected headline and core personal consumption expenditure (PCE) price inflation to decline over the next few years. Most of the decline in core inflation is expected to occur in the second half of 2023. Forward-looking indicators suggest that the increase in the price of housing services will slow, and prices of core non-housing services and core commodities are also projected to slow over the remainder of 2023. Inflation is expected to ease further in 2024 as the supply-demand imbalance continues to be resolved, with the total PCE price projected to increase by 2.2% and core inflation by 2.3% by 2025.
San Francisco Fed: U.S. households will run out of excess savings in this quarter
According to a new study by the San Francisco Fed, the excess savings accumulated by U.S. households during the pandemic may run out this quarter, which means consumer spending may slow down which is not good for the economy. Excess savings often means excess consumption, which is one of the key pillars of the U.S. economy. The depletion of excess savings by U.S. consumers could hurt the economy's ability to achieve a soft landing.
[Focus of the Day]
UTC+8 20:30 U.S. Initial Jobless Claims
