Connect with us

Markets

U.S. Economic Growth Cools on Biggest Trade Drag Since 2010

Published

on

U
  • U.S. Economic Growth Cools on Biggest Trade Drag Since 2010

U.S. economic growth slowed more than forecast last quarter on the biggest drag from trade in six years and more moderate consumer spending. Business investment picked up, which may be a harbinger for faster expansion in 2017.

Gross domestic product, the value of all goods and services produced, rose at a 1.9 percent annualized rate following the prior quarter’s 3.5 percent gain, Commerce Department data showed Friday in Washington. The median forecast  called for 2.2 percent. Consumer spending, the biggest part of the economy, rose 2.5 percent, in line with projections.

The results cap growth of 1.9 percent for the full year — near the average pace of the current expansion — and reinforce the leading role of household purchases while showing that businesses are starting to spend again. The strong job market and optimism among consumers and companies for President Donald Trump’s policies are likely to keep growth humming along in 2017, though tensions over trade could temper any gains.

“The economy is continuing to chug along in the slow lane,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “Consumer spending was fairly solid. We’re at a turning point on the upside for business investment. Based on the economy and on the policies we’re likely to see, growth is going to speed up this year.”

Economists’ U.S. growth forecasts ranged from 1.7 percent to 2.9 percent. The GDP estimate is the first of three for the quarter, with the other releases scheduled for February and March when more information becomes available. Growth is seen at 2.3 percent in 2017 and 2018, based on median projections in a Bloomberg survey earlier this month.

Soybean Exports

Net exports subtracted 1.7 percentage points from expansion in the October-December period, the most since the second quarter of 2010, as the trade deficit widened following a jump in soybean shipments that helped add to growth in the third quarter.

In addition to household spending, the economy got help from business outlays on equipment, which rose 3.1 percent for the first gain in five quarters. Inventory accumulation added the most to growth since early 2015, housing made the strongest contribution in a year and government spending picked up.

To get a better sense of underlying domestic demand, economists look at final sales to domestic purchasers, which strip out inventories and exports, the two most volatile components of GDP. After adjusting for inflation, such sales grew 2.5 percent last quarter, the fastest since the third quarter of 2015, following a 2.1 percent increase.

The increase in household purchases, which account for about 70 percent of the economy, followed the prior quarter’s 3 percent jump. Spending added 1.7 percentage points to growth.

After-tax incomes adjusted for inflation climbed at a 1.5 percent annual rate, a three-year low. The saving rate decreased to 5.6 percent from 5.8 percent.

Inventories Grow

Inventory expansion added 1 percentage point to GDP growth, as stockpiles were rebuilt at a $48.7 billion annualized pace following a $7.1 billion rate.

Nonresidential fixed investment increased at a 2.4 percent annualized pace, adding 0.3 percentage point to growth, the most in five quarters. Investment in nonresidential structures, including office buildings and factories, fell at a 5 percent rate after a 12 percent jump.

The housing recovery continued last quarter. Residential construction increased at a 10.2 percent annualized rate, adding 0.37 percentage point to growth. That followed a 4.1 percent decline in the previous three months.

Government spending grew at a 1.2 percent rate as state and local outlays picked up. Spending by federal agencies fell for the third time in a year, dropping at a 1.2 percent pace.

The GDP report also showed price pressures remain limited. A measure of inflation, which is tied to consumer spending and strips out food and energy costs, climbed at a 1.3 percent annualized pace.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Crude Oil Pulled Back Despite Joe Biden Stimulus

Published

on

Oil 1

Crude Oil Pulled Back Despite Joe Biden Stimulus

Crude oil pulled back on Friday despite the $1.9 trillion stimulus package announced by U.S President-elect, Joe Biden.

Brent crude oil, against which Nigeria’s oil is priced, pulled back from $57.38 per barrel on Wednesday to $55.52 per barrel on Friday in spite of the huge stimulus package announced on Thursday.

On Thursday, OPEC, in its latest outlook for the year, said uncertainties remain high in 2021 with the number of COVID-19 new cases on the rise.

OPEC said, “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.”

Governments across Europe have announced tighter and longer coronavirus lockdowns, with vaccinations not expected to have a significant impact for the next few months.

The complex remains in pause mode, a development that should not be surprising given the magnitude of the oil price gains that have been developing for some 2-1/2 months,” Jim Ritterbusch, president of Ritterbusch and Associates, said.

Still, OPEC left its crude oil projections unchanged for the year. The oil cartel expected global oil demand to increase by 5.9 million barrels per day year on year to an average of 95.9 million per day in 2020.

But also OPEC expects a recent rally and stimulus to boost U.S. Shale crude oil production in the year, a projection Investors King experts expect to hurt OPEC strategy in 2021.

Continue Reading

Crude Oil

OPEC Says Uncertainties Remain High in 2021

Published

on

Nigeria's economic Productivity

OPEC Says Uncertainties Remain High in 2021

The Organization of the Petroleum Exporting Countries (OPEC) on Thursday said global uncertainties remained high going forward in 2021 but kept its oil demand forecast unchanged.

In the cartel’s latest oil outlook for 2021, oil demand is expected to increase by 5.9 million barrels per day year on year to 95.9 million barrels per day. The prediction was unchanged from December’s assessment.

However, OPEC and allies, said: “Uncertainties remain high going forward with the main downside risks being issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior.”

“These will also include how many countries are adapting lockdown measures, and for how long. At the same time, quicker vaccination plans and a recovery in consumer confidence provide some upside optimism.

Crude oil rose to $57 per barrel this week after incoming US President Joe Biden announced it would inject $1.9 trillion stimulus into the world’s largest economy.

But the recent rally in the commodity and stimulus announcement is expected to boost US crude oil output and disrupt OPEC+ production cuts strategy for the year.

The 2021 supply outlook is now slightly more optimistic for U.S. shale with oil prices increasing, and output is expected to recover more in the second half of 2021,” OPEC said.

Still, OPEC, in its forecast “assumes a healthy recovery in economic activities including industrial production, an improving labour market and higher vehicle sales than in 2020.”

“Accordingly, oil demand is anticipated to rise steadily this year supported primarily by transportation and industrial fuels,” the group said.

Continue Reading

Crude Oil

Brent Crude Oil Rose to $56.25 Per Barrel

Published

on

oil

Brent Crude Oil Rose to $56.25 Per Barrel

Oil price surged following the declaration of Joe Biden as the President-elect of the United States of America last week after Trump’s mob invaded Capitol to disrupt a joint Senate session.

Also, the large drop in US crude inventories helped support crude oil price to over 11 months despite the second wave of COVID-19 crushing the world from Asia to Europe to America.

Brent crude oil, against which Nigerian Crude oil is priced, rose to $56.25 per barrel on Friday before pulling back to $55.422 per barrel on Monday during the London trading session.

Experts attributed the pullback to the rising number of COVID-19 cases in Asia with about 11 million people already locked down in Hebei province in China.

Covid hot spots flaring again in Asia, with 11 million people (in) lockdowns in China Hebei province… along with a touch of FED policy uncertainty has triggered some profit taking out of the gates this morning,” Stephen Innes, chief global market strategist at Axi, said in a note on Monday.

China, the world’s largest importer of crude oil, has joined the United Kingdom and others declaring full or partial lockdown to curb the second wave of COVID-19.

Continue Reading

Trending