Weekly Economic Update: April 29th, 2019
• The two-year Treasury note declined by ten basis points in yield last week following the GDP release for the first quarter. First quarter GDP came in stronger than expected boasting a growth rate of 3.2% which was influenced by several factors that overstated its reported strength. Taking these onetime factors out of the equation results in a growth rate closer to 1.3%, which is half of the increase in GDP that occurred during the fourth quarter of 2018.
• Retail sales perked up during March staging the biggest monthly increase in eighteen months. This strong report should add momentum to the Personal Consumption report on Monday.
• Equity investors appear to be looking through the headline slowdown in GDP, focusing on encouraging earnings reports, a possible trade deal with China, the sustained strength in the job market and the Fed’s promise to forego further interest-rate hikes. The S&P 500 rose 1.20% last week.
• Inflation continues to stay well contained below the Fed’s inflation target. Inflation will need to rise above the Fed’s target of 2.0% to even begin considering an increase in the fed funds rate. A sustained increase in inflation above the Fed’s target rate is a low probability event over the next several quarters.