Robots are going to take all our jobs, and it doesn’t matter. We should actually be thrilled about the prospects of automation, because it means freeing up economic resources, including arguably the most valuable resource, time.
The key economic releases this week are the consumer confidence report on Tuesday, the third estimate of Q4 GDP on Thursday, and the PCE report as well as Personal Income & Spending data on Friday. In addition, there are several scheduled speaking engagements by Fed officials this week.
Should the Fed hike next Wednesday it will do so in a quarter in which GDP was just revised from 1.8% as of last week to just 1.3%. This forecast was more than double, or 2.7%, as recently as one month ago.
The relentless risk rally which took the Dow above 21,000 and the S&P over 2,400, has taken a breather overnight, with S&P futures modestly lower tracking European stocks, while Asian stocks advanced on US momentum; late Wednesday comments by a unexpectedly hawkish Lael Braniard has pushed the dollar higher, pressuring oil lower.
With the Fed jawboning for an imminent rate hike, it is perhaps not surprising that on Wednesday most banks, as well as the Atlanta Fed all slashed their Q1 GDP forecasts, with virtually everyone now expecting a sub-2% print.
The dollar and U.S. Treasury yields jumped on Wednesday, while global stocks and S&P futures rose as investors gave generally favorable marks to President Donald Trump's first speech to Congress, while paying more attention to the sudden onslaught of Fed hawks who repriced March Fed hike odds from 50% to 80% in a single afternoon. Strong economic data from China and Europe helped propell global risk assets higher.
Following a series of better than expected GDP-feeding prints, consensus had expected Q4 GDP to tick higher in the first revision released today, rising from 1.9% to 2.1%. That, however, did not happen and instead, the revised print came in unchanged at 1.9%, missing expectations despite an uptick in consumer spending.
With traders focused on President Trump's address to Congress tonight where he is expected to outline his economic priorities and provide plan details, European stocks are little changed for a second day and Asian stocks decline modestly as U.S. futures trade around the flatline. Oil declines, while the dollar is little changed.
The main focus this week will be on President Trump's speech to Congress and Chair Yellen's speech which is the last before the blackout period. US durable goods, ISM, the BoC rate decision, EZ CPI, UK PMIs and a busy calendar in Australia & Scandinavia also coming up.
Personal income growth disappointed in December, rising a less-than-expected 0.3% MoM. Of course, that did not stop Americans from spending as personal consumption rose 0.5% MoM in December. This is the 9th month in a row of higher annual spending growth than income growth and sends the savings rate tumbling to just 5.4% - the lowest since March 2015.
It appears that Deutsche Bank's warning that the global economy is about to roll over was spot on, because moments ago the Bureau of Economic Analysis reported that GDP in Q4 rose only 1.9%, barely above the lowest forecast of 1.7%, and below both the consensus estimate of 2.2% and the whisper estimate of 2.5%-2.6%.