Is the US back on its merry way after GDP data?
What would the Fed like?
It would like 4-5% growth per year, unemployment at sub 5.0% and inflation glued to 2.0%
The market would like that and it would probably keep most Americans happy too
That's not where we are now and we've got to realise it. I almost get the sense that the market is waiting to see the US hit the boom times but that's far from happening. So we have to take the current situation at face value.
Is 2.3% great for the US?
No.
Is 2.3% great for the US with global growth in a weak phase?
Yes (Europe would give their right arm (or Greece) for those numbers right now)
It's all about context and that's what we need to remember when we look at these numbers. The US may have put to bed Q1, partly due to the new revisions but it's back looking steady, not booming, steady.
As such growth is susceptible to larger moves from the smaller components. consumption may be up but business investment fell (-0.6% vs +1.6% prior). Housing investment fell, government spending rose overall but came with a jump in State and local purchases and a drop from Federal
Does any of it scream rate rises? No. It doesn't scream it as there's no booms or bubbles to try and contain but it does give the fed more rope to raise rates with. It does allow them to edge closer to getting the elephant out of the room. The market is trading the first hike, not where rates will be in a year's time.
These numbers keep that rate rise on track for this year, yet as we heard yesterday, the Fed want to see a little more
