Friday’s Preliminary 4Q 2017 US Gross Domestic Product publication is deceiving and lies below expectations at 2.60% (consensus: 3.0%; real GDP at 2.30% and +1.50% in 2016) while December core PCE Y/Y stands at 1.50% (3Q: 1.35%), signaling a relatively weak performance, lower than 3Q GDP of 3.20%. With a December Personal Income M/M increase of 0.40% (0.30% consensus) and Household Real Consumption of 3.80% (consensus: 3.70%; fastest pace since 2014 while savings fell at 2.40%, lowest since September 2005) confirms that US consumption steered expansion during the last quarter of the year, also supported by Trump’s tax reform outlook and US global market optimism in the stock market. However, the drawback of this consumption boost is the increasing import rate (November 30th 2017 Y/Y: 8.40% and October 31st 2017 Y/Y: 7.0%) that underscores annual GDP.
Weakening USD (USD/EUR -2.38%, USD/GBP: -3.48%, USD/JPY: -3.09% and USD/CHF: -4.09%) might however be a driver to the 3% GDP growth target of Trump’s administration. Due to almost full employment conditions within the US economy (US December Seasonally Adjusted Unemployment rate at 4.10%, its lowest rate since December 31st 2000), effective corporate tax reform contribution (from 35% to 21%) to GDP growth remains limited for further growth. Government total expenditures also largely contributed to actual growth within the US economy, accounting for USD 6’586.71 billion (+1.027% increase from Q3 to Q4 2017) and remains at historical highs.
By Vincent Mivelaz