Huitong Finance APP News - With the unwavering support of American consumers, the world's largest economy may expand at its fastest pace in nearly two years in the third quarter, which poses a challenge for Federal Reserve officials who are discussing whether further tightening policies are needed.
According to a survey conducted by Bloomberg among economists, it is expected that the US Gross Domestic Product (GDP) will grow at an annualized rate of 4.3% from July to September. This growth indicates that compared to Europe's stagnation and Asia's response to the economic problems of major Asian powers, the United States remains a powerful engine of the global economy.
Personal consumption is the main driving force of the US economy, expected to grow at a rate of 4%. After nearly two years of interest rate hikes, resilient demand is testing the policy capabilities of Federal Reserve officials. Although inflation has moved away from its peak, price pressure is still almost twice the target.
Thursday's US Gross Domestic Product (GDP) report may not be enough to prompt the Federal Reserve to take interest rate hikes in November, but if fourth quarter spending continues to grow, it may increase the possibility of further tightening monetary policy by the end of the year.
At last Thursday's New York Economic Club event, Federal Reserve Chairman Jerome Powell said, "If there is further evidence that economic growth continues to be above trend, or if labor market tensions no longer ease, this may pose a risk to the progress of inflation and may require further tightening of monetary policy
The September personal consumption expenditure price index released on Friday in the United States will provide the market with an understanding of household demand and inflation trends in the fourth quarter.
Economists currently expect the core personal consumption expenditure price index to increase by 3.7%. This index is one of the preferred indicators for the Federal Reserve as it excludes typically volatile food and energy costs. If the actual increase reaches this level, it will be the smallest annual increase since May 2021, in line with the gradual progress in inflation.
Bloomberg economists Anna Wong, Stuart Paul Elizabeth Winger and Estelle Ou stated: With the frenzy of summer tourism and entertainment, consumers are accelerating their spending to an unsustainable 4.2%, and the annualized growth rate of real GDP in the third quarter may soar to 4.7%. We expect consumption growth to slow down in the fourth quarter due to high inflation rates, high interest rates, and the recovery of student loan repayments. The Federal Reserve's tightening cycle will take time to affect the real economy, but we believe that rising mortgage rates, rising credit The increase in card debt and corporate loan defaults will have an impact on economic growth this quarter
The Bank of Canada will release its interest rate decision on Wednesday and release new forecasts for inflation, economic growth, and economic risk conditions. It is widely expected that Bank of Canada Governor Tiff Macklem will maintain the policy of suspending interest rate hikes, but at the same time may imply the need for further rate hikes.
In other regions, the European Central Bank may keep interest rates unchanged, the Bank of Israel will make the first policy decision after the conflict broke out, Chilean policymakers may reduce borrowing costs, and Russia and Türkiye may implement substantial interest rate increases.
Asia
In China, the highest legislative body of the Standing Committee of the National People's Congress will meet before Tuesday and is expected to discuss proposals for the early issuance of new local government debt and the appointment of key personnel. In addition, China will also release industrial profit data, which may indicate a sustained economic recovery. Investors will closely monitor the situation of the world's second largest economy.
In Japan, Prime Minister Fumio Kishida may consider the results of special elections held over the weekend. If the election results are disappointing, further spending policies may be encouraged.
Over the weekend, Tokyo will release inflation data, which may reveal whether Japan's price growth continues to slow down. At the same time, with the end of the month approaching, investors may pay close attention to the rise of treasury bond bond yields and the weakening of the yen, because the Bank of Japan is about to hold the next monetary policy meeting.
Europe
The UK will release new labor market data on Tuesday, which may indicate that the employment growth momentum in the UK is weakening. On the same day, the Purchasing Managers' Index (PMI) of the UK and Eurozone may show that the manufacturing industry continued to shrink in October, although it may slow down its deterioration rate.
In the following week, other economic data for the eurozone include Monday's consumer confidence index and two days later the German Ifo index. It is expected that the German Ifo index will show only a slight improvement in business confidence in Europe's largest economy.
On Friday, Spain's gross domestic product (GDP) data will become the first major member country in the eurozone to release its third quarter data. The report is expected to show that despite economic weakness elsewhere, output remains strong, supporting economic expansion in the tenth quarter.
At Thursday's European Central Bank (ECB) meeting, policymakers led by President Christina Lagarde are expected to maintain borrowing costs unchanged for the first time since June 2022, although they may suggest that they can resume raising interest rates if needed. Officials may also discuss the possibility of reducing bond holdings in the future.