The latest GDP report was encouraging. Final sales to domestic purchasers jumped by an annualised 3.52% q/q in Q2: the first quarter data was revised up to 1.79% q/q. The first half of 2019 was strong, despite the pessimism reflected in surveys.
Sceptics largely ignored the consumption data for Q2 (up by an annualised 4.3% q/q) and focussed on the soft exports (-5.2% q/q) and non-residential investment (-0.6% q/q). That may be the Fed’s focus this week too.
A more obvious concern will be the big downward revisions to corporate profits. In the past, this commentary has placed great emphasis on the BEA data for profits. The hefty revisions cannot be dismissed lightly. If they are genuine, then it is legitimate to question how firms can continue to invest, when margins are being squeezed.
For now, the stock market looks set to continue rising driven by the triple boost of strong spending, low inflation and a sympathetic Fed.
