Thought For The Week
This morning’s 4Q GDP print came in a touch lower than expected, at 0.70% versus the consensus estimate of 0.80%. Looking through the numbers, this appears to have largely been caused by businesses trying to tackle high inventory levels (reducing the amount of new goods they purchase for sale), weak exports (stronger dollar and weaker global demand), and softer business investment (mainly from energy related businesses).
This seems to paint a dim picture for future growth prospects; however there are also several reasons to be hopeful for a stronger 1H 2016 and beyond. There was a slowdown during the quarter in consumption growth, which is being somewhat attributed to record wet weather. Alongside this, real personal disposable income increased. When taken together with a still strong consumer confidence level and employment still expanding at a good pace, consumption growth is expected to pick up again this year.
Despite this release of data, driving the markets higher this morning was the Bank of Japan’s decision to inject further stimulus through the use of negative interest rates. This has bolstered several currencies versus the JPY, and in theory should lead to improved exports and cheaper money fo businesses in Japan.
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