GDP growth dims, but we see bright spots ahead

We believe consumption is poised to bounce back, while investment activity shows strength

James OngUS gross domestic product (GDP) rose only slightly in the first quarter, but this result was in line with Invesco Fixed Income’s expectations and we still expect solid growth this year. While output grew by only 0.7% annualized between January and March, we believe the underlying details of the data were supportive of stronger growth in the coming quarters.1

As shown in the chart below, consumption was the big disappointment, expanding by only 0.3%, versus averaging around 1.6% growth since 2009. However, we believe the current high level of consumer confidence, above average employment growth and rising pay suggest that consumption is likely to bounce back. Also, initial GDP releases have tended to misread consumption. Gathering consumption data has become more challenging as the bulk of consumption shifts away from easier-to-measure sectors, such as autos, toward harder-to-measure ones, such as services. So, it’s possible we may get a positive upward revision.


New jobs report disappoints, but shouldn’t stop the Fed

A June rate hike is still possible given longer-term employment trends

James OngCorum

Today’s jobs report from the US Bureau of Labor Statistics was headlined by a much lower-than-expected number, with nonfarm payrolls growing by just 98,000 in March. Yet, we at Invesco Fixed Income don’t think the results are as bad as the headline indicates, and it does not change our view of future Federal Reserve interest rate hikes.

 Analyzing the jobs report


Fed rate hike: Further monetary tightening expected amid synchronized global growth

Bond markets likely to absorb rate increase with limited impact, but questions remain on Fed’s economic projections

James OngCorumIn its March 14‒15 meetings, the Federal Reserve (Fed) will decide whether to raise interest rates for the third time since it began monetary policy normalization 15 months ago.1 Invesco Fixed Income believes there is a high probability that the Fed will raise its policy rate by 0.25% next week. Fed Chair Janet Yellen and Vice Chair Stanley Fischer have indeed signaled in recent statements that they believe a rate increase is likely to be appropriate. Further monetary tightening has been in the cards for some time; however, the bond markets had not placed a high probability of a March rate hike even a few weeks ago.

What has changed in the last few weeks to cement expectations of a March hike?


Can the Trump administration make the American economy great again?

Trump’s tax and infrastructure proposals will soon face the reality of US debt and monetary policy. We analyze what to expect next.

James Ong

Since the US election, financial markets seem to have priced in a significant boost to growth and inflation under a Trump administration. It is still early in the presidential transition, yet the US equity markets have rallied and bonds have sold off in an apparent anticipation of major fiscal policy easing and deregulation under soon-to-be President Trump. The Trump campaign was generally unspecific about its favored policies in most areas, and it also remains unclear which policies will actually materialize. However, we attempt to delve into President-elect Trump’s proposed policy agenda, acknowledging that uncertainty remains high.