By Joyce Yu
Philadelphia, PA–Wall street rose slightly on Wednesday, lifted by positive US economic data. Gains, however, were limited as investors keep a close eye on U.S.-Canada trade talks.
Real US gross domestic product grew at an annualized rate of 4.2% last quarter, the Bureau of Economic Analysis reported Wednesday. It remains the highest rate since the third quarter of 2014. Compared to the second quarter of 2017, the economy grew 2.9%, output expanded 3.2% in the first half of 2018, putting the economy on track to hit the Trump administration’s target of 3% annual growth.
“If we keep up anywhere close to 4 percent growth in the rest of this year, I just got to believe they’re going to push … [annual] inflation, wages, the 10-year yield all above 3 percent,” Paulsen, chief investment strategist at Leuthold Group, said in a CNBC interview. “We’re going to be struggling a little bit with good growth, but maybe too good,” he added. “I do think the market is still going to have a struggle finding this silver lining, ‘Goldilocks’ path, because you could get either too hot or too cold in a hurry here this late in an economic cycle at full employment.”
Growth in consumer spending, on the other hand, was lowered to a 3.8% in the Q2 from earlier estimate of 4.0%. Soybean exports were accelerated in the second quarter to beat Chinese tariffs that took effect in July, bolstering overall exports rose at a 9.1% in the second quarter. Housing market continue to weaken with homebuilding rising less than expected in July and sales of new and previously owned homes declining.
But whether the robust growth will be able to sustain is a question mark given that this is partly fueled by one-off drivers such as a $1.5 trillion tax cut package. Estimates for the current quarter range widely, from as low as 2% to as optimistic as 4.6%.
“Investors will continue to concentrate on trade talks now with Canada,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York, told the Reuters. “It looks like we are headed for another mixed to positive session much like yesterday’s, but with lighter trading volume. Any positive comments on trade might contribute to a stronger upwards move.”
Canada and the United States could reach an in-principle deal by the Friday deadline despite obstacles. “We are optimistic about having some very good, productive conversations this week,” Canadian Foreign Minister Chrystia Freeland said on Wednesday told reporters as she entered the U.S. Trade Representative’s Office.
