US GDP and Consumer Confidence: Is a Revival Coming?
Final GDP beats forecast
The U.S. Bureau of Economic Analysis published the final 1Q16 GDP figures on June 28, 2016. The GDP rose by 1.1%—above the forecast of 1.0%. The upward revision was mainly due to import and export figures that were substantially better than the previous forecast. There were also positive contributions from personal consumption expenditure, residential fixed investment, and government spending. Despite the strong numbers, markets don’t expect a rate hike by the Fed in the near term given the global uncertainty due to the United Kingdom voting to exit the European Union on June 23.
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Consumer confidence improves in June
The conference board consumer confidence index also came out. It beat the forecast on June 28. The index rose to 98.0 in June after disappointing numbers in May. The index was well above the forecast of 93.2. There was a moderate improvement in the expectations in terms of the labor market and business conditions. However, consumers remained cautious about short-term economic growth. It’s also worth noting that the poll was conducted before the referendum. It could have easily been lower if the poll had been after Brexit.
Rebound in ETFs
US markets seem to have made a bottom following the reaction to the United Kingdom’s referendum. Markets reversed on June 28. This was partially due to the strong domestic data release in terms of GDP and consumer confidence.
The banking sector also bounced back from large losses in previous trading days. The SPDR S&P Bank ETF (KBE) and the SPDR S&P Regional Banking ETF (KRE) posted gains of 3.3% and 3.0%, respectively. The risk aversion sentiment also declined as the SPDR Gold Shares ETF (GLD) fell by 1.0%.