New figures out yesterday showed that US economic growth accelerated in the second quarter at a 2.3 per cent annual rate, with strong consumer spending offsetting weak business spending. The release fuelled expectations that the Federal Reserve will hike interest rates later this year, however the figure was slightly disappointing as economists had expected a 2.6 per cent rise in GDP.
According to the Bureau of Economic Analysis, real GDP indicates that the US Economy's Top Speed Has Probably Been Overestimated for Years and that GDP from 2011 to 2014 increased at an annual rate of 2 percent, a downgrade from the prior estimate of 2.3 percent.
In a slightly more positive note, applications for US unemployment benefits remained near the four decade low of last week, consistent with a strong labour market.
The Fed's July statement indicated the central bank will
raise rates when it has seen "some further improvement in the labour
market" and is "reasonably confident" that inflation will trend
toward 2 percent. The recent data release underscores the difficulties the
Federal Reserve faces in gauging just when to hike interest rates.
Yesterday the International Monetary Fund (IMF) said it could be prevented from participating in Greece's third bailout programme, due to the state's debt pile and poor record of implementing previous economic reforms. This means while IMF staff will continue to participate in current negotiations around the Greek debt crisis, it could be months - potentially even a year - before they're able to sign up to a new programme.
Yesterday IMF chief Christine Lagarde said "for any programme to fly, a significant debt restructuring should take place". It thinks Greek debt could surpass 200 per cent of GDP otherwise. The organisation's position puts it on a collision course with German officials who vehemently oppose any cuts to Greece's debt. They favour re-profiling which analysts say would involve extending the repayment time, without marking down the value of the debt.
There are no key announcements today.