Source: Golden Ten Data

At 20:30 Beijing time on Thursday, the US will release GDP data for the first quarter. According to foreign media surveys of economists, the US GDP annualized growth rate for the first quarter is expected to be 2.4%, compared to the previous value of 3.4%. The estimated range ranges from 1.0% to 3.1%.

Last week, the International Monetary Fund (IMF) raised the US economic growth forecast for 2024 to 2.7% from 2.1% in January, citing stronger US job market and consumer spending than expected. The average number of new jobs added in the first quarter was 276,000 per month, higher than the average of 212,000 from October to December last year. Foreign media expect the initial request data released at 20:30 today to further confirm the resilience of the job market. Since the beginning of the year, the number of initial jobless claims has fluctuated between 194,000 and 225,000. The low layoff rate has maintained high wage growth and supported consumer spending, which accounts for more than two-thirds of economic activity.

Furthermore, the personal consumption expenditure (PCE) price index for the first quarter, excluding food and energy, is expected to be 3.4%, compared to 2.0% previously. Although inflation is likely to pick up, economists aren't worried that price pressure will return.

The “main driver” of economic growth

Economists expect consumers to remain the main driving force of the economy. Gregory Daco, chief economist at EY-Parthenon, said, “The US economy is still very resilient, supported by a stable job market. The job market continues to support strong revenue growth, which in turn drives consumer spending activity.” Since late 2022, despite aggressive interest rate hikes by the Federal Reserve to curb inflation, the US economy has withstood the effects of doomsday predictions.

Economists such as Anna Wong expressed similar views: “We expect consumer retail spending to increase in March, while food service spending (the main indicator of service in retail sales reports) remains steady. Strong employment driven by an increase in labor supply supports overall income growth, which in turn supports consumption.”

Economists say American consumers locked in lower mortgage interest rates, while US companies completed debt refinancing before the start of the austerity cycle. American companies are also hoarding employees due to difficulties in recruiting jobs during the pandemic, and have enjoyed higher profit growth thanks to strong pricing capabilities.

Richard de Chazal, macro analyst at William Blair, said, “American companies are relatively unaffected by interest rate hikes. In the past economic cycle, once the economy showed signs of slowing down, American companies usually quickly laid off workers and then quickly re-hired when the cycle improved.”

According to the Atlanta Federal Reserve's GDPNow, the US economy grew by 2.7%. Foreign media said the data is extremely accurate, especially as it gets closer to the US Department of Commerce releasing GDP data. Goldman Sachs referred to the Atlanta Federal Reserve's GDP forecast, which is higher than the market's general expectations. They expect the US economic growth rate to be 3.1% in the first quarter.

Goldman Sachs economist Spencer Hill said in a report that the bank's forecast was based on four “key factors,” including a “sharp rise” in residential investment, a rebound in automobile production and manufacturing activity, and “another quarter of strong consumption growth.”

Economists also see US government spending as an important driver of its first-quarter GDP growth. This is partly due to continued increases in US state and local government spending, as these levels of government spending have been limited during the pandemic.

This rebound is evident in monthly employment data: the number of local government employees grew at an annualized rate of 3.4% in the first quarter, the biggest increase since 2021, while the number of state government employees also increased by a similar margin.

Michael Reid (Michael Reid), US chief economist at Royal Bank of Canada Capital Markets, said in a Monday report: “We expect government spending to be the second largest contributor to economic growth as states and localities will continue to narrow the spending gap after the pandemic. ”

Interest rate cuts are still expected

Foreign media said that the US economy may slow to a steady pace in the first quarter, while inflation may accelerate, which will reinforce the financial market's expectations that the Federal Reserve will postpone cutting interest rates until September. Since July of last year, the Federal Reserve has maintained the policy interest rate in the range of 5.25% to 5.50%. The Federal Reserve has raised the benchmark overnight interest rate by 525 basis points since March 2022.

ING's chief international economist James Knightley said that continued inflation will push employees to demand higher wages, which will give consumers more purchasing power and allow companies to raise prices, but “what we are seeing is a marked weakening of labor demand and cost indicators.” Knightley said, “There is no sign that wage growth will accelerate and keep inflation high for a long time.”

Economists believe that consumer spending may have maintained the 3.3% growth rate in the fourth quarter of last year, and the rise in US stocks also provided support.

However, they are concerned that low-income households have run out of savings during the pandemic and are mostly dependent on borrowing to spend. Recent data and statements from bank executives suggest that it is increasingly difficult for low-income borrowers to repay loans.

The real estate market is also likely to support the US economy. Housing investment is expected to grow in double digits, thanks to a severe shortage of second-hand housing for sale, thereby encouraging new single-family homes and sales. Investments by companies in intellectual property in the field of artificial intelligence may be another driving force.

Although investment in non-residential buildings continues to grow, the growth rate is likely to slow significantly compared to last year. Last year, companies used the Biden administration's policies to bring semiconductor manufacturing production back to the US by building factories.

A drag factor

Foreign trade is likely to drag down GDP growth, as part of the increase in consumer spending is offset by imports.

Enterprise equipment spending could be another drag. Due to this continuous contraction in data, combined with weak sentiment surveys, some economists believe that the US economy may not be as strong as its GDP and labor market data suggest, and they expect economic growth to slow.

However, some people warned against overinterpreting the differences between so-called hard data and sentiment surveys. They believe that the COVID-19 pandemic has made it difficult to obtain clear signals from surveys. They also note that businesses are generally conservative. Brian Bethune, professor of economics at Boston College, said, “Those (survey) indicators are still not normalized in relation to economic reality. The company found that the actual situation was a little better than they had anticipated, and that was the key for them.”

Can GDP data save the price of gold?

Fxstreet analyst Dhwani Mehta said that the US GDP data for the first quarter released tonight will be the key to the trend of gold prices.

As can be seen from the daily chart, the price of gold closed below the key 21-day simple moving average (SMA) on Wednesday, which strengthened the bearish sentiment. However, the leading indicator, the 14-day Relative Strength Index (RSI), is still far above the median line around 56.00, indicating that another decline in gold prices may be seen as a good entry point for bulls.

If gold bears regain dominance, the price of gold may once again challenge the $2,300 mark. After falling below this level, the low of $2,291 hit on Tuesday will become the next target price. The last line of defense for gold bulls may be near the low of $2,265 in early April.

On the other hand, if the gold price continues to rebound and break through the 21-day SMA (currently at $2,324), which has become a resistance level, it may rekindle bullish determination and push the gold price to test the psychological level of $2,350. If the price of gold rises further, the target of many gold companies will be around the static resistance area around $2,360 to $2,365.

edit/lambor