US and UK GDP Reports: What Will They Show?

The US and the UK GDP reports will be at the forefront of financial news for the rest of this week. Such reports are taken into consideration by central bank policymakers when it comes to adjusting their monetary policies.

The European Central Bank (ECB) chief economist Philip Lane said that “we will have a sustained period where rates need to remain restrictive to make sure we don’t have any new shock that takes us away from 2% and that durability of restrictiveness is very important.” Commenting on the possibility of rate cuts, Lane noted that he doesn’t forecast rapid rate cuts for the next couple of years.

US GDP Q1 2023 Report

The US economy is expected to post a 1.3% growth in the first quarter of the year, on an annualised basis, according to market analysts' forecasts. As economists will wait for the US Bureau of Economic Analysis (BEA) report to confirm the figure on Thursday, the US economy struggles to find its way, affected by factors such as rising interest rates, inflation and a quite strong labour market.

HSBC analysts wrote in a report that “the U.S. will enter a downturn in the fourth quarter, followed by a “year of contraction and a European recession in 2024.”

On the contrary, BofA analysts seem to acknowledge the economy’s resilience, prompting them to anticipate significant upward revisions to the US GDP. The third estimate of the second quarter GDP is expected to be revised significantly higher to 1.8% on a quarterly basis seasonally adjusted annual rate, driven by residential and non-residential construction spending as they suggest in a report.

UK GDP Q1 2023 Report

The Office for National Statistics (ONS) will publish its GDP report for the first quarter of 2023. Market analysts suggest that the UK’s economy grew by 0.1% on a quarterly basis. Economists anticipate a 0.2% growth rate on an annualised basis. 

Wells Fargo analysts wrote in a report: “With the Bank of England set to raise rates substantially further, we expect the UK economy to come under renewed pressure by late 2023 and look for growth to either stagnate or even for the economy to contract.”

In contrast with the Wells Fargo forecast, economists at the Economics Observatory suggested that “our updated forecast of 0.1% growth in the second quarter is consistent with the view that GDP growth will remain close to zero in 2023.”

Eurozone Unemployment Rate Unchanged in May?

Eurostat will release its May unemployment rate report. Economists forecast that the euro bloc’s unemployment remained unchanged at 6.5%. A report by EY said that “the eurozone officially entered a recession in Q1 2023 and, while the downturn is expected to be very shallow and short-lived, European markets continue to face high inflation and an unprecedented rise in interest rates.”

A Reuters report published on June 23rd said “economic activity is weak and the ECB has clearly failed in its goal of tightening policy just enough to contain price pressures without pushing the bloc into recession. Another issue is that a recession would normally push up unemployment, making the bank's job easier. But firms appear to be hoarding labour, keenly remembering how difficult it was to hire back workers after the pandemic and offering the ECB little relief.”

Tokyo CPI rises in June?

The Tokyo CPI inflation report for June will be published by the country’s Statistics Bureau on Thursday. Analysts forecast inflation to come in at 3.8% on an annualised basis, surging from the 3.2% figure recorded in May. The Nationwide core consumer price index (CPI), which excludes fresh food but includes energy items, rose 3.2% in May on a yearly basis, slowing from 3.4% in April but exceeding market forecasts for a 3.1% surge.

The figure is much higher than the Bank of Japan inflation target of 2%.  Economists at Moody's Analytics noted that “although price pressures are broadening, inflation nevertheless remains overwhelmingly supply-driven. With an economy that is still smaller than before the pandemic, policy tweaks remain some way off.”

Australian Retail Sales in May

The Australian Bureau of Statistics (ABS) is going to announce retail sales data on Thursday morning. Market analysts suggest that May’s retail sales rose by 0.1% on a month-to-month basis, gaining small ground when compared to April’s flat zero figure. Some analysts suggest that several Australian retailers have experienced a 20-30% drop in sales in the last year.

The Reserve Bank of Australia (RBA) board will meet next week and is expected to keep interest rates on hold. If it does, it would be the RBA's second pause in the current interest rate hiking cycle which has seen the bank increase its official cash rate by 4% in the last 13 months.

Does trading on macroeconomic news interest you? Learn how this approach works with our free webinars. Meet and interact with expert traders. Watch and learn from live trading sessions.

This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.