According to James Knightley, chief international economist at ING, recent US data has been encouraging, with the consumer sector clearly in a good place and even manufacturing showing renewed signs of life.
Key Quotes
“2Q GDP will undoubtedly be weaker than in 1Q but, given the volatility in trade and inventories, we think it’s better to look at the two quarters together. This gives an average growth rate of 2.5%, which is clearly very respectable. This is slower than the 3% growth seen in much of 2018 and there is the threat that trade uncertainty will continue to act as a brake on activity.”
“To combat this risk, we expect the Federal Reserve to pull the trigger on a precautionary 25bp rate cut on July 31st with a further 25bp move likely in September. While inflation is benign, to us the economic backdrop doesn’t appear bad enough to justify more aggressive action.”
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