April 26, 2019 Let's Get This Party Started! by Lester Murray

The weekend has already gotten off to a good start with this morning's announcement by the Bureau of Economic Analysis that America's economy was blowin' and goin' in the first quarter. The annualized rate of 3.2% far exceeded expectations of just slightly over 2%. The greater-than-anticipated growth rate can be traced to declining imports, increased government spending, and inventory build-up. This comes in the face of January's partial government shutdown that has been estimated to have "cost" around 0.3% in the growth rate. At the same time, the muted level of inflation remained so with a core PCE rate of just 1.3% in Q1. That's down from 1.8% the previous quarter and slightly below estimates of 1.4%. Will this cause the Fed to rethink its pause? Unlikely, not with core inflation on the decline. Bonds have responded positively with the Ten-Year yielding just below 2.50%. If credit markets believed that this would motivate the Fed to alter its intentions, that wouldn't be happening.