May 14, 2019
The initial reading of the first quarter’s economic growth was somewhat of a shocker. A growth rate of over 3.0% was certainly higher than market analysts expected. As a matter of fact, many were expecting interest rates to head higher after the number was released. Though rates have risen somewhat from their lows earlier last month, they have not risen significantly.
The question is–why have rates not reacted? It could be because analysts are pointing out that the first quarter’s numbers were skewed by temporary factors such as a build-up in inventories. Such a build-up could mean that companies are getting ready for a stronger economy. Or, it could be that there is just a build-up of unsold goods. Time will tell if this reading was indeed a precursor of a future slowdown or not.
Certainly, the April jobs report has indicated that the economy is not slowing down much. But, even if the economy is indeed slowing down, one thing we can say is that we are further from recession than many thought. This actually would represent good news. A growing economy which is not too strong to cause rates to spike upward. Not too hot or not too cold. Just right. Some call that a Goldilocks Economy. That would mean smooth sailing for the rest of 2019, save unforeseen variables popping up.
Source: Origination Pro