REPORT
By Gülbin Yıldırım
U.S. briefing, May 1

- U.S. economy records lowest growth in three years

The Gross Domestic Product (GDP) report for the first quarter was one of the major developments last week in the U.S. According to official figures, GDP increased by 0.7 percent in the January-March period, marking the lowest growth figure since the first quarter of 2014. The market expectation for the first growth data announced under the Trump Administration was 1.0 percent.

The report said economic activities were negatively influenced by the decrease in stock investments and federal expenditures in the first three months of this year. In addition, personal consumption spending, which makes up approximately 70 percent of the economy, recorded its lowest increase since 2009 with 0.3 percent.

The consumer confidence indices by both the University of Michigan and the Conference Board were among the other data releases in the country last week. Both indices showed that consumer confidence in the country declined in April.

Perhaps the only positive data of the week was new housing sales. According to official data, new home sales rose by 5.8 percent in March, the highest level in eight months.

 

- Outline of tax reform

President Donald Trump's tax reform announcement also made headlines. Trump's Chief Economics Adviser Gary Cohn and Treasury Secretary Steven Mnuchin announced that their tax reform would lower corporate tax rates from 35 percent to 15 percent.

They also announced that individual income tax rates, which are currently divided into seven different brackets ranging from 10 percent to 39.6 percent, would be simplified.  They intend to reduce the number of brackets to three, with the new rates at 10, 25 and 35 percent, however, no information was given on what income levels would fall into which brackets.

The lack of detail caused some disappointment among market actors as there are still a lot of unanswered questions about the tax reform.

 

- FOMC, Yellen, budget negotiations, employment, inflation

The Federal Open Market Committee (FOMC) meeting of the Federal Reserve Board is at the forefront of upcoming developments in the U.S.

Even though the Fed is not expected to raise interest rates at this meeting, the FOMC announcement will be closely watched for hints about the next rate hike.

It is also important that Fed Chair Janet Yellen, Vice Chair Stanley Fischer and regional Fed officials are lined up to speak on Friday.

Another highlight of the week is the budget for the remainder of the fiscal year 2017. The third stopgap budget, which Congress approved on Friday, postponed the deadline to pass an omnibus bill until midnight Friday, May 5, after which the federal government will close due to a lack of funding. Now Republicans and Democrats are expected to agree on a $1 trillion budget to keep the government open until Oct. 1.

Budgetary crises have become routine, causing the government to shut down for over two weeks in 2013 over disputes about healthcare spending.

The week begins with intense data flow. Personal income and expenditures for March, personal consumption expenditure (PCE) price index, Institute of Supply Management (ISM) and Purchasing Managers' Indices (PMI) and construction spending will be announced on Monday. On Wednesday, ISM and PMI indices for the ADP private sector employment and services sector will be released. On Friday, all eyes will be on April employment, while weekly unemployment claims, as well as trade balances and factory orders will also be followed.

01 May,2017

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