Economic Update – GDP Slows in US, UK and France, Euro Inflation Rises, more…

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U.S. Economy Grew 0.7% in First Quarter, Slowest in Three Years

  • The U.S. economy expanded at the slowest pace in three years as weak auto sales and lower home-heating bills dragged down consumer spending, offsetting a pickup in investment led by housing and oil drilling.
  • Gross domestic product, the value of all goods and services produced, rose at a 0.7 percent annualized rate after advancing 2.1 percent in the prior quarter, Commerce Department data showed Friday in Washington. The median forecast of economists surveyed by Bloomberg called for a 1 percent gain. Consumer spending, the biggest part of the economy, rose 0.3 percent, the worst performance since 2009.

Bloomberg: U.K. Economy Slows More Than Forecast as Consumers Cut Back

  • The U.K. economy posted its worst performance in a year as the dominant services industry felt the impact of an intensifying squeeze on living standards.
  • Growth slowed to 0.3 percent in the first quarter from 0.7 percent in the final three months of 2016, the Office for National Statistics said on Friday. The figure was weaker than the 0.4 percent forecast by economists in a Bloomberg survey.
  • Further evidence of the squeeze on households emerged Friday, with separate surveys showing house prices fell for a second month in April and consumer confidence dipped to the lowest since July.

Market Watch: French growth casts doubt on eurozone’s health

  • French economic growth slowed at the start of the year, but the Spanish economy gained momentum, a mixed signal at a time of cautious optimism about the outlook for the eurozone’s so-far modest recovery.
  • French gross domestic product expanded 0.3% quarter-on-quarter in the three months through March after growing 0.5% at the end of 2016, statistics agency Insee said. Economists polled by The Wall Street Journal had forecast a 0.4% increase.
  • The slightly weaker-than-expected growth rate came as the country braced for a high-stakes presidential election that puts France at a crossroads between deeper economic integration in the eurozone, or retreat.

Bloomberg: Euro-Area Inflation Picks Up as ECB Takes Baby Step Toward Exit

  • Euro-area inflation bounced back to a level in line with the European Central Bank goal and underlying price growth surged, setting up a debate about an exit from unconventional stimulus that may lead to a policy signal in June.
  • Consumer prices rose an annual 1.9 percent in April after gaining 1.5 percent in March, according to Eurostat data published Friday. Economists predicted an increase of 1.8 percent. Core inflation, a measure that excludes volatile components such as food and energy prices, jumped to 1.2 percent, the most in almost four years and stronger than anticipated.

Fox Business: French April Inflation Slightly Weaker Than Expected

  • French inflation was slightly lower than expected in April, due to a slowdown in the growth of energy, food and services prices.
  • France’s consumer price index rose 0.1% from March and 1.2% on the year. Economists polled by the Wall Street Journal had forecast a 0.2% rise on the month and a 1.3% rise from April 2016.

Zero Hedge: ECB Keeps Rates Unchanged, Says Ready To Expand QE If Outlook Worsens

  • There was no surprise in the ECB’s monetary policy statement released moments ago, in which the central bank kept all three of its rates unchanged as expected, however it did confirm that QE is intended to to run “until the end of December 2017, or beyond, if necessary,” and in a surprise addition added that “if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.”

Market Watch: German inflation rises to 2.0% in April

  • German inflation picked up notably in April, but was largely driven by price increases for package holidays and other vacation-related services around Easter.
  • The annual inflation rate, measured by harmonized European Union standards, rose to 2.0% from 1.5% in March, Germany’s statistics office said Thursday. The outcome is in line with economists’ forecasts.
  • The pickup was led by price hikes in the services sector. The annual inflation rate in this category jumped to 1.7% in April from 0.7% in March.

Asia Times: Growing credit card losses in US set alarm bells ringing

  • UBS analysts wrote in a report on Wednesday that US non-mortgage consumer debt has risen to an unprecedented level of 20% of the nation’s annual economic output, and consumers are increasingly unable to pay it off.
  • Capital One’s first quarter earnings results released on Friday reflected the trend, with its US credit card unit’s write-off rate reaching its highest point in almost six years. “This isn’t just a one-quarter blip. This is a change,” warned Ryan O’Connell of Bloomberg Intelligence Unit on Wednesday.

Zero Hedge: US Consumers Tap Out – Credit Card Defaults Surge To 4 Year High And It’s Getting Worse

  • Two weeks ago, when JPMorgan launched Q1 earnings season, we noted that while the results were generally good, one red flag emerged: the company’s credit card charge offs rose to just shy of $1 billion, the highest in four years.
  • It wasn’t just JPM: all other money-center banks reported similar trends, so we decided to look into it.
  • What we found was not pretty. According to the latest data from the S&P/Experian Bankcard Default Index, as of March 2017, the default rate on US credit cards had jumped to 3.31%, an increase of 13% from a year ago, and the highest default rate since June 2013.

Reuters: Millennials at risk for loan defaults in next 12 months – UBS

  • Millennials face the greatest risk among all U.S. age groups on defaulting on their loans, especially on what they borrow for schools and cars in the next 12 months, UBS analysts said on Wednesday.
  • Millennials, people who are 21 to 34 years old, hold $1.1 trillion of $3.6 trillion in U.S. consumer debt outstanding. They account for 45 percent student loans outstanding and a third of all auto leases, according to UBS strategists Stephen Caprio and Matthew Mish.
  • “By number of individuals, 21-34-year-olds were the greatest source of expected spending on big-ticket purchase items over the next 12 months. However, this is where default risks were highest,” they wrote in a research note published on Wednesday.
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