U.S. GDP Expanded More Than Expected; FOMC’s Bostic is Hawkish on Rates

A number of U.S. economic reports and Fed speaker comments helped move the financial markets on Wednesday, but most of the focus remained on geopolitical events and the possibility of a trade war between the U.S. and China. Traders were also focusing on the possible easing of tensions between North Korea and the United States.

U.S. Gross Domestic Product

U.S. gross domestic product expanded at a 2.9 percent annual rate in the final three months of 2017, instead of the previously reported 2.5 percent, the Commerce Department said in its third GDP estimate for the period on Wednesday. That was slightly below the third quarter’s brisk 3.2 percent pace.

Economists predicted that fourth-quarter GDP growth would be revised up to a 2.7 percent rate. For 2017, the economy grew 2.3 percent, an improvement from the 1.5 percent gain in 2016.

According to the report, the biggest gain in consumer spending in three years partially offset the drag from a surge in imports. Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, was revised up to a 4.0 percent rate in the fourth quarter from the 3.8 percent pace reported in February. Additionally, that was the quickest pace since the fourth quarter of 2014 and followed a 2.2 percent rate of growth in the July-September period.

Imports were up 14.1 percent, better than the previously reported 14.0 percent rate. That was the fastest pace since the third quarter of 2010 and overshadowed a rise in exports driven by weakness in the dollar.

U.S. Pending Home Sales

Contracts to buy previously owned homes rose in February, the National Association of Realtors said on Wednesday. The NAR’s pending home sales index increased to a reading of 107.5, up 3.1 percent from the prior month. January’s index was revised to 104.3 from 104.6. Economists had forecast pending home sales rising 2.1 percent last month.

U.S. Federal Reserve Member Comments

On Wednesday, Atlanta Fed President Raphael Bostic said the U.S Federal Reserve should continue to raise interest rates back to the long-term neutral rate given how close the central bank is to its goals.

“For me personally, I think we need to get back to neutral,” Bostic, who is a voting member of the Fed’s policy-setting committee this year, told an audience of finance and investment professionals in Atlanta.

“Unemployment is very close to something that is equivalent to a full employment position and inflation is approaching back to our 2 percent target. If things are running at close to where we…hope that they’ll be, then our policy doesn’t need to be super accommodative,” he said.

U.S. Goods Trade Balance

The U.S. Goods Trade Balance came in slightly worse than expected at -75.4 Billion. Traders were looking for -74.4 Billion. The previous month’s report was revised lower to -75.3 Billion.

U.S. Preliminary Wholesale Inventories

Preliminary Wholesale Inventories came in at 1.1%, worse than the 0.6% estimate. The previous month’s figure was revised higher at 0.8%.