International News (Issue 406) – 1 July 2016

International News – 1 July 2016

US consumer confidence figures were published this week and the veracity of these figures must now be questioned given the confidence figures will certainly come under duress in July following the Brexit vote.

Consumers were deemed to be less negative about current business and labour market conditions suggesting that household spending will provide further support to the economy.

The consumer confidence index rose to 98 in June from 92.4 a month earlier. However, it was noted that there was an expectation for this figure to fall back dramatically in July should the UK vote to leave the EU succeed.

Additionally, first quarter GDP figures showed that the US economy expanded at an annualized 1.1% for the first quarter of 2016, but this was still one of the weakest performances in recent years.

Exports (+2%) rose slightly and business investment was better than expected (yet still declined) but consumer spending (+1.5%) was revised and represented the smallest gain in 2 years whilst inflation rose at an annual rate of 0.2%.

Given that this data preceded the Brexit vote it will be very interesting to see how the Fed react.

There are suggestions that the Fed may now need to abandon their rate hiking agenda in order to deal with the global economic struggles that are expected to emerge post Brexit.

Some US economists are actually pricing in a rate cut as soon as September (14%) but perhaps more notably further rate hikes seemed to be far less likely in the short-term.

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