US economy slows to 2.1% annual GDP growth in second quarter – as it happened
Rolling coverage of the latest economic and financial news as US figures show slowdown was less severe than expected
- Sports Direct shares fall as company delays results for a second time
- UK weather: rail travel disrupted after extreme heat causes chaos
- Santander trades accusations with banker denied top job
3.09pm BST
Pangloss or Cassandra: is the world economy doing just fine or about to seriously hit the buffers?
The views of economists are varied, and the spread of opinion on what central banks should do about it is even broader. But like with the European Central Bank yesterday, hawks and doves alike have something to play with after today's US GDP release, which showed that the US economy slowed down, but slower than expected.
US real #GDP +2.1% in Q2:
- #consumer spending surged +4.3% w/ services +2.5%
- #business investment -0.6% on weak equip & large struct drop
- resid invest -2.0% (6th consecutive Q drop!)
- net #trade -0.7ppt as exports fell sharply
- inventories drag -0.9ppt
- gov spend +5% pic.twitter.com/LIRUdlNRmL
We expect the Federal Reserve to pull the trigger on a precautionary 25 basis point rate cut next Wednesday with a further 25 basis point move likely in September.
The market continues to look for four rate cuts in total by the end of 2020, but we believe the catalyst for such action would have to be a significant ratcheting up in trade tensions.
US Movers: Alphabet (GOOG, GOOGL) +8.7%, Twitter (TWTR) +7.2%, Starbucks (SBUX) +4.9%, Intel (INTC) +2.2%; Amazon (AMZN) -1.7%, Mohawk Industries (MHK) -17.5% (approx)
2.38pm BST
The US GDP figures might suggest that a Fed rate cut can't address the real problem holding back the world's biggest economy.
Ronald Temple, head of US equities, Lazard Asset Management, said:
Today's GDP report reaffirms the Fed narrative that the US consumer is in good shape, but business confidence has weakened. A Fed rate cut appears to be a done deal next week, but the unfortunate reality is that rate cuts will not resolve uncertainties over trade policy.
Not to sound like a broken record, but this is pretty much the exact opposite of what corp tax reform was supposed to do. Either tariffs/uncertainty really are undermining that expectation, or... https://t.co/ULLcT8x2Y9
2.33pm BST
Wall Street gains at the opening bell after US GDP figures that had something for everyone.
The Nasdaq is storming ahead, up by 0.7%, while the S&P 500 opened up 0.37% and the Dow Jones industrial average was up by 0.1%.
2.26pm BST
Meanwhile, we're not wanting to sound like a broken record, but Sports Direct has delayed its results yet again after that 2pm BST deadline came and went.
The delay has left some in the City with a bit of time on their hands on a sultry Friday afternoon.
Sports Direct auditors as they look to get their latest numbers out of the door... pic.twitter.com/ZsNEiDKZoK
Still nothing from Sports Direct pic.twitter.com/hQ24MV42ea
https://t.co/jVAG73nNkA pic.twitter.com/ppTPZ39NZf
2.17pm BST
The Fed's Jerome Powell should make it a "one-and-done" rate cut next week, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
This economy is not broken, and it does not need Fed action to fix it (but it will get it).
So much for the first half rollover in the US economy. Growth averaged 2.6% in the first half, slightly better than the 2.4% average for the previous five years, despite the end of the boost from the tax cuts and the manufacturing recession.
2.14pm BST
It might be enough for the Fed to stick to its guns and follow through on the widely expected rate cut next week.
Paul Ashworth, chief US economist at Capital Economics, said:
This slowdown just about justifies a 25 basis point cut by the Fed next week, but the chances of a bigger 50 basis point reduction just receded further.
Despite the weaker headline gain, consumption growth actually accelerated to 4.3% in the second quarter, from 1.1%. But business investment declined by 0.6%.
2.11pm BST
It looks like it might be a Goldilocks US GDP release for Wall Street: not too hot, not too cold.
Art Hogan, chief market strategist at National Securities in New York (via Reuters), said:
This is just what the market needed, not so soft that the economy is slowing down precipitously and not so strong that the Fed is going to reverse course.
We expected bad earnings and bad GDP numbers, but an upside on both is something markets are going to embrace today.
2.04pm BST
US stock market futures have given up some of their earlier gains, but still point to a rising tide on Wall Street.
Futures prices are pointing to increases of about 0.3% on the S&P 500, the Dow Jones industrial average and the Nasdaq.
1.59pm BST
US economic growth slowed in the second quarter of 2019 as ongoing trade disputes and a global slowdown took their toll.
But, writes the Guardian's Dominic Rushe, the decline was less than expected - thanks to a consumer spending spree - and the report showed signs that there is continuing momentum in the US's decade-long economic expansion.
Related: US economic growth slows in second quarter as trade disputes take toll
1.55pm BST
The inflation figure in the GDP data is fairly striking: it shows that consumer prices rose by an annual rate of 2.3%, according to the personal consumption expenditures price index, one of the Federal Reserve's preferred measures of inflationary pressures.
That represented a large jump from the 0.4% rate seen in the first quarter.
1.49pm BST
The figures also confirmed that the US economy missed the 3% growth target set by US President Donald Trump for 2018.
US GDP expanded by 2.9% during the calendar year, the Bureau of Economic Analysis said, despite Trump's unfunded tax cuts. The cuts were criticised for targeting wealthier Americans.
1.46pm BST
Already the doubts over the pace of the Federal Reserve's purported plans to cut rates are coming through.
US Q2 GDP beats at 2.1%
Personal Consumption 4.3%
Core PCE Q2 1.8% - good numbers.
Remind me why the Fed needs to cut again?
#GDP above forecast mostly due to consumer spending. +4.3%, in Q2, fastest since Q4 2017 and +1.1% in Q4. Bad news was contraction in biz investment, the 1st since Q1 2016. Still, these prints likely reduce expectations of 50bp ##Fed rate cut next week even further ^KO
1.42pm BST
Here's the Bureau of Economic Analysis's graph showing the US GDP growth slowdown.
1.39pm BST
The 2.1% annualised rate of GDP growth was the second slowest since the end of final quarter of 2016 - but it may cause something of a headache for the US Federal Reserve given that it came in ahead of economists' expectations.
The Bureau of Economic Analysis said:
The deceleration in real GDP in the second quarter reflected downturns in inventory investment, exports, and nonresidential fixed investment. These downturns were partly offset by accelerations in PCE and federal government spending.
1.31pm BST
US economic growth slowed to an annualised rate of 2.1% in the second quarter - although that was faster than the 1.8% economists had expected.
The US Bureau of Economic Analysis previously reported annualised GDP growth of 3.1% in the first three months of the year.
1.21pm BST
Investors have dialled back their bets on a shock and awe 0.5 percentage point cut from the Federal Reserve next week, says IG Group's senior market analyst, Joshua Mahony.
US GDP up in 15 minutes. Expectations of a 50bp rate cut now down to 17.5% (BBG) after ECB inaction. A big miss on GDP could see calls for such a move ramp up again
1.17pm BST
The US dollar hit a two-month high on Friday as investors awaited GDP figures which are expected to show a slowdown in the American economy.
The dollar index, which measures its performance against a trade-weighted basket of currencies, hit a high of 97.938 on Friday, a level not seen since the end of May.
12.56pm BST
With just over half an hour to go until US GDP data is released, Wall Street futures prices are pointing to gains on stock markets: the S&P 500 and Dow Jones industrial average are both set to rise by 0.3% and the Nasdaq is set for a 0.4% gain.
Amazon and Google owner Alphabet both posted mixed earnings results last night, but Twitter beat analyst forecasts in results published today.
12.19pm BST
The UK car industry lobby group has welcomed Boris Johnson as prime minister - and reminded him that it is implacably opposed to his key policy.
Above all, we must ensure the sector continues to enjoy - without interruption - preferential trade with critical markets around the world, including the EU.
[...] when automotive succeeds, so does the UK. We cannot, however, continue to deliver these benefits, or take advantage of new opportunities, if the UK leaves the EU without a deal. A no-deal Brexit presents an existential threat to our industry.
12.13pm BST
Russia's central bank has joined the global move to stimulate the economy: it just delivered a rate cut from 7.5% to 7.25%.
There could be more rate cuts to come, the Central Bank of the Russian Federation warned, as "the weak dynamics of domestic and external demand" weigh on inflation.
12.07pm BST
Sports Direct has finally given us an update: we need to wait for another update.
The company is still finalising its results, and will let us know the progress at 2pm BST. A reminder: markets close at 4:30pm BST.
11.44am BST
Sports Direct shares have now risen by more than 1% for the day - despite there being no update on the results.
Some eyebrows have been raised in the City and on Fleet Street amid the confusion. Sports Direct earlier said there would be an update at midday.
Sports Direct shares are actually up 1.5%, despite financial results being delayed yet again. Has someone given someone a nudge?
11.28am BST
Morning trading has been somewhat more forgiving than yesterday's performance on European stock markets. Most major indices, with the exception of Italy, have gained.
The FTSE 100's gains have been underpinned by Vodafone - shares now up by 9.4% - as investors lick their lips on a 10bn+ pay day if it successfully floats its European mobile masts business.
11.06am BST
The battle between Santander and its former chief executive, Andrea Orcel, has already been fairly colourful. Now it has hit the courts and the fur is really flying.
Related: Santander trades accusations with banker denied top job
10.46am BST
The UK's broadcasting regulator has fined the news channel RT 200,000 for "serious failures" to comply with rules on impartiality in relation to its coverage of multiple issues related to Russian foreign policy.
RT, previously known as Russia Today, was censured by Ofcom over its coverage of the poisoning of Sergei and Yulia Skripal in Salisbury, the armed conflict in Syria, and the Ukrainian government's position on Nazism and its treatment of Roma Gypsies.
Taken together, these breaches represented serious and repeated failures of compliance with our rules. We were particularly concerned by the frequency of RT's rule-breaking over a relatively short period of time.
10.35am BST
Let's have a quick Brexit update: new prime minister Boris Johnson came into office promising a renegotiation of the terms of the withdrawal agreement with the EU. The response was, perhaps unsurprisingly, a short, sharp no.
President Juncker listened to what Prime Minister Johnson had to say, reiterating the EU's position that the withdrawal agreement is the best and only agreement possible - in line with the European council guidelines.
10.23am BST
Here is what markets expect from the Federal Reserve, based on futures prices reported by CME Group.
The current target range is 2.25% to 2.5%, so the upshot is there is apparently a 100% chance of a cut.
10.11am BST
However, others are less sure that the federal open markets committee (FOMC), that sets rates, will be so pessimistic.
Seth Carpenter, an economist at UBS, expects annualised US GDP growth of 2.6% for the second quarter - slower than the start of the year but significantly above 1.9% consensus expectations.
We believe that the pervasive pessimism at the June FOMC meeting was in part driven by softness in April data, especially as the softness followed relatively tepid growth in the first quarter. Much of that weakness has subsequently been erased either by outright revisions or by strong gains in the following months.
The data are a clear risk to our expectation of a 50 basis point cut next week. However, [...] the core of the committee has consistently downplayed good data and focused on weakness.
10.05am BST
If US GDP growth does slow, as expected, then that could provide an obvious rationale for the Fed to cut rates on Wednesday.
With a rate cut all but guaranteed, if traders' bets are any guide, it could also give the chance for Powell to give a dovish signal - in contrast to his counterpart in the ECB, Mario Draghi.
FOMC reaction won't be same as ECB dovish disappointment:
US rates stabilising lately vs. dovish bias prior to last 4 Fed meetings. Scope for bigger post-FOMC reaction
Even if Fed only cuts 25bps - Powell typically sounds more dovish than actions based on post-FOMC $USD moves pic.twitter.com/5sd8kOAisD
9.59am BST
Looking ahead to US GDP later, it's all about the implications for the Federal Reserve.
Jerome Powell appears to have put the US central bank on a path towards a rate cut on Wednesday next week, in a move which could mark the end of an extraordinary period of monetary and economic history.
9.26am BST
Sports Direct's repeated results delay is starting to annoy people.
There is a "total lack of visibility - there is not yet an indication that there is a material problem with the numbers, although one can draw one's own conclusions," said Neil Wilson, chief market analyst at Markets.com.
It's a total and utter shambles and betrays a number of problems at the business after Ashley embarked on his rather random acquisition spree. Above all it betrays a total disregard for shareholders.
It not only raises questions about the haphazard way in which the investor relations and finance teams are run, but also could suggest a material problem with the numbers.
9.01am BST
And here is the full update on the Sports Direct shenanigans from the Guardian's Rob Davies:
Related: Sports Direct shares fall as company delays results for a second time
8.57am BST
Sports Direct says there will be an update around midday. There must be a fair bit of scrambling going on behind the scenes.
Its auditor is Grant Thornton, which is under pressure over its failure to spot alleged manipulation of the accounts of Patisserie Valerie.
Total shambles at Sports Direct. People rushing in and out of its office off Oxford Street and no explanation as to why interviews and results have been delayed
Remarkable - Sports Direct still finalising preliminary results. "We anticipate that our annual results will be still be released today, with a presentation to follow, and will update again at midday." - the word anticipate is doing a lot of work here
Related: Mike Ashley vomited into fireplace at pub meeting, court told
8.47am BST
Sports Direct's results are still being finalised, according to an emailed statement.
Sports Direct said it still plans to report its full-year results at some point today - a week later than initially planned.
8.34am BST
Vodafone's gains today would put it on track for its best day since November, after it said it will spin off its mobile masts business - potentially earning it more than 10bn.
We believe there is a substantial opportunity to unlock the embedded value of our towers, and we have startedpreparations for a range of monetisation options over the next 18 months, including a potential IPO.
8.17am BST
Pearson is jostling with telecoms company Vodafone to be the biggest riser on the FTSE 100, after the world's largest education company put out a solid set of results.
Shares have bumped by more than 7% in early trading as investors welcomed signs of a turnaround after a dire run of results.
We are on track to at least stabilise revenue this year and return the company to top line growth from 2020.
8.09am BST
Sports Direct shares are down by 1.5% in early trades - still no sign of their results from where we are sitting.
8.05am BST
The FTSE 100 has gained 0.1% at the open, helping European shares to a 0.1% increase, according to the Euro Stoxx 600 index.
France's Cac 40 index has gained 0.2%, but Spain's Ibex has lost 0.2%. Germany's Dax benchmark was flat at the opening bell.
8.02am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The last decade has not exactly been boom-time, but we might miss it when it's gone. Central bankers are doing their best to cushion the bumps as the global economy slows, with a new consensus around a new round of stimulus from the world's two most important central banks.
Draghi described the eurozone economic outlook as "worse and worse", although he also suggested that the risk of a recession is "pretty low". He explained that, despite growing employment and wages, external factors are weighing on growth through the second and third quarters; specifically trade uncertainties, a particular challenge for the manufacturing sector. So risks remain tilted to the downside.
The flash PMIs from @IHSMarkitPMI signals US GDP growth around ~1.5% q/q annualised. In our view the indicators support the call for #Fed easing pic.twitter.com/HkVFuid485
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