TD Securities projects that United States Gross Domestic Product (GDP) growth will slow to 1.0% quarter-on-quarter annualized in the second quarter, which is significantly below the consensus estimate of 2.0% [1]. The firm notes that while underlying growth remains supported by a recovering US consumer and increased investment related to artificial intelligence, net exports and inventories are expected to act as drags on the headline GDP figure [1].
For June, TD Securities anticipates that the Personal Consumption Expenditures (PCE) Price Index will show soft headline and core prints, with the headline expected to decline by -0.06% month-on-month and the core to rise by 0.20% month-on-month (consensus: -0.1% and 0.2%, respectively) [1]. Lower gasoline prices are cited as a factor weighing on the headline number, although energy prices have since rebounded [1]. Services inflation is expected to moderate, while spending is projected to outpace income, putting pressure on the savings rate [1].
Personal spending is forecast to increase by a solid 0.5% month-on-month in nominal terms (0.6% in real terms), supported by strong control-group retail sales (consensus: 0.4%) [1]. In contrast, income growth is expected to moderate to 0.2% month-on-month, below the consensus of 0.3% [1].
TD Securities' outlook suggests that while headline growth and inflation data may soften, underlying consumer strength and AI-driven investment continue to provide some support to the US economy [1].
CONCLUSION
TD Securities anticipates softer US GDP and inflation data for Q2, with headline figures likely to come in below consensus expectations. Despite these softer numbers, consumer spending and AI-related investment are seen as ongoing sources of support for the economy.