Slowing US GDP Growth

The noise

• US GDP rose at a 1.1% annualised rate in the first quarter of 2023, slowing considerably compared to the fourth quarter of last year, and missing economists expectations by almost 1%. Consumer spending drove the US economy forward in Q1, while businesses cut investment and reduced production, likely a by-product of rising interest rates and stress in the banking system. The Federal Reserve have been shooting for a soft landing and these figures appear to be a step in the right direction.

• The UK’s Competition and Markets authority (CMA) have blocked Microsoft’s $69 billion deal to buy US video game maker Activision Blizzard. Despite regulators globally moving to stop the deal, the UK being the first to take decisive action has drawn accusations of it being anti-competitive and discouraging technological innovation. This statement is reinforced by British tech firm Arm choosing to list in the US rather than the UK last month.

• Rescue talks have been taking place for First Republic, a US bank that has been at risk of failure since Silicon Valley Bank’s collapse early last month. The US Treasury department and other government bodies have initiated talks, bringing private-sector efforts to the table to provide a lifeline for the troubled lender, with optimism that a positive solution can be found.

​The numbers

The nuance

Thursday delivered the best day for Wall Street stock in almost four months, as this week saw a flurry of Q1 earnings releases. Many that have reported at the time of writing have come in better than consensus expected. Despite this, companies coming in above expectations may not see to sustained price rallies off the back of their releases given the strong run equities have had leading up to earnings season. Significant headwinds still remain, and the few companies that have missed expectations are seeing their share price penalised by more than the historical mean. Tech earnings reports have almost all had AI as the key talking point of the piece, with many conveying optimism that they can successfully implement and generate profits from the implementation of their AI tools.

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