TD Securities expects United States (US) Gross Domestic Product (GDP) to slow to 1.0% q/q annualized in Q2, well below the 2.0% consensus, even as underlying growth is supported by a recovering US consumer and AI-related investment, with net exports and inventories dragging. For June Personal Consumption Expenditures (PCE) Price Index, they look for soft headline and core prints, with lower gasoline weighing, services moderating, and spending outpacing income, pressuring the savings rate.

GDP and PCE seen moderating

"Headline GDP likely moderated to 1.0% q/q AR in Q2 (cons: 2.0%). However, underlying growth will show strength owing largely to a recovering US consumer and the AI buildout supporting investment."

"Net exports and inventories will act as drags on the headline."

"June PCE inflation should reflect the modest CPI and PPI prints, with softer services offsetting slightly firmer core goods. We look for core to advance 0.20% m/m with headline a weak -0.06% m/m (cons: 0.2% and -0.1%). "

"Lower gasoline prices will weigh on the headline, though energy prices have since rebounded. "

"Personal spending is likely to rise a solid 0.5% m/m (real: 0.6% m/m) on strong control-group retail sales (cons: 0.4%), while income growth moderates to 0.2% m/m (cons: 0.3%), pressuring the savings rate."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)