Economic Commentary: Rates

Our First Quarter’s Growth Rate

The initial reading of the first quarter’s economic growth has been somewhat of a shocker. A growth rate of over 3.0% was certainly higher than market analysts expected.  As a matter of fact, many were expecting interest rates to head higher after the number was released.  Though rates have risen somewhat from their lows earlier last month, they have not risen significantly.

The question is why have rates not reacted?  It could be as analysts are pointing out that the first quarter’s numbers were skewed by temporary factors such as a build-up in inventories.  Such a build-up could mean that companies are getting ready for a stronger economy.  Or, it could be that there is just a build-up of unsold goods.  Time will tell if this reading was indeed a precursor of a future slowdown or not.

Certainly, the April jobs report has indicated that the economy is not slowing down much.  But, even if the economy is indeed slowing down, one thing we can say is that we are further from recession than many thought.  This actually would represent good news.  A growing economy which is not too strong to cause rates to spike upward and not too hot or not too cold could be just right.  This might mean smooth sailing for the rest of 2019, save for unforeseen variables popping up.

Source: Origination pro