The Atlanta Fed GDP tracker shows a small increase in GDP, now at 2.6%, up from 2.5%. The advance GDP report is set to be released on July 30. Recent data from different US agencies have influenced these forecasts. The nowcast for real personal consumption expenditures growth for the second quarter rose from 1.5% to 1.6%. Additionally, real gross private domestic investment growth improved from -11.9% to -11.7%.

Forecast For Government Expenditures Growth

The forecast for second-quarter real government expenditures growth also increased, going from 2.0% to 2.3%. These numbers indicate changes in economic activity across several areas. Overall, these figures suggest a slight improvement in the expected economic growth for the second quarter in the United States. The GDP forecast adjustment from 2.5% to 2.6% comes ahead of the official advance GDP report later this month. These updates are driven by revisions related to consumer spending, business investment, and government expenditure, each influencing traders’ expectations for future movements. The increase in real personal consumption expenditures, even a small rise of 0.1 percentage points to 1.6%, indicates that household spending may be gaining more momentum than we thought. While modest, this change suggests consumers feel some confidence despite broader concerns. For market participants, this alone may not cause drastic shifts, but any increase in consumer activity often affects assumptions about future inflation. Private domestic investment still shows contraction but has been revised slightly less negatively—from a drop of 11.9% to 11.7%. This still shows significant weakness, particularly in equipment and construction areas. However, the slight improvement suggests that some sectors may be stabilising or not declining as sharply as expected. This could influence expectations for future capital spending and how it affects corporate balance sheets.

Impact On Government Spending Forecasts

The increase in government spending forecasts to 2.3% from 2.0% adds support to overall growth estimates. Federal, state, and local budget contributions vary, but this combined rise suggests that public sector demand remains strong. This can help offset weaknesses in other sectors, like housing or equipment investment. While government spending typically does not drive core inflation, it can have secondary effects, especially alongside ongoing service sector support. Considering everything, we see a changing mix of inputs that may slightly shift the risks perceived in some short-term interest rate instruments. These changes could lead to small adjustments in the middle of the curve. A consistent approach—focusing on how small revisions align with previous expectations—continues to provide the clearest insight. Therefore, we should monitor not just the main figures but also the secondary components. These smaller changes can accumulate and cause pricing inefficiencies to persist longer. Minor shifts in consumption or investment could impact discounting behavior more than overall growth rates would initially suggest. With the GDP report due at the end of the month, any further tracking adjustments in regional Fed models will be important. They could support or challenge the current view of whether the economy is gradually cooling or showing unexpected strength. This narrative, in turn, affects how curve steepeners or flatteners perform over both short and intermediate timeframes. Carefully watching these small movements helps us understand how relative value desks react as flows begin to reposition. As expectations stabilise, we may see spreads revert or widen based on how the momentum in each area is perceived. Create your live VT Markets account and start trading now.

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