Consumer spending and private inventory investment lift GDP by 3%. The decline in Chinese students studying in the US raises concerns. Nvidia's stock dips despite Q2 earnings beat. The US economy grew faster than expected in the second quarter.
Sources:
https://www.pymnts.com/economy/2024/consumer-spending-private-inventory-investment-lift-gdp-3percent/
https://www.voanews.com/a/economics-tensions-blamed-for-chinese-students-shifting-from-u-s-to-australia-britain-/7764241.html
https://www.tradingview.com/news/benzinga:849eedfe5094b:0-nvidia-stock-dips-despite-q2-earnings-beat-is-the-ai-rally-fading/
https://www.thetimes.com/business-money/economics/article/us-economy-grew-faster-than-expected-in-second-quarter-v6wbdvb0p
Outline:
(00:00:00) Introduction
(00:00:42) Consumer Spending and Private Inventory Investment Lift GDP 3%
(00:03:09) Economics, tensions blamed for Chinese students shifting from US to Australia, Britain
(00:06:13) Nvidia Stock Dips Despite Q2 Earnings Beat — Is The AI Rally Fading?
(00:08:51) US economy grew faster than expected in second quarter
Simply Economics
GDP Growth Surpasses Expectations, Chinese Students Shift to Australia and Britain
Consumer spending and private inventory investment lift GDP by 3%. The decline in Chinese students studying in the US raises concerns. Nvidia's stock dips despite Q2 earnings beat. The US economy grew faster than expected in the second quarter.Sources:https://www.pymnts.com/economy/2024/consumer-spending-private-inventory-investment-lift-gdp-3percent/https://www.voanews.com/a/economics-tensions-blamed-for-chinese-students-shifting-from-u-s-to-australia-britain-/7764241.htmlhttps://www.tradingview.com/news/benzinga:849eedfe5094b:0-nvidia-stock-dips-despite-q2-earnings-beat-is-the-ai-rally-fading/https://www.thetimes.com/business-money/economics/article/us-economy-grew-faster-than-expected-in-second-quarter-v6wbdvb0pOutline:(00:00:00) Introduction(00:00:42) Consumer Spending and Private Inventory Investment Lift GDP 3%(00:03:09) Economics, tensions blamed for Chinese students shifting from US to Australia, Britain(00:06:13) Nvidia Stock Dips Despite Q2 Earnings Beat — Is The AI Rally Fading?(00:08:51) US economy grew faster than expected in second quarter
- Duration:
- 11m
- Broadcast on:
- 30 Aug 2024
- Audio Format:
- mp3
Good morning and welcome to Simply Economics. It's Friday, August 30th. On today's show, consumer spending and private inventory investment lift GDP by 3 percent, while economics tensions are blamed for Chinese students shifting from the U.S. to Australia and Britain. Plus Nvidia stock dips despite Q2 earnings beat is the AI rally fading. Use coverage and more, up next. I'm David and you're listening to Simply Economics. We start off with some positive news on the economic front. The U.S. economy grew at a faster pace in the second quarter than initially estimated, driven by strong consumer spending and private inventory investment. Real gross domestic product increased at an annual rate of 3 percent, up from the advanced estimate of 2.8 percent released in July. For more on this, we turn to our economics correspondent. What can you tell us about the factors behind this upward revision? The Bureau of Economic Analysis attributed the higher GDP growth primarily to an upward revision in consumer spending, both spending on services led by nonprofit hospitals and institutions, as well as spending on goods, particularly gasoline and energy products, contributed to the increase. This suggests that despite economic headwinds, American consumers have remained resilient and continued to drive economic activity through their purchasing power. However, the report also showed some signs of slowing growth in personal income and savings. How concerning are those figures? While disposable personal income did increase by 3.6 percent in the second quarter, that was a slower pace than the 4.8 percent growth seen in the first quarter. Real disposable income adjusted for inflation rose just 1 percent. Perhaps more notably, the personal saving rate fell to 3.3 percent, down from 3.8 percent in the previous quarter. This indicates that while consumers continue to spend, they are doing so by saving less of their income, which could become unsustainable if incomes do not keep pace with inflation. So even as top-line economic growth exceeds expectations, there are some underlying concerns when it comes to personal finances. Have we seen any evidence of consumers pulling back or becoming more cautious in their spending habits? Some retailers have noted that consumers are being more discerning and focusing their spending on essential goods and services rather than discretionary purchases. A recent report also found that a significant portion of consumers living paycheck to paycheck expect to dip into their savings this year to afford necessities, not luxuries. While the labor market remains strong, pessimism about future pay increases may also be weighing on consumer sentiment. So while spending has been a bright spot so far, there are certainly risks to monitor going forward. It will be important to track how these economic trends evolve, especially as the Federal Reserve continues to raise interest rates to combat inflation. Thank you for that insightful analysis, David. In other news, U.S. universities are welcoming international students as the academic year begins. But while the total number of foreign students is steadily growing, the top-sending country, China, is showing signs of leveling out or shrinking. Together with more details is our correspondent. What factors are contributing to this trend of fewer Chinese students studying in the U.S.? The main reasons appear to be economic. China's struggling economy, coupled with the high cost of studying in the U.S., are making it more difficult for Chinese students to afford an American education. Many are opting for less expensive options in countries like Australia and Britain instead. For example, a one-year master's degree in the U.K. can be significantly cheaper than studying in the U.S. How significant is the drop in Chinese student numbers, and is this part of a longer-term trend? In the 2022-23 academic year, the number of international students from China fell by 0.2 percent to 289,526. That's 600 fewer students than the previous year, when their numbers had already dropped by nearly 9 percent. The COVID-19 pandemic saw an even steeper decline of nearly 15 percent in 2021, mirroring the global trend. While it's not yet clear if this represents a leveling out or a continuing decline, the economic factors at play suggest it could be part of a longer-term shift. Despite the drop in Chinese students, the total number of international students in the U.S. actually increased, correct? What does that tell us? Yes, that's right. The total number of foreign students studying in the U.S. in 2022-23 passed 1 million for the first time since the pandemic, a nearly 12 percent increase year on year. This suggests that while China remains the top-sending country, U.S. universities are successfully attracting students from a more diverse range of countries. It also highlights the enduring appeal of an American education, despite the challenges posed by the pandemic and geopolitical tensions. How are U.S. universities and the international education sector responding to these trends? Many universities are doubling down on their international recruitment efforts, looking to attract students from a wider range of countries to offset any potential declines from China. They're also working to provide more support and resources for international students, recognizing the unique challenges they face in terms of language barriers, cultural adjustment, and financial pressures. At the same time, there are ongoing efforts to address some of the geopolitical tensions and visa issues that can make it more difficult for students from certain countries to study in the U.S. It will be interesting to see how these trends evolve in the coming years as the global economy and geopolitical landscape continue to shift. On that note, let's turn our attention to a major player in the tech industry. NVIDIA's stock dipped despite the company delivering impressive second-quarter earnings that beat expectations. Revenue surged over 122% compared to the same quarter last year, reaching $30.4 billion. However, the stock slipped 3.6% in after-hours trading following the earnings report. Here to discuss the mixed signals in NVIDIA's stock chart is our simply economics correspondent. And what are the key takeaways from analyzing NVIDIA's stock trends? The charts are giving some conflicting signals about NVIDIA's stock trajectory. In the short term, the stock is trading below its eight-day moving average, which suggests a bearish outlook. However, looking at the medium and long-term trends, NVIDIA's stock remains above both the 20-day and 50-day moving averages. The 200-day moving average is also significantly lower than the current price, reinforcing a bullish long-term perspective on the stock's enduring strength. What additional technical indicators are providing insight into trader sentiment around NVIDIA's stock? The moving average convergence divergence, or MACD, currently supports a bullish stance reflecting positive momentum for NVIDIA. However, there are signs the MACD line may be about to cross below its signal line, which would be considered a bearish signal suggesting a reversal in the stock's positive momentum. The relative strength index is neither overbought nor oversold, but any rise towards overbought levels above 70 could be a cause for caution. With NVIDIA's price near the upper Bollinger Band, that's another bullish signal, though it also hints at the potential for a short-term pullback. So putting it all together, what's the overall verdict on NVIDIA's stock based on this technical analysis? The overall picture painted by NVIDIA's chart indicators is mostly bullish, but there are a few warning signs to keep an eye on. The company's strong earnings performance contrasts with the recent dip in the stock price, offering a mixed but still hopeful outlook. Analysts are saying the pullback could actually be a buying opportunity, noting that NVIDIA's push into AI is too significant to slow down. But given some of the cautionary signals, a watchful approach is probably wise for traders and investors. Thanks for that analysis and insight into what NVIDIA's stock chart is signaling after a strong earnings report, but a dip in share price. In other economic news, the US economy grew faster than expected in the second quarter, outpacing other G7 nations and casting doubt on the need for large interest rate cuts this year. The GDP expanded at a 3% annualized rate from April to June, up from the initial 2.8% estimate. This strong performance raises questions about whether the Federal Reserve will deliver a hefty 50 basis point rate cut next month. For more, let's bring in our economics correspondent. What's behind this surprisingly robust growth? The key drivers were stronger consumer spending and business investment along with increased government outlays, imports which subtract from GDP also rose in the quarter. This suggests the economy is proving quite resilient even in the face of high inflation and rising interest rates over the past year. The Fed has been tightening monetary policy to cool demand and bring down price pressures. But this report indicates the economy is holding up well and potentially headed for a soft landing rather than a recession. So does this diminish the chances of the Fed cutting rates aggressively in the near term? It likely reduces the odds of a 50 basis point move in September. Before this report, traders were pricing in about a 50% probability of a half point cut. That's now fallen to around 30%. Fed Chair Jerome Powell has said they will be data dependent in setting policy. And this stronger than expected growth, along with a still healthy labor market, argues for a more moderate 25 basis point reduction. The Fed wants to avoid stimulating the economy too much and reigniting inflation just as it's starting to ease. What about the political implications heading into next year's presidential election? This certainly looks positive for the incumbent Democrats. Recent polls show Vice President Kamala Harris, the party's likely nominee, leading former President Trump when it comes to voter confidence in handling the economy. A strong growth trajectory and soft landing would boost the Democrats' economic message in 2024, but there's still a long way to go and a lot can change. The Fed will have to keep a close eye on incoming data and adjust policy as needed to maintain stability. The economic picture can certainly shift quickly, as we've seen in recent years. Thanks for that insightful analysis of the latest GDP numbers and what they mean for Fed policy and the political landscape. And with that, we wrap up our stories for today. Thanks for listening to Simply Economics. We'll see you back here tomorrow. [MUSIC] [BLANK_AUDIO]