US GDP Miss and Elevated PCE Create Complex Macro Backdrop for Equities

US equity futures showed resilience on Friday morning despite a combination of slowing economic growth and persistent inflationary pressures. The latest data presents a challenging environment for policymakers, as the economy expands at a slower pace than anticipated while the Federal Reserve's preferred inflation metric remains elevated. First-quarter GDP grew at an annual rate of 2.0%, falling short of the 2.3% forecast by economists. This suggests that while the US economy continues to expand, the momentum is softening more than previously projected. Simultaneously, the Personal Consumption Expenditures (PCE) price index—the Federal Reserve's primary gauge for inflation—is currently running at 3.5% annually. This 'hotter' inflation reading, combined with a tight labor market characterized by rising employment costs and low jobless claims, complicates the path toward price stability. Despite these stagflationary hints, futures are edging higher. Market participants may be interpreting the slower growth as a potential catalyst for the Federal Reserve to eventually ease its restrictive monetary stance, balancing the risk of inflation against the risk of a sharper economic slowdown.