US: Another ugly first quarter? – Capital Economics
|The early activity data for January have come in below expectations, raising the possibility that economic growth may once again disappoint in the first quarter, according to analysts at Capital Economics.
Key Quotes
“Both industrial production and headline retail sales declined last month, with the latter suggesting that, after a near-4% annualised surge in the fourth quarter of last year, real consumption growth may slow quite sharply in the first. That said, the rapid growth of domestic demand towards the end of last year was always unlikely to be sustained. And the January ISM activity surveys are consistent with GDP growth of more than 4% y/y. (See Chart.) Accordingly, for now at least, we still expect first-quarter GDP growth to be between 2.5% and 3.0% annualised. Moreover, with the turmoil in financial markets having eased and mounting evidence that underlying price pressures are starting to build, even a temporary lull in activity growth is unlikely to throw the Fed off course.”
“Output and activity indicators point to weaker manufacturing output growth in the first quarter.”
“Consumption indicators show that households have shrugged off the recent market volatility.”
“Investment indicators suggest that business equipment investment may start to slow.”
“External indicators reveal that strong export growth has been outweighed by a surge in imports.”
“Labour market indicators are consistent with a steady rise in wage growth this year.”
“Inflation indicators show that a broad-based rebound in core inflation is underway.”
“Financial markets indicators reveal that corporate bond yields remain low despite the sell-off in the Treasury market.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.