by Macroview Growth continued to be dampened by a strong dollar, a collapse in oil sector investment and falling inventories, but prospects still relatively healthy Read the full report here US real GDP, buffeted by numerous headwinds and lacking momentum, grew by a feeble 0.5% in Q1 2016. Seasonality factors mean the first-quarter GDP growth rate can be very volatile, but Q1 growth was a clear disappointment overall, particularly as growth in Q4 2015 was already soft (+1.4% q-o-q annualised). Of course, recent weakness in GDP data is disturbing and downside risks exist. But it seems unwise to us to turn too pessimistic on the US economy. Financial conditions have now eased back noticeably, the impact of the collapse in investment in the oil sector will diminish, and prospects for consumption and housing remain relatively bright. We continue to believe a serious downturn in the US economy is unlikely this year and actually we expect GDP growth to bounce back noticeably in Q2 and Q3. Although we expect a substantial improvement over the coming quarters, we have decided to cut our forecast for yearly average growth in 2016 from 2.0% to 1.8%. However, even after this downward revision, it will still be close to the US economy’s potential growth (currently estimated at 1¾%). Our preliminary forecast for growth in 2017 remains unchanged at 2.
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Growth continued to be dampened by a strong dollar, a collapse in oil sector investment and falling inventories, but prospects still relatively healthy
US real GDP, buffeted by numerous headwinds and lacking momentum, grew by a feeble 0.5% in Q1 2016. Seasonality factors mean the first-quarter GDP growth rate can be very volatile, but Q1 growth was a clear disappointment overall, particularly as growth in Q4 2015 was already soft (+1.4% q-o-q annualised).
Of course, recent weakness in GDP data is disturbing and downside risks exist. But it seems unwise to us to turn too pessimistic on the US economy. Financial conditions have now eased back noticeably, the impact of the collapse in investment in the oil sector will diminish, and prospects for consumption and housing remain relatively bright. We continue to believe a serious downturn in the US economy is unlikely this year and actually we expect GDP growth to bounce back noticeably in Q2 and Q3.
Although we expect a substantial improvement over the coming quarters, we have decided to cut our forecast for yearly average growth in 2016 from 2.0% to 1.8%. However, even after this downward revision, it will still be close to the US economy’s potential growth (currently estimated at 1¾%). Our preliminary forecast for growth in 2017 remains unchanged at 2.0%, which is also below the consensus Bloomberg forecast of 2.3%.