25 April 2024
If you are covering the latest US GDP figures, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“The advance estimate for first quarter US economic growth has come in below expectations at an annual rate of 1.6%. The market had been anticipating a figure of 2.2% following a fourth quarter growth rate of 3.4%. This is also well below the majority of macro indicators which had been reasonably strong in the run up to today’s figures, including the Atlanta Fed’s GDPNow model’s running estimate which had anticipated a rate of 2.7%. Though this is lower than had been hoped, it is only the first estimate, so it is unlikely to be enough to make investors pencil in earlier rate cuts given the Federal Reserve is expected to wait and see whether inflationary forces can be brought to heel as a result.
“The slowdown has been blamed on weaker consumer spending, lower exports and a deceleration in government spending. The US economy enjoyed a strong bounce in the second half of 2023 built on both the consumer economy and willingness of the government to spend heavily. With a tight labour market driving wage growth in excess of inflation, consumers have on aggregate been enjoying rising real disposable incomes and have been able to increase their spending as a result. However, this now appears to be slowing, with some signs from recent corporate surveys suggesting that high prices are beginning to restrict demand.
“While it is clear that the US economy has been stronger than many expected, headwinds are beginning to be felt, namely from a more challenging business environment amidst ongoing inflationary forces. Nonetheless, GDP growth surprised to the upside several times last year and there remains a possibility that we could see the same materialise later in the year, particularly if disinflationary trends soon pick up, allowing the Federal Reserve to again consider nearer term rate cuts.
“Though growth appears to have eased somewhat compared to the end of last year, this was only the first estimate. It’s certainly an important reminder that a soft landing is not a given but could well lead to more favourable inflation figures in months to come, and with it the possibility of easing financial conditions, potentially limiting any negative impact on equity markets.”
