March quarter US GDP was revised down to an annualised -2.9%, significantly lower than the market expectation of -1.8%. While the factors behind the downward revision were well known (healthcare spending, net exports) and most of the growth-detracting factors in the quarter can be attributed to one-offs (weather, lower inventory investment) the scale of the revision was nevertheless disappointing.
Markets took the news in its stride as most
partial activity data has rebounded since.
Indeed the Leading Economic Index has resumed its upward trend following
a brief wobble. That’s indicative of a
strengthening in underlying growth.
That said it’s not all good news all the
time. Trade remains an underperformer
and the high frequency monthly data still throws up the accessional disappointment:
May durable goods orders were also released
overnight and were weaker than expected falling -1.0% m/m, although core non-defence
capital goods orders rose +0.7%.
I’ve got an annualised +3.8% pencilled in
for June quarter GDP growth. That will
now combine with the March quarter to produce only 1% growth for the first half
of the year. And with expected growth of
around 3.2% in the second half of the year, my annual average growth forecast
for calendar 2014 is now 1.8%. That’s about
the same as last year although the flat profile for the numbers belies the
improvement in the underlying growth trend.