United States: growth is stronger than it seems

CHART OF THE WEEK

At an annualised 2.6%, Q4 2017 US GDP fell slightly short of market expectations and was moderately slower than in the previous two quarters, which both came in above 3.0%. However, this number clouds a strong underlying level of domestic demand, as when stripping out the negative trade balance (-1.1% due to robust imports) and inventories (-0.7%), final domestic demand grew 4.3%, one of its highest readings in the past fifteen years.

us growth

 

OUR ANALYSIS

Strong consumption (+3.8% in volume) is one of the main factors driving domestic demand. Such a high level of spending will be hard to sustain because recent quarters have seen the savings rate fall sharply. That said, we are witnessing an acceleration in household real disposable income, up from 0% to 2.1% between end-2016 and end-2017. This should continue to be underpinned by healthy job creations and potentially faster wage growth.

Investment picked up sharply after falling for the previous two quarters. Summer storm-related rebuilding has indeed played a part, but housing permits remain upbeat and the recent pick-up in property prices will doubtless continue to stimulate construction.

Given the faster growth, high sentiment levels, and recent tax reforms, non-residential investment spending should also continue to gather pace.

The scene seems to be set for growth approaching 3% in 2018, following 2.3% in 2017.

 

 

The opinion expressed above is dated 02 February 2018 and is liable to change.

This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS.


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Julien-Pierre Nouen

Directeur des études économiques et de la gestion diversifiée