United-States: weak first-quarter growth confirmed

CHART OF THE WEEK

US GDP growth has turned out to be weak at 0.7% year-on-year. ISM indices and other survey data suggested a stronger figure, but the result is no surprise given January and February’s spending data (see Chart of the Week #14), and it is near to consensus forecasts of 1.0%.

Over the last seven years, weak first-quarter growth has been a common occurrence, standing at just 0.9% on average compared with 2.5% for the rest of the year, and despite seasonally adjusting the data. There are various possible explanations for the pattern, including residual seasonality, yet the fact that the weakness is never due to the same demand components suggests an element of chance.

OUR ANALYSIS

This year’s weak first quarter is essentially due to spending and inventory levels. Data for March suggest a slight upturn in spending which we believe should continue over the next few months, driven by positive momentum in personal income. The particularly negative effect of inventory changes can be expected to reverse in forthcoming quarters, and investment is currently recovering well. For these reasons, we expect to see growth pick up in the months ahead.

The opinion expressed above is dated May 2nd, 2017, and is liable to change

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Julien-Pierre Nouen

Directeur des études économiques et de la gestion diversifiée