Hann-Ju Ho, Research Analyst at Lloyds Bank, expects the US annualised Q2 GDP growth to rebound to at least 3%, with full-year growth forecast at 2.2%, up from 1.6% in 2016.
“US economic growth slowed to only 0.7% (annualised) in Q1, compared with 2.1% in Q4, led by a weaker pace of consumer spending growth. Still, both business surveys and labour market indicators show a firm underlying pace of growth. The manufacturing ISM survey fell to 54.8 in April, but remained in expansionary territory, while the nonmanufacturing ISM advanced to 57.5, consistent with a vigorous pace of growth. Nonfarm payrolls increased by 211k in April, suggesting that the soft March outturn was temporary, while the unemployment rate fell to a new post-crisis low of 4.4%. The rise in April retail sales signals a revival of consumer spending this quarter.”
“We expect annualised Q2 GDP growth to rebound to at least 3%, with full-year growth forecast at 2.2%, up from 1.6% in 2016. Growth for 2018 is forecast at 2.5%, with some fiscal stimulus measures assumed from next year. The growing political storm in the US, however, is raising doubts on whether the Trump administration will be able to push through pro-growth policies, although it is too early to assess the impact. Latest reports are that US President Trump asked former FBI Director Comey to drop an investigation into one of his aides. The Justice Department has named former FBI Director Mueller as special counsel to investigate alleged Russian interference in the US election.”
“On the inflation front, annual wage growth eased to 2.5% in April, suggesting that there may be lingering slack in the labour market, despite the low unemployment rate. Annual headline CPI inflation, meanwhile, fell for a second month to 2.2% and the ‘core’ measure (excluding food and energy) also eased to 1.9%. We expect headline CPI inflation to average 2.4% this year.”