28 Apr 2016
US: Economic growth close to stalling - Lloyds
Today numbers showed that the US economy (initial reading) grew at a 0.5% rate during the first quarter, less than expected and the weakest since the first quarter of 2015.” According to analysts from Lloyds Bank, stronger growth signals will be needed over the next weeks for the Federal Reserve to raise rates in June.
Key Quotes:
“Some of the slowdown was due to destocking, the impact of which is likely to be short lived. Final demand, however, was also weaker than in Q4, reflecting slower consumer spending growth and a decline in both business investment and net exports.”
“The sluggishness of GDP growth was not unexpected, as most indicators for the first few months of this year have pointed to a softening. The exception to this is employment growth, which has continued to be strong. This contrast between a buoyant labour market and weak output growth may be in part due to weak underlying productivity growth, which is an issue for many economies, including the UK.”
“The Fed is attaching a high probability to the assumption that the slowdown in activity will be short lived and that Q2 growth will be considerably stronger.”
“As the Fed had already indicated that it was expecting Q1 growth to be weak today’s data does not negate the message from yesterday’s FOMC meeting that a June interest rate hike remains on the table. Nevertheless, signs of stronger growth over the next six weeks will be required for this to occur. “
Key Quotes:
“Some of the slowdown was due to destocking, the impact of which is likely to be short lived. Final demand, however, was also weaker than in Q4, reflecting slower consumer spending growth and a decline in both business investment and net exports.”
“The sluggishness of GDP growth was not unexpected, as most indicators for the first few months of this year have pointed to a softening. The exception to this is employment growth, which has continued to be strong. This contrast between a buoyant labour market and weak output growth may be in part due to weak underlying productivity growth, which is an issue for many economies, including the UK.”
“The Fed is attaching a high probability to the assumption that the slowdown in activity will be short lived and that Q2 growth will be considerably stronger.”
“As the Fed had already indicated that it was expecting Q1 growth to be weak today’s data does not negate the message from yesterday’s FOMC meeting that a June interest rate hike remains on the table. Nevertheless, signs of stronger growth over the next six weeks will be required for this to occur. “