GDP probably contracted modestly in the first quarter. The unseasonably cold weather in the Northeast and the collapse in the shale oil industry were key factors driving that decline, but the weakness could also reflect some residual seasonality. Over the previous five years, first-quarter GDP growth has averaged only 0.6% annualised, well below the average gains in the other three quarter of each year. Alternative measures of activity, such as:
- 1. gross domestic income and the coincident indicators suggest that first-quarter growth was much stronger too.
- 2. While the stronger dollar is acting as a restraint on the manufacturing sector, the survey evidence suggests that activity is picking up in the non-manufacturing sectors.
- 3. A weighted average of those activity indices points to GDP growth of more than 3%.
- 4. Other survey evidence suggests there will soon be a rebound in manufacturing output.
- 5. The leading indicators also point to a pick-up in economic growth.
- 6. At first glance, the slump in the annual growth rate of business sales looks disconcerting.
But this is a nominal measure that is being dragged down by the collapse in energy prices. Excluding petroleum, growth looks just fine.
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