On Friday, US Q4 GDP data revisions were released. The data gave a mixed message. US quarterly GDP was upwardly revised to 1.4% q/q as compared with the initial figure of 0.7% growth and first revision of 1%. The improvement in the data was mainly due to upward revisions in services spending of 2.8% q/q saar, as compared with the initial figure of 2%. Consumer spending outlook was revised by around 20bps.
Even if the upgrade to the GDP data was positive, it did not alter the overall GDP number. US economy is now forecast to expand 2% y/y as compared with the initial projection of 1.8% y/y growth.
“With GDP tracking for a print in the 1.5% q/q annualized area for Q1 2016, year-on-year GDP for Q1 is likely to come in a bit above 2% y/y (despite a very weak base effect from a soft Q1 2015) and would need to grow at a rate above 3% q/q annualized in Q2 simply to stay above the 2% y/y mark”, says Scotiabank.
This suggests that decent positive growth in GDP in the first and second quarter of 2016 will still leave the GDP growth in the area of 2% y/y.
“This isn’t bad per se (2% growth would sure look good say in Europe), but it’s not the acceleration that many had hoped for and points to the possibility that the U.S. economy may have actually hit its cycle peak during the 2013-2015 period”, says Scotiabank.
Meanwhile, corporate profits declined 11.5% y/y, worst since Q1 2011. This is partially because of fall in profits at oil firms and utilities. However, the weakness was based mainly with retail trade and financials, both of which recorded weak returns.
The material has been provided by InstaForex Company – www.instaforex.com