Bounce in US GDP

The poor market performance in early Q1 can be blamed in large part on concerns that growth in the US was slowing markedly.  And it did - final GP for Q1 was a measly annual rate of 0.5%.  But there does appear to be a significant seasonal effect occurring as you can see from the Deutsche Bank slide:

Average growth in each quarter since 2010.

If this pattern holds, how much of a bounce could we see in Q2.  The best place to look for advance reads on GDP (way, way better than any forecast by an economist) is the Atlanta GDPNow series.  This takes account of real time data that feeds into the official GDP calculation.  For instance, on Friday in the US, the Retail Sales report for April was released - a very strong number (+1.3% month on month, +3.0% year on year), much greater than expectations.  Interestingly, several large retailers have reported disappointing results in the last few days, perhaps pointing to a further shift by consumers away from the old style retailer to newer options.  This chart from Factset explains everything about where the traditional retailers need to look to find their missing top line revenue:

Traditional retailers can moan all they like about poor personal income growth, and that the economy isn't really growing etc, but the answer appears much simpler "It's the interwebs, stupid."

The beat on the Retail Sales number has had a significant impact on the Atlanta Fed GDP estimate:

Early indications then, are that the US economy will continue to grow at a decent (relative to the rest of the world) clip in 2016, along with a reversal of the recent earnings decline trend, and a tight labour market that is showing clear signal of employment cost inflation.


Subscribe here to be advised of future blog posts

* indicates required