30 Jan 2015
US 4Q GDP might disappoint – ING
FXStreet (Barcelona) - Rob Carnell of ING, explains why US 4Q GDP might disappoint the markets, forecasting 4Q GDP to come out at 2.9%, below the consensus, with risks tilted to the downside.
Key Quotes
“Consensus forecasts for US GDP started out at about 3.5%, but in recent weeks, have been dipping, and are now just a shade over 3.0% (ING f = 2.9%).”
“We are comfortable sitting fractionally below this consensus, although the room for error on an initial forecast such as this is embarrassingly high, recent data-flow has been a little disappointing. And the consensus range is very tight – probably a sign of herding and lack of genuine conviction.”
“Take the durable goods orders figures, for example. Even though this is a horribly volatile piece of data, the three-month moving average has fallen from last quarter, and the pace of growth of shipments has slowed too.”
“Business investment, which ran at a double-digit pace in 3Q14, looks likely to come off the boil quite sharply in 4Q14. Consumer spending suffered the same fate in December, but that still leaves the rate of growth of the core “control group” of sales slowing. Inventories – one of the most volatile and hard to forecast bits of any GDP forecast – according to our survey-based model – will likely drag on growth.”
“Government spending will likely come off after the 4.4% defence-led rise in 3Q14, though public construction may soften the fall. And private residential construction will also likely grow a little slower than the 4.8% 3Q rate, though this may be marginal.”
“Add it all together, and our total comes to 2.9%. This is still respectable, and looks more so because it follows the 5.0% 3Q figure, suggesting that trend growth picked up sharply from the beginning of the year. This helps to justify the Fed’s recent upbeat FOMC assessment, despite the relative softness of data so far this year, and keeps a June rate hike on the cards.”
“The Fed probably had a sneak preview of preliminary estimates when it released its upbeat FOMC statement earlier this week, which is one reason for keeping optimistic. But we still think the major risk to our forecast is on the downside.”
Key Quotes
“Consensus forecasts for US GDP started out at about 3.5%, but in recent weeks, have been dipping, and are now just a shade over 3.0% (ING f = 2.9%).”
“We are comfortable sitting fractionally below this consensus, although the room for error on an initial forecast such as this is embarrassingly high, recent data-flow has been a little disappointing. And the consensus range is very tight – probably a sign of herding and lack of genuine conviction.”
“Take the durable goods orders figures, for example. Even though this is a horribly volatile piece of data, the three-month moving average has fallen from last quarter, and the pace of growth of shipments has slowed too.”
“Business investment, which ran at a double-digit pace in 3Q14, looks likely to come off the boil quite sharply in 4Q14. Consumer spending suffered the same fate in December, but that still leaves the rate of growth of the core “control group” of sales slowing. Inventories – one of the most volatile and hard to forecast bits of any GDP forecast – according to our survey-based model – will likely drag on growth.”
“Government spending will likely come off after the 4.4% defence-led rise in 3Q14, though public construction may soften the fall. And private residential construction will also likely grow a little slower than the 4.8% 3Q rate, though this may be marginal.”
“Add it all together, and our total comes to 2.9%. This is still respectable, and looks more so because it follows the 5.0% 3Q figure, suggesting that trend growth picked up sharply from the beginning of the year. This helps to justify the Fed’s recent upbeat FOMC assessment, despite the relative softness of data so far this year, and keeps a June rate hike on the cards.”
“The Fed probably had a sneak preview of preliminary estimates when it released its upbeat FOMC statement earlier this week, which is one reason for keeping optimistic. But we still think the major risk to our forecast is on the downside.”