US: Growth Headwinds

Consensus Forecasts

The recent steady rise in consensus forecasts for 2013 GDP has halted this month. This coincides with the advance release of the Q1 national accounts which, at first glance, were relatively upbeat. After a negligeable 0.4% (q-o-q annualized) rise in the final three months of last year, the economy accelerated by 2.5%, helped in part by a 3.3% surge in personal spending. Given that fiscal sequestration prompted a 4.1% contraction in government consumption (following from a 7.1% collapse in Q4 2012), the uptick in GDP growth appears all the more impressive. However, the 2.5% GDP figure was below many economists’ expectations. As it turned out, robust residential investment and spending on automobiles could not completely offset the drag from sequestration. Moreover, disposable income recorded a sharp 5.3% decline in Q1 following a 6.2% surge in Q4 2012, on the back of Federal tax increases. With further cuts in spending having been introduced in March, government spending will likely subtract further from growth. And with incomes either stagnant or declining, consumer spending is not on a strong growth path yet.

Industrial activity moderated from 1.1% (m-o-m) in February to only +0.4% in March, reined in by a 0.1% fall in manufacturing. The 5.3% monthly surge in utilities output (prompted by unseasonably cold weather) prevented industry as a whole from falling into contraction. Elsewhere, new factory orders fell by a larger-than-expected 4% (m-o-m) during the same month and shipments declined by 1.0%. April’s ebbing manufacturing PMIs point to further slowing ahead. However, despite this, the 2013 industrial production forecast has been upgraded again.

You can download a sample of Consensus Forecasts G-7 and Western Europe at

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