The 2.1% #GDP print gives "optical illusion" of an economy chugging along at moderate 2% clip at end-2019, but composition of growth reveals softer picture.
More than 70% of Q4 advance came from temporary collapse in imports, business investment subdued & consumers + cautious
More than 70% of Q4 advance came from temporary collapse in imports, business investment subdued & consumers + cautious
Average 2.3% GDP advance in 2019 is marginally weaker than 2.4% print in 2017 but this is another optical illusion as most recent 3 Qs mark economy’s worst performance since the 2016 slump.
Even momentum headed into 2020 is softer than the 2.3% y/y print would indicate
Even momentum headed into 2020 is softer than the 2.3% y/y print would indicate
Consumer spending only +1.8% in Q4 as households exercised more caution in the face of elevated policy uncertainty and moderating income growth.
In 2020, cooler employment trends and lower income growth prospects will lead consumers to gently rein in spending
In 2020, cooler employment trends and lower income growth prospects will lead consumers to gently rein in spending
Softening consumer spending momentum means the main pillar of US activity is eroding
But even chart below is misleading given "optical illusion" from 1.5ppt contribution from 8.7% plunge in imports.
But even chart below is misleading given "optical illusion" from 1.5ppt contribution from 8.7% plunge in imports.
Lower mortgage rates and reduced price inflation continued to support the residential sector, but the 5.8% advance in Q4 was barely enough to pull the annual pace above zero, to 1.5% y/y, and not sufficient to prevent back-to-back years of contracting investment.
Biz investment contracted for 3rd consecutive Q – worst performance since 09 – w/ spending on structures & equipment and machinery contracting.
Biz facing worst outlook since '16 w/ lingering headwinds from global growth, #trade protectionism, policy uncertainty, dollar & energy
Biz facing worst outlook since '16 w/ lingering headwinds from global growth, #trade protectionism, policy uncertainty, dollar & energy
Trade volumes collapsed in Q4, with imports plunging 8.7% – their worst performance since the Great Recession – and exports rising 1.4%.
Net trade represented the largest optical illusion in the GDP report, providing an artificial boost to GDP growth of 1.5ppts
Net trade represented the largest optical illusion in the GDP report, providing an artificial boost to GDP growth of 1.5ppts
On the #inflation front, headline PCE inflation firmed 0.1ppts to 1.5% y/y, while core inflation slipped a tick to 1.6% y/y.
Persistent inflation undershoot, weakened inflation expectations & lingering softness in US econ activity will bolster case for additional mid-yr #Fed cut
Persistent inflation undershoot, weakened inflation expectations & lingering softness in US econ activity will bolster case for additional mid-yr #Fed cut
