Analyst Eric Green of TD Securities is out with a take on GDP, and he agrees with us that the number wasn’t that bad, despite a negative headline.
He notes that it was all due to lumpy military spending, and the giveback from inventories.
Furthermore, he sees this as evidence that Q1 will come in strong.
Key point after this release is the decline in GDP looks quirky and will not persist. It makes us more comfortable with a strong bounce in Q1 GDP and does nothing to shake our view that GDP will shift into the 2.5% to 3.0% range over the second half. Growth will remain too low for Fed comfort and the at face value the release today reinforces the bias toward accommodation. That dialogue will continue to evolve and the debate on the Fed will be very different in one year as we transition to stage two, the let it run phase. In the meantime, as the above details in this report become more apparent the market will re-focus on what is next rather than what was.