Up until now most economists have been expecting a strong bounce-back in activity in the second quarter. Forecasts for 3% plus growth in seasonally-adjusted annualised terms have been seen regularly in recent weeks.
However, these lofty expectations may be wound back significantly.
Here’s a chart from Westpac which shows expectations for economic growth are looking somewhat optimistic.
The yellow line is the market consensus forecast for US economic growth in the second quarter. At present it sits at 3.1% in SAAR terms. While it remains elevated, the Atlanta Fed’s nowcast indicator, shown in grey, — something that nailed the slowdown in economic growth seen in the first quarter – is currently pointing to economic growth in the second quarter of just 0.7%.
Westpac’s G10 model US growth signal — marked in blue — along with its US data surprise index — portrayed in red — both suggest that US data, along with expectations for growth, have also been weakening in recent months.
While a substantial amount of data for the second quarter is still to be released — at present markets are only receiving information for April — if the pattern continues into May, expectations for economic growth are likely to be slashed in the week’s ahead.
In a research note this morning, the NAB’s co-head of FX strategy Ray Attrill suggested “there’s currently a decent chance the US economy will record no growth in H1 2015”.
Let’s hope that’s not the case. The world presently requires a strong US economy and currency.