CHART: Forecasts for US economic growth could be slashed

Photo by Scott Gries/Getty Images

The US economy hasn’t had a good start to the year. First quarter GDP rose just 0.2%, and is likely to be revised significantly lower, while US retail sales came in flat for April.

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‚Äôs currently a decent chance the US economy will record no growth in H1 2015”.

No growth.

Let’s hope that’s not the case. The world presently requires a strong US economy and currency.

NOW WATCH: Money & Markets videos

Want to read a more in-depth view on the trends influencing Australian business and the global economy? BI / Research is designed to help executives and industry leaders understand the major challenges and opportunities for industry, technology, strategy and the economy in the future. Sign up for free at