CHART: It looks like the US economy is picking up speed

Photo by Michael Steele/Getty Images

US economic growth is suddenly looking better on the back of a strong retail sales report for April, as the the chart below, supplied by ANZ research, demonstrates.

It’s the bank’s GDPNow estimate, something ANZ describes as “an indicator of underlying momentum in real time” which “comprises both soft and hard data that reflect the supply and demand side of the economy”.

Essentially, it’s a model that uses economic data to estimate likely eco growth over a specific period of time, in this instance the June quarter of 2016.

As a result of the 1.3% monthly increase in retail sales in April, the largest in percentage terms since March 2015, ANZ’s GDPNow Q2 estimate jumped to a quarterly seasonally-adjusted annual rate (SAAR) of 2.4% last week from around 1.3% seen previously.

While an impressive bounce, ANZ warns “the accuracy of GDP nowcasting is low at the beginning of the quarter and then improves over time as more information is incorporated into the estimation”, acknowledging that the “standard error of the GDPNow estimate tends to settle down 30 days prior to the release of the GDP estimate”.

Indeed, the current estimate is based of just 19% of the available data inputs for the quarter, indicating that there’s plenty of room for revision in the months ahead, both to the upside and downside.

The improvement in the ANZ GDPNow model mirrors that in the separate Atlanta Fed Q2 GDPnow model — something which is watched closely by financial markets — which accelerated to 2.8% (SAAR) as a result of the retail sales report.

In the first quarter of 2016 the US economy grew by just 0.5% in SAAR terms according to the advanced reading provided by the US Bureau of Economic Analysis, the weakest expansion recorded since the first quarter of 2014.

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