OUCH: Goldman's Jan Hatzius Just Cut His Q2 GDP Estimate


Goldman Sachs chief U.S. economist Jan Hatzius and his team lowered their tracking estimate of Q2 GDP growth to 1.6 per cent from 1.8 per cent on the back of weak retail sales data out of the United States this morning.

Hatzius wrote in a note to clients that “key details of the report were weaker than the consensus had expected,” including non-auto retail sales, which were down 0.4 per cent, and “core”/control retail sales — a metric that strips autos, gasoline, and building materials out of the number — which came in flat at 0 per cent.

Here is Hatzius on the effect the retail sales numbers have on their estimate for Q2 GDP:

The report was a negative for our tracking estimate of Q2 GDP growth, due to the downward revision to core/control retail sales in March and April (the flat reading for May was in line with our forecast). Some of this may be offset by stronger inventory accumulation. Weakness in building material sales also trimmed our forecast for residential investment slightly. In total, we revised down our tracking estimate of Q2 GDP growth by two tenths to +1.6% (annualized) from +1.8% previously.

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