Following last Friday’s GDP report, Morgan Stanley economist David Greenlaw slashed his 2H economic outlook from 4% to 3.5%.
But argualy the big eye-raiser there is the 3.5% growth, which is an acceleration from current rates.
So what’s that all about?
Greenlaw cites 4 factors:
- Autos: A jump in auto production after the big-time disruptions earlier this year will add 1% to GDP.
- Fuel prices: Due to the drop in gasoline prices, real consumption growth will be 3% in the second half compared to 1.5% in the first half.
- A business expensing provision: A provision to incentivise business spending expires at the end of the year, and so businesses will therefore accelerate their investments as the year comes to an end.
- Exports: For the past 5 years, there’s been a seasonal quirk that means Q4 sees a bigger boost to exports than other years. See the blow chart:
Photo: Morgan Stanley