It’s no secret that US economy underwhelmed during the first quarter of 2015. Most major data points were weak, culminating in a GDP reading of just 0.2% earlier this week.
This excellent chart, released by Soc Gen overnight, shows their economic surprise index for the US and Eurozone data going back to 2013.
It really tells a story.
The brown line representing US economic data, having outperformed significantly in the second half of 2014, has collapsed since the beginning of the year. Diverging central bank policy, currency movements, climatic conditions and industrial action all likely contributed to sharp turnaround in economic fortunes.
Understandably expectations for US economic growth are beginning to move lower, as demonstrated in Soc Gen’s chart below.
While this is nothing new – every year since 2012 it’s occurred – Kit Juckes and Sebastien Galy of Soc Gen’s Forex strategy team believe the US economy will, like last year, accelerate strongly in the final three quarters of the year.
“With real income growing at a rate above 4% per annum with employment growing by over 2% in the last year and showing no signs of slowing, the US consumer has ammunition to fuel a recovery in the months ahead. And the pattern of Q1 growth coming in at 0.6% in 2010-2014, while Q2 comes in at 3% and H2 at 2.8%, at least means we shouldn’t write 2015 off just yet – and with it, the dollar rally.”
Let’s hope they’re right. It would be a significant and welcome development.
A strong US economy accompanied by a strong US Dollar – for a reasonable period of time – is exactly what the global economy needs at present.
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