Over the past week, we’ve seen a raft of US activity data for May. Manufacturing PMIs surveys (ISM and Markit) were weak, and so was labour market data. Services PMI data were mixed (ISM up, Markit down). Small business sentiment and auto sales were strong. They confirm the loss of momentum in the US economy but suggest that it is still some way from recession.
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Over the past week, we’ve seen a raft of US activity data for May. Manufacturing PMIs surveys (ISM and Markit) were weak, and so was labour market data. Services PMI data were mixed (ISM up, Markit down). Small business sentiment and auto sales were strong. They confirm the loss of momentum in the US economy, but suggest that it is still some way from recession.
Consensus and nowcasting estimates for Q2 growth are wide-ranging, from 1% on the low-end (NY Fed nowcast) to 2.9% on the high-end (St Louis Fed, see chart and table). The median forecast is 2.3%. This is notably lower than Q1’s 3.1%, which itself was inflated due to an inventory build. It would appear, then, that the US economy has been in a 2% growth zone, which was temporarily boosted last year by the fiscal stimulus.
The good news is that with US yields low, trade war chatter ebbing somewhat, and recession risk low in the near term, US equities should be well supported (see also my earlier note: Gloomy US yields, Silver Lining or US stocks).
Figure 1: Latest US Quarterly GDP Forecasts and Nowcasts
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
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