US Growth In Good Zone For Equities (2 min read)

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).

Latest US Quarterly GDP Forecasts and Nowcasts

Nowcast bar chart
Nowcast table

(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)

Sign up to the Macro Hive newsletter here:

Sign Up For the Free Newsletter