Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

US GDP crashes to 0.1% in snowbound Q1

US GDP crashes to 0.1% in snowbound Q1

US GDP grew just 0.1% in the first quarter, the slowest rate of growth since the end of 2012, deeply disappointing expectation of 1.2% and down from 2.6% in the final three months of 2013.

Economists had estimated that the bitterly cold winter would knock 1.4% from quarterly GDP – deferring activity which, at least partially, should be carried through to the second quarter.  

‘As the weather has returned to seasonal norms, we have already seen a marked improvement in the monthly data for March,’ said Paul Ashworth, chief US economist at Capital Economics.

Of the 52 US snow storms since 1952 which earned the classification ‘high impact’ – which measures the number of people impacted in addition to their severity – five occurred during this winter.

Much of the difference between forecast and actual growth was due to an unexpected 5.5% fall in capital investment however, and no gain in government spending following the Q4 shut down.

Consumption growth surprised on the upside at 3%, boosted by a 4.4% gain in spending on services related to the Affordable Care Act prompting many to buy insurance policies.

‘That will generate another big gain in spending at the start of the second quarter too,’ added Ashworth. ‘Overall, disappointing news on first-quarter GDP growth, but it was principally due to the weather.

‘We anticipate that second-quarter GDP growth will rebound to 3.5% and we don't expect these figures to affect the pace of the Fed's QE taper, particularly not when conditions in the labour market appear to be strengthening.’  

Meanwhile David White, a trader at Spreadex, said the data will test bulls' confidence but drew comfort from the fact the Dow was holding firm at the 16,530 level in the minutes after the opening bell.  

'Since the equity market is hardly in freefall as a result of the number, investors might take solace from the crowd that the consequences of the event aren’t yet biting,' White said.  

'But the session is far from over yet, and traders will likely be more vigilant of taking on risk today than most others, waiting to see how flows direct prices.'  

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play JPM’s Negyal: Back divis to temper EM volatility

JPM’s Negyal: Back divis to temper EM volatility

Omar Negyal, co-manager of the JPMorgan Global Emerging Markets Income trust, says a dividend approach to emerging markets reduces the volatility of investing in the asset class.

Play WMR: Why Russia will lose this war

WMR: Why Russia will lose this war

Author and journalist Adam Lebor believes a perfect storm is brewing when it comes to the Russian economy. .

Play WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

WMR: Gerard Lyons warns Asia is the real risk, not Russia & Ukraine

Chief economic adviser to London mayor Boris Johnson outlines the geo-political risks in Asia and explains why the risk of another eurozone crisis must not be underestimated.

Your Business: Cover Star Club

Profile: 'new normal' now is as dangerous as when it was applied to tech

Profile: 'new normal' now is as dangerous as when it was applied to tech

7IM's CIO Chris Darbyshire says he has been re-energised by his new role, but has little time for 'new normal' doom-mongers

Wealth Manager on Twitter