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 tumbles to surprise 1% fall in Q1

US GDP tumbles to surprise 1% fall in Q1

US GDP took an unexpectedly severe tumble in the first quarter according to the second and more complete cut of the data, falling 1% over the period, a much steeper fall than the initial estimate of a 0.1% gain.

While the slide was also much deeper than the median forecast of a 0.5% fall, markets were happy to ascribe the difference to one-off factors, with the S&P 500 climbing 0.27% in early trading.

‘The downward revision is almost entirely because inventories were a much bigger drag on growth than previously thought,’ said Paul Ashworth, chief US economist at Capital Economics.  

‘Inventories subtracted 1.6% from overall GDP growth in the second estimate, compared with a more modest 0.6% in the first estimate. But that bigger first quarter drag means that we are likely to see a bigger bounce back in the second quarter.’

Having moved out over the course of the morning, benchmark US treasuries were marginally tighter, with the 10-year down from a day high of 2.44% to 2.43%.

Following one of the bitterest winters on record in the US and much more positive recent data, Capital Economics said its forecast of second quarter US GDP growth of around 3.5% remained unchanged.

Markit chief economist Chris Williamson added: 'The likely rebound in the economy in the second quarter will fuel expectations that the Fed may start to raise interest rates earlier than the current widespread expectation of a June-July hike. However, the true acid test of the resilience of the economy to the taper so far, and its ability to cope with higher interest rates, will be how the economic data flow settles after the second quarter rebound.

'That’s something which won’t become clear until the fall.'

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: The adviser that tempted Robin Minter-Kemp on board

Profile: The adviser that tempted Robin Minter-Kemp on board

It is rare to meet an impassioned individual who is willing to bang the drum for investment advisory right now

Wealth Manager on Twitter