GDP: Deja Vu But Too Weak To Ignore
eFXnews | Apr 29, 2015 03:07PM ET
As the US economy only expanded by 0.2% in 1Q, coming in below consensus expectations of 1.0%, Bank of America Merrill Lynch (NYSE:BAC) notes that this is the exact same story as last year — the consensus was for low-1% and the first estimate of GDP was 0.2%.
"But last year, the data were subsequently revised even lower to -2.1%. And, it was easier to explain away the weakness from abnormally harsh winter weather and peculiar swings in a few of the components of growth. While there are “special factors” this year as well, including a port shutdown on the West Coast and poor weather in February, we are less comfortable dismissing these data," BofA adds.
"There were two big shocks to hit the economy at the beginning of the year — the effect from the plunge in oil prices and rapid appreciation of the dollar — which are clearly serving as a bigger drag to growth and showing up earlier than we had expected. The strong dollar should remain a drag on growth in the coming quarters, but we expect the oil shock to turn neutral as consumer spends spend some of their savings from gas," BofA clarifies.
"Considering these factors, we have revised down our forecast for 2Q GDP growth to 2.5% from 3.5% previously. We are holding with our forecast of 3.2% growth in 3Q and 4Q. However, for the year, growth is now averaging 2.4%, matching the pace last year. The long awaited pick-up in growth remains a forecast," BofA projects.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.