Daily Insight
Group Economics Macro & Financial Markets Research
29 April 2016
US at virtual standstill Nick Kounis Head Macro & Financial Markets Research Tel: +31 20 343 5616 nick.kounis@nl.abnamro.com Aline Schuiling Senior Economist
US economy slowed to a snail-pace in Q1, as cyclical elements slumped…
…growth should improve going forward but will remain lacklustre
US economy does not look to be desperately in need of higher interest rates
Eurozone inflation set to go negative again
Eurozone economic sentiment picked up from lows in April
Tel: +31 20 343 5606 aline.schuiling@nl.abnamro.com
US economy at virtual standstill US GDP slowed to 0.5% qoq annualised in Q1 from 1.4% in Q4, roughly in line with consensus. The US economy has a recent history of weak first quarter data, but weather/other special factors were less important this year. The components of US GDP on the surface look just as bad as the headline. Some of the most cyclical parts of expenditure are contracting. For instance, durable goods consumption (-1.6%) and investment in equipment (-8.6%). The latter is partly due to a slump in mining investment (-86%), which should stabilise over time given the recovery in oil prices. However, there also seems to be underlying weakness, which is consistent with developments in company profits. Other drags on the economy came from net exports and inventories (each stripping off 0.3 percentage points). These drags could also ease given the end of the dollar rally and eventual improvement in manufacturing. There were a number of areas of strength in the report, which prevented the economy from contracting. Economic growth was supported by residential investment (+14.8%) reflecting that the housing market is going strong. In addition, services consumption (+2.7%) remained robust. Overall, the economy should improve going forward, though the overall pace of economic growth is set to remain lacklustre. This does not look like an economy desperately in need of higher interest rates. Eurozone inflation set to go negative again Early German and Spanish data suggest eurozone inflation turned negative again in April. The flash out today should show eurozone inflation coming in at -0.2% yoy following 0% in March. This reflects that the early Easter effect that boosted inflation in March is now unwinding. Later in the year, we expect headline inflation to accelerate back into significant positive territory as energy inflation bounces back. However, underlying inflationary pressures are likely to remain
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Daily Insight – US at virtual standstill – 29 April 2016
very weak given the slack in the economy and subdued wage growth. Indeed, core inflation could decline over the next few months, as the impact of euro strength feeds through. Eurozone economic sentiment picked up in April, but stays at subdued levels Following three consecutive monthly drops, eurozone economic sentiment as measured by the European Commission, picked up April. It rose to 103.9, up from 103.0 in March. Despite its rise, it remained well below the level of the end of last year of 106.6. At its current level it seems consistent with GDP growing at a quarterly rate of around 0.2-0.4%, which is in line with our main scenario for the eurozone economy of ongoing but modest GDP growth. The rise in sentiment in April was broad-based, with sentiment in industry, services and construction all improving. The only exception, was sentiment in the retailing sector, which fell in April. Still, consumer sentiment improved, suggesting that the outlook for private consumption did not deteriorate and that it will continue to be a major driver of GDP growth.
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Daily Insight – US at virtual standstill – 29 April 2016
Day
Date
Time
Country
Key Economic Indicators and Events
Period
Latest outcome
Consensus
ABN AMRO
Monday Monday
25/04/2016 25/04/2016
10:00:00 16:00:00
DE US
Ifo - business climate - index New homes sold - % mom
Apr Mar
106.6 -2
107.0 2
107.1 1
Tuesday Tuesday Tuesday Tuesday
26/04/2016 26/04/2016 26/04/2016 26/04/2016
14:00:00 14:30:00 15:00:00 16:00:00
HU US US US
Base rate -% New durable goods orders - % mom S&P/Case Shiller house price index Conference Board cons. confidence - index
Apr 26 Mar P Feb Apr
1.05 0.8 0.7 94.2
1.06 1.7 0.7 95.9
Wednesday Wednesday Wednesday Wednesday Wednesday Wednesday
27/04/2016 27/04/2016 27/04/2016 27/04/2016 27/04/2016 27/04/2016
10:30:00 16:00:00 20:00:00 20:00:00
EC GB US US US BR
M3 growth - % yoy GDP - % qoq Pending home sales - % mom Federal Funds Target Rate - Upper bound Federal Funds Target Rate - Lower bound Policy rate - %
Mar 1Q A Mar Apr 27 Apr 27 Apr 27
5.0 0.4 3.5 0.50 0.25 14.25
5.0 0.4 -0.1 0.50 0.25 14.25
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
28/04/2016 28/04/2016 28/04/2016 28/04/2016 28/04/2016 28/04/2016 28/04/2016 28/04/2016 28/04/2016
01:30:00 01:30:00 01:50:00 06:30:00 09:55:00 11:00:00 14:00:00 14:30:00
JP JP JP NL DE EC DE US JP
Unemployment - % CPI - % yoy Industrial production - % mom Producer confidence manufacturing - index Unemployment - % Economic sentiment monitor - index CPI - % yoy GDP - % qoq annualised Policy rate - %
Mar Mar Mar P Apr Apr Apr Apr P 1Q A Apr 28
3.2 -0.1 3.6 4.7 6.2 103.9 0.1 0.5 -0.1
3.3
Friday Friday Friday Friday Friday Friday Friday Friday Friday
29/04/2016 29/04/2016 29/04/2016 29/04/2016 29/04/2016 29/04/2016 29/04/2016 29/04/2016 29/04/2016
11:00:00 11:00:00 11:00:00 11:00:00 12:30:00 14:30:00 14:30:00 15:45:00 16:00:00
EC EC EC EC RU US US US US
Unemployment - % GDP - % qoq CPI - % yoy Core inflation - % yoy Key rate % PCE deflator core - % mom PCE deflator core - % yoy Chicago Fed - business confidence - index Univ. of Michigan cons. confidence - index
Mar 1Q A Apr Apr A Apr 29 Mar Mar Apr Apr F
10.3 0.3 0.0 1.0 11.00 0.15 1.7 53.6 89.7
1.8 94.0
1.0 0.50 0.25
2.0 3.5 6.2 103.5 0.2 0.7
10.3 0.4 0.1 0.9 10.88 0.10 53.2 90.1
103.4 0.1 0.9 -0.1 10.3 0.4 -0.1 0.8
90.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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