Daily Insight
Group Economics Macro & Financial Markets Research
30 October 2015
US in a lower growth gear
US GDP growth weakens; though inventories were a sharp drag
Maritza Cabezas
Report could raise concerns of more dovish FOMC members
Senior Economist
Upcoming job numbers will be critical for rate decision
Tel: +31 20 343 5618 maritza.cabezas@nl.abnamro.com
US GDP growth weakens The US economy went down a gear in the third quarter. The first estimate of GDP growth was only 1.5% in the first quarter after growing 3.9% in the second quarter. The growth in consumption remains the bright spot, with a contribution to GDP of 2.2%. Inventories, a volatile category, stripped 1.4 percentage points off GDP. This could be a reflection of the weakness in manufacturing and the sharp fall is likely to be temporary. The contribution of the external sector was neutral. On average, the contribution of net export growth has been a drag to growth so far this year, and this is likely to continue going into the next quarter as a result of the strong dollar and lacklustre world trade growth. Meanwhile the contribution of fixed investment growth was also weak, particularly investment in structures. Investment in mining structures remains depressed, given the low level of oil prices.
US GDP growth softer than expected
6 4 2 0 -2 -4 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2013 2013 2014 2014 2014 2014 2015 2015 2015 Consumption
Investment
Government
Inventory
Net trade
GDP growth
Source: Thomson Reuters Datastream
Insights.abnamro.nl/en
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Daily Insight - US in a lower growth gear - 30 October 2015
Consumption growth to remain strong going forward US consumer spending is likely to remain strong going forward, and this should keep the economy in recovery mode despite external drags. The gains for US household disposable income as a result of lower oil prices is a significant positive. Continued job gains – even at a slower pace – and rising net worth are also likely to be supportive. We expect the economy to expand in the coming quarters, but the pace is unlikely to be very strong.
Fed and the slowing economy This GDP report could raise concerns for the more dovish FOMC members. At the forefront of past rate hike cycles the economy had been growing at well-above trend rates. The Fed in its October statement mentioned that it expects the economy to expand at a moderate pace. Average growth in the past three quarters was 2%, while in 2013 and 2014 GDP growth was around 2.5%. The Fed will therefore not find much comfort in this GDP report. FOMC members will likely focus on the next two job reports, which would need to show a significant improvement compared to the last two reports for the committee to feel confident enough to raise interest rates. Our base case is that the Fed will wait until next year.
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Daily Insight - US in a lower growth gear - 30 October 2015
Day
Date
Time
Country
Key Economic Indicators and Events
Monday Monday Monday Monday Monday Monday
26/10/2015 26/10/2015 26/10/2015 26/10/2015 26/10/2015 26/10/2015
09:00:00 06:30:00 09:00:00 10:00:00 15:00:00 15:45:00
CH NL CH DE US EC
Total Sight Deposits bn Producer confidence manufacturing - index Total Sight Deposits bn Ifo - business climate - index New homes sold - % mom ECB announces weekly QE details
Tuesday Tuesday Tuesday Tuesday Tuesday
27/10/2015 27/10/2015 27/10/2015 27/10/2015 27/10/2015
10:00:00 10:30:00 13:30:00 14:00:00 15:00:00
EC GB US US US
M3 growth - % yoy GDP - % qoq New durable goods orders - % mom S&P/Case Shiller house price index Conference Board cons. confidence - index
Wednesday Wednesday Wednesday Wednesday
28/10/2015 28/10/2015 28/10/2015 28/10/2015
09:30:00 19:00:00 19:00:00 21:00:00
SE US US NZ
Thursday Thursday Thursday Thursday Thursday Thursday Thursday Thursday
29/10/2015 29/10/2015 29/10/2015 29/10/2015 29/10/2015 29/10/2015 29/10/2015 29/10/2015
00:50:00 09:55:00 09:55:00 11:00:00 13:30:00 14:00:00 15:00:00 20:00:00
Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday Friday
30/10/2015 30/10/2015 30/10/2015 30/10/2015 30/10/2015 30/10/2015 30/10/2015 30/10/2015 30/10/2015 30/10/2015 30/10/2015
00:30:00 00:30:00 11:00:00 11:00:00 11:00:00 11:30:00 13:30:00 13:30:00 14:45:00 15:00:00
Period
Latest outcome
Consensus
ABN AMRO
Oct
467b 2.4
Oct Sep
108.2 -11.5
107.9 -0.6
108.1 0.1
Sep 3Q A Sep Aug Oct
4.9 0.5 -1.2 0.1 97.6
5.0 0.6 -1.4 0.2 102.5
-1.5 103.0
Policy rate - % Policy rate - % (lower bound) Policy rate - % (upper bound) Policy rate - %
Oct 28 Oct 28 Oct 28 Oct 29
-0.35 0.00 0.25 2.75
0.00 0.25 2.68
-0.35 0.00 0.25 2.75
JP DE DE EC US DE US MX
Industrial production - % mom Unemployment - % Unemployment change - thousands Economic sentiment monitor - index GDP - % qoq annualised CPI - % yoy Pending home sales - % mom Policy rate - %
Sep P Oct Oct Oct 3Q A Oct P Sep Oct 29
1.0 6.4 -5 105.9 1.5 0.3 -2.3 3.0
-0.7 6.4 -4.1 105.0 1.8 0.2 0.5 3.0
JP JP JP EC EC EC RU US US US US
Policy rate - % Unemployment - % CPI - % yoy Core inflation - % yoy CPI - % yoy Unemployment - % Key rate % PCE deflator core - % mom PCE deflator core - % yoy Chicago Fed - business confidence - index Univ. of Michigan cons. confidence - index
Oct 30 Sep Sep Oct A Oct Sep Oct 30 Sep Sep Oct Oct F
80.0 3.40 0.2 0.9 -0.1 11.0 11.0 0.11 1.3 48.7 92.1
3.40 0.0 1.0 0.0 11.0 10.8 0.17 1.4 49.6 92.7
105.1 2.1 0.1 0.5
10.9 10.5
93.0
Source: Bloomberg, Reuters, ABN AMRO Group Economics (we provide own forecasts only for selected k ey variables and events)
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