BNP i Q1 for USA: Det går stadig godt

S GDP: It’s still good

 Fra BNP Paribas:

*     Economic activity for the first quarter proved to be relatively good, despite fears that the slowing in consumption and residual seasonality would have more pervasive effects. All told, the economy grew by 2.3% q/q saar in Q1 2018, in line with our expectations and a bit north of consensus.
*     The headline number did mask, however, some of the weak points in the report which included a snapback in goods consumption and no growth in residential investment.
*     The impressive bits in the report came from services consumption which held up well at 2.1% q/q saar while business investment registered an impressive 6.1% quarterly gain on the back of solid growth in the previous four quarters. Moreover, inventory building added about 0.4pp to the headline growth number.
*     Trade was also a positive contributor to the month’s print with a gain of 4.8% q/q saar in exports and a mild 2.6% gain on the import side – overall net exports contributed about 0.2pp to topline growth.
*     In terms of some of the detailed highlights, it was an impressive 12.3% q/q saar pop in structures investment that helped prop up business investment, while equipment and intellectual property investment were solid at 4.7% and 3.6%, respectively.
*     Meanwhile, it was the 3.3% q/q saar drop in durable goods consumption on the back of the outstanding 13.7% q/q saar gain in Q4 that weighed heavily on goods consumption. Non-durable goods consumption was a paltry 0.1%, but also on the back of an outsized gain in Q4 (4.8% q/q saar).
*     On the prices front, the GDP price index came in at 2.0% q/q saar (down from 2.3% q/q saar in Q4), in line with expectations, while core PCE rose 2.5% q/q saar (up from 1.9% q/q saar in Q4), in line with expectations.
*     First quarter GDP, which is typically the weakest quarter of the year due to poor seasonal adjustment from the BEA (residual seasonality), showed that domestic demand slowed by a lot to just 1.6% in Q1 after an outsized gain of 4.5% in Q4 last year. However, thanks to better inventories and firm exports, overall growth was pretty decent.
*     With the individual tax cuts hitting pay checks in late Q1, we expect the individual income gains to result in stronger spending in the quarters ahead. We are already seeing strong business investment growth, with our view that there is stronger growth ahead as businesses implement capex plans on the back of the tax reform package which included, among other things: lower taxes, accelerated depreciation for new investments and the freeing up of cash held abroad.
*     Ahead of next week’s FOMC meeting, we expect the Fed to digest this report as positive. While the Fed will likely be in a holding pattern at their March meeting (See US FOMC – why so accommodative), we expect their plans for a gradual removal of accommodation to remain on track. Growth is still above trend, and with this likely to be the weakest quarter of the year, we think the Committee is on track to deliver three more rate hikes this year.