US: 2.5% gain is most likely in Q2 GDP - Westpac

Analysts at Westpac are estimating the US Q2 GDP to post a gain of 2.5% after Q1's 1.4% annualised outcome was a disappointment for a number of reasons, but most notably because of the weakness evident in consumption.

Key Quotes

“To an extent this was due to unseasonal weather which limited demand for services – two-thirds of total consumption.”

“However, durables and non-durables demand also experienced a material deterioration in Q1. Come Q2, the demand pulse for these categories is again likely to underwhelm. Partial data also suggests services will struggle to accelerate materially. Given confidence and jobs growth, spending should be much stronger.”

“Business investment rebounded in Q1, but Q2 will see slower growth; the public sector's contribution will also be negligible. All told, a 2.5% gain is most likely. Risks are skewed to the downside and centred on the consumer.”