The U.S. economy began this year on a weak footing, based on the recent hard economic data. Despite the solid sentiment seen amongst businesses and consumers, real GDP expanded in the first quarter at the slowest rate in three years, rising at an annual rate of 0.7 percent. Consumer spending growth decelerated significantly, especially due to unusually warm weather in the first quarter that impacted utilities spending. But a strong rate of business investment growth and a possibly temporary drag from inventories and utilities spending imply a strong rate of growth in the coming quarter, said Nordea Bank in a research report.
However, the real GDP growth is expected to rebound in the second quarter, much like the pattern seen in recent years. The economy is expected to expand to about 3 percent annual rate in the June quarter. The underlying trend pace of the U.S. economy appears to be about 2 percent annually, consistent with the average growth rate in the nearly eight-year growth and close to the economy’s potential growth pace of 1.8 percent. The weak pace comes from trends that began before the Great Recession and are continuing largely unabated, stated Nordea Bank.
Some of the upbeat confidence seen in recent solid business and consumer confidence indicators are likely to spill over to the real economy. Ongoing strong job growth and stronger wage rises are expected to underpin consumer spending. Business investment, which is supported by solid global growth and favourable financial conditions, already appears to be rebounding. But because of the sharp rise in mortgage lending rates at the end of 2016, the recent solid expansion of residential investment is expected to lose some momentum later in 2017, noted Nordea Bank.
“Overall, we expect real GDP growth of around 2¼ percent in 2017 and 2018, with monetary policy becoming less and fiscal policy more expansionary”, added Nordea Bank.
The material has been provided by InstaForex Company – www.instaforex.com
May 17, 2017 at 04:28AM
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