US GDP Growth Will Not Reach 2% in 2016
Reaction comment from Brian Coulton, Chief Economist at Fitch Ratings, on US Q2 GDP figures released on July 29th 2016
Today’s numbers are a disappointment, both in terms of Q2 itself (growth of 1.2% annualised versus 2.1% in Fitch’s latest Global Economic Outlook, Bloomberg Consensus 2.5%) and the downward revision to Q1 (from 1.1% to 0.8%). While consumer spending rebounded as expected and external demand picked up, investment weakened further and inventories were a big drag.
Business investment excluding oil was flat again and firms’ caution about the future also seems to have taken a toll on inventory behaviour. The fall in residential investment was quite surprising though, given the expansion in housing starts in Q2. The big cuts to US 2016 capex forecasts we made in the spring look to be panning out. GDP growth is clearly not going to reach 2% this year.