US: Q1 GDP slightly lower than expected

According to the advance estimate, the US economy grew by an annualized 1.8% Q/Q during the first three months of the year, significantly down from the previous quarter (3.0% Q/Q) and below the market consensus (2.0% Q/Q). The details are less pessimistic as government consumption (-5.2% Q/Q) posted a significant drag on growth (-1.09%), while also residential investment (-4.1% Q/Q) and next exports made a negative contribution in the first quarter. However, the drag from net-exports was significantly smaller (-0.08%) than most had expected. Personal consumption (2.7% Q/Q) and non-residential investment (1.8% Q/Q) grew in the first three months of the year, while also the build-up in inventories supported growth (0.93%). Overall, the GDP data are not as bad as the headline figure suggests as there might have been a negative impact from the bad weather and rising energy prices. In the coming quarters we hope to see growth picking up, although government spending might continue to be a drag on the economy in the coming quarters. On Wednesday, Bernanke already suggested that Q1 GDP could be somewhat lower than most had expected, so it was no real surprise for markets.

In the week ended April the 23rd, US initial claims rose by 25 000 from an upwardly revised 404 000 to 429 000, while they were expected to fall back below the 400 000 level. The less volatile four-week moving average jumped higher too, rising from 399 250 to 408 500. The labour department added that the auto shutdowns had no huge effect on the claims. Initial claims are now at the highest level since January, but the week under review included the Good Friday Holiday, which probably distorted figures. Also the higher claims in the previous weeks were probably due to the late timing of Easter and therefore we hope to see the claims trending down again in the coming months. Continuing claims, which are reported with an extra week lag, surprised on the downside of expectations. In the week ended April the 16th, continuing claims fell by 68 000 to 3 641 000, while the consensus was looking for a figure of 3 641 000.

March US housing data continue to surprise on the upside of expectations. Pending home sales rose by 5.1% M/M, while the previous figure was downwardly revised from 2.1% M/M to 0.7% M/M. Regional details show that pending home sales rose in the South (10.3% M/M), West (3.1% M/M) and Midwest (3.0% M/M), while they dropped in the Northeast (-3.2% M/M). After weak housing data in February, the March data are an encouraging sign that the spring selling season took off with a strong starts, which will hopefully be confirmed by strong data in the coming months.