The U.S. economy grew by an annualized pace of only 0.5% in Q1 2016. That is comparable to around 0.1% q/q. It is not only low but below expectations. However, there are a few silver linings. For example, the deflator surprised to the upside with 0.7% instead of 0.6% expected. Also the Core PCE Price Index that comes out with the publication was at 2.1% in Q1, better than expected and above the Fed’s 2% inflation target. Perhaps the inflation situation is not too shabby.
In addition, looking into the details also paints a slightly brighter image: consumer spending is up 1.9% annualized, better than 1.7% expected. In addition, inventories were a net negative. When there is a draw-down in inventories in one quarter, they are usually replenished in the following one. The Fed also put an emphasis on weak growth now, better later on.
However, investment is also negative. Is it a result of the minor rate hike? It seems a bit unlikely. There is a dearth of investment also in Europe and Japan where rates went below the bottom.
US jobless claims came out better than expected once again: 257K. The moving average continues falling, this time to 256K. This is a separate release.
The first release for US GDP in Q1 2016 was expected to show weak growth of around 0.7% after a “final” read of 1.4% in Q4 2015. This is the first out of three releases.
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