Consumer expenditure and business capex likely to account for US Q1 GDP contraction

The US Q1 GDP growth is broadly projected to be adjusted higher but will continue to evidence contraction in the first quarter.

The Q1 GDP growth number is projected to be revised up from a -0.7% annual rate to -0.2%, driven by upward revisions to consumer spending and business investment.

Revised US GDP data for Q1 may also provide further colour on the extent to which the apparent US weakness in Q1 is purely an issue of measurement.

We foresee a modest rising adjustments to a flat reading on the quarter overall just ahead of the consensus, largely reflecting upward revisions to retail sales data that suggest that consumer spending in Q1 was stronger than initially estimated.

Despite this an impression of a soft patch in Q1 is likely to remain intact.

For now, risks to our 2.5% forecast for GDP growth in Q2 are mainly seen on the upside.