There were no surprises in US GDP report, with the headline number remaining unchanged relative to the BEA's second fourth quarter estimate of real GDP. Helping lead the way will be continued strengthening in consumer demand.
Indeed, recent retail sales data have been nothing to brag about, but a large portion of the weakness can be attributed to both bad weather and price effects stemming from lower gasoline prices. This has come at the a time when we have also started to see some rotation away from goods-related consumption towards more service-based consumption - a component not well captured in retail sales data, but by far the largest contributor to spending activity.
With the labor market continuing to strengthen, personal income rising at its fastest pace in over two-years and interest rates not far from 2013 levels, this is not the time to rule the American consumer out.
"Our current tracking has real GDP growth slowing to 1.7% (annualized) in the first quarter of this year, but nonetheless still averaging 3.0% for the year as a whole - the strongest annual pace in a decade.
Having said that, headwinds to our forecast still remain. Business investment, particularly in the oil and gas sector, will struggle over the first half of this year, as the impact of lower oil prices starts to filter through to the capital investment side.
Moreover, weak global demand alongside a heighten dollar will help to depress export activity, while the latter is likely to support domestic imports. Overall, we expect net exports to be a small drag on GDP growth for 2015." - TD Economics said in a report on Friday.
