US economy likely slowed in Q1, GDP seen to rebound in Q2 to 3.1 pct

US economy likely decelerated in the first quarter of 2016, given the weak consumption data along with the soft inventories and exports data, according to Societe Generale. The US economy is expected to have grown just 0.2% in Q1. Real consumption is expected to have grown only 1.4% in spite of tailwinds from lower oil prices, labor market and recovery in equity prices, added Societe Generale. Real consumption likely subtracted nearly one percentage point from the GDP.

Inventories and trade balance are expected to have knocked off 0.3% and 0.9% respectively. Meanwhile business investment probably contributed 0.4%, while government spending and residential investment likely contributed 0.4% and 0.5% respectively.

The weakness in the first quarter growth seems to be due to inventories and global trade patterns, rather than weather. These distortions are expected to have knocked off two percentage points from Q1 GDP on average.

“We anticipate a reacceleration of growth in Q2 to 3.1%, with annual growth at 1.9% in 2016”, said Societe Generale.