U.S. economy to rebound in H2, GDP growth to average around 1.5 pct in 2016

The second quarter economic growth of the U.S. was marginally revised downwards to an annualized rate of 1.1 percent from the advance estimate of 1.2 percent. It affirms that the U.S. economy was performed weakly in the first half of this year, dragged on by headwinds from external trade, business investment and inventory drawdowns.

Some data that were released more recently have been on the weak side of expectations. The U.S. economy added 151,000 jobs in August, below expectations, whereas the jobless rate remained at 4.9 percent. The annual growth in average hourly earnings dropped from 2.7 percent to 2.4 percent.

The ‘hard’ data continues to indicate towards a possible rebound in growth in the third quarter; however, survey shown less convincing evidence. Especially, the ISM manufacturing survey dropped in August to 49.4, entering the contraction level, whereas the broader ISM non-manufacturing survey also dropped from July’s 55.5 to 51.4 in August.

However, growth is still likely to rebound in the second half of 2016, aided by persistent strong growth in private consumption and an unwinding of the drag to overall growth from inventories, said Lloyds Bank in a research note.

However, business investment is expected to remain weak if companies assess the economic outlook as being too uncertain, including the likely effect of the upcoming Presidential Election. The robust dollar and weak global activity might also restrict export growth.

“Overall, we look for US GDP growth to average about 1.5 percent this year, before rising above 2 percent in 2017”, added Lloyds Bank.