In the advance estimate of Q1 GDP, the BEA estimated that the US economy grew by a tepid 0.2% q/q saar pace. Overall, this is yet another weak Q1 GDP print, repeating the pattern in recent years. Since 2010, the average rate of Q1 real GDP growth has been 0.6%, versus an average of 2.9% in the remaining three quarters.
While we can point to one-off factors of European sovereign debt crises and two harsh winters, the repeated pattern of soft Q1 growth will fuel skepticism about the process by which the BEA seasonally adjusts the GDP data.
The important question for now is whether we see this slowdown as largely transitory or more permanent in nature. Barclays says "Our view is that most of the shortfall in activity relative to our expectation is related to transitory factors like adverse weather and the West Coast port strike, and we expect a bounce back in growth to 3.0% in Q2 driven by a solid 3.5% rise in personal consumption."
However, some of the weakness in structures investment and net trade is likely to persist as the effects of a stronger dollar and lower oil prices constrain activity in these sectors of the economy over time. Hence, headline growth is likely to remain moderate this year and next at 2.6% and 2.5%, respectively, on a calendar year average.
"Underneath, we are more constructive on private consumption given the momentum in labor markets." adds Barclays
