US GDP slowed, but overall positive momentum continues – NAB

FXStreet (Delhi) - Research Team at NAB, note that that the U.S. GDP growth slowed in the September quarter to 0.4% qoq or 1.5% annualised, but while growth in most of the major categories slowed, the details were more positive.

Key Quotes

“A large part of the slowdown was due to an inventory correction which will be transitory. Consumption growth remained strong, as did housing investment, while business fixed investment and government demand continued to expand. As a result, domestic final demand remained strong, growing at a 2.9% annualised rate in the quarter.”

“The major surprise was that the net exports detraction from growth was only minimal, with both export and import growth slowing in the quarter.”

“Real private consumption slowed to a still strong 0.8% qoq from 0.9% the previous quarter. Both export and import growth slowed in the September quarter. Exports over the last year have managed to grow by 1.5% qoq despite the strong appreciation of the U.S. dollar and a lacklustre world economy. Import growth has, however, been stronger, again reflecting the U.S. dollar appreciation (which improves the competitiveness of importers) and reasonably strong U.S. domestic demand.”

“However, we expect that the economy will continue to grow at a solid pace given the strong underlying momentum in consumption and residential investment. The drag on business investment from lower oil prices should slow as prices stabilise, although investment from businesses exposed to the U.S. dollar (particularly in manufacturing) will continue to come under pressure. Easing lending standards are also likely to continue to be a positive factor.”

“Moreover, the headwind from fiscal policy seems well and truly past. This week’s federal budget deal (still subject to Senate approval, but this appears almost certain to be given) not only provides a small fiscal boost, but also removes the tail risks around government shutdowns and default at least until 2017.”

“While our outlook for the economy is essentially unchanged, due to the slightly lower than expected September quarter result the forecast for 2015 has been lowered from 2.5% to 2.4%.”
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