First Quarter Growth Strong, No Signs Of Recession
The GDP forecast for the first quarter is now predicted to be anywhere between 1 and 2% as there were positive earnings. Some economists had predicted a near to zero growth forecast, and with the new median tracking data last week there are no signs of recession. The possible reasons attributed to the near-zero growth forecast include the 5-week government shutdown in the early part of the first quarter and the lack of data due to the shutdown which may have led to fears of a slowing economy and possibly a recession. But now things seem to have picked up, and economists expect a growth of 2.5%.
Economists’ take on the growth:
Speaking on revising the forecast of the growth many economists said that the first quarter was bound to be shaky due to various reasons including the government shutdown and the bad weather conditions. The stock market also slowed down due to the China-US trade war and a weak global economy. Moreover, the first-quarter is always expected to have a slow growth due to it being a festival season.
Chief economist Stephen Stanley said, “Just the evolution of forecasts more broadly maybe two months ago people were talking about a recession. The reasons are pretty evident. We had the restraint from financial market tightening. We had the government shutdown which was a pretty significant blow to confidence particularly given how long it lasted compared to what people were expecting.” A Goldman Sachs economist said, “Reflecting the upward revisions to retail sales and faster than expected construction spending and business inventories we boosted out Q1 GDP tracking estimate by four-tenths to 1.2%.”
After many companies released, their first-quarter earnings economists are increasing their forecasts as they get into the second quarter. Also, with the positive indications of a trade deal with China, there is more optimism for the coming quarters. With the GDP report being released today Chief market analyst Marc Chandler said, “We already know the first quarter is stronger than people expected. We might get some headline effect, but we’re not going to learn a lot we already don’t know.”
Markets are happy with the indications of China’s manufacturing surveys being positive, and U.S. ISM manufacturing also showing great improvements, with the national factory activity index increasing from 54.2 to 55.3 in February. Investors who were worried about a slowdown and a possible recession will heave a sigh of relief at least for the time being.