Analysts Cut Their Q2 GDP Forecasts Even More After Today's Ugly Report
Bloomberg - Apr 30, 2015
The U.S. economy had a disappointing start to 2015, data released Wednesday showed. Now, a solid second quarter is looking less and less likely as well, clouding the outlook for Federal Reserve policy makers hoping to raise interest rates later this year.
The U.S. Bureau of Economic Analysis reported that gross domestic product expanded at just a 0.2 percent seasonally-adjusted annualized rate in the first quarter. It was below the 1 percent median forecast of economists surveyed by Bloomberg.
After the release, Macroeconomic Advisers cut its GDP growth tracking estimate for the second quarter to 2 percent from 2.2 percent. Its initial forecast, published April 7, was 2.8 percent. In an email to clients, the forecasting firm cited "inventory investment, which was well above expectations, and which points to a larger decline in the second quarter."
Inventories rose at a $110 billion pace in the first quarter, marking the biggest build since the third quarter of 2010.
"Given the fact the various regional purchasing manager surveys have been weak in April, it appears that producers will allow inventory positions to run off," Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, said in an email to clients. "This tells us that current-quarter growth is likely to run around 2.5 percent, not the 4 percent snap-back we had previously been anticipating."
