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US: Weak trade numbers led to cut in GDP forecasts – Deutsche Bank

FXStreet (Delhi) – Jim Reid, Research Analyst at Deutsche Bank, suggests that the confirmed weaker US trade numbers led our economists to cut their GDP forecasts for Q3 and Q4 with the former reduced from 3.0% to 1.7%, and the latter trimmed from 3.0% to 2.3%.

Key Quotes

“This has the effect of lowering 2015 real GDP growth, as measured on a Q4 over Q4 basis, from 2.6% to 2.1%. They think the recent deterioration in net exports is likely to be long lasting. Slower overseas growth is weighing on the demand for US-based products, and a strengthening dollar is boosting the demand for imports.”

“They have cut 2016 to 2.7% from 3%. With that, they have also pushed out their forecast for a Fed hike to next year, starting in March with a 25bp hike and then followed up in June with another 25bp move. That puts their view more closely aligned with market pricing at the moment, with the probability of a move by March next year currently sitting at 57% while December continues to hover around the mid-30s (currently 36%).”

“Despite the market pricing in a low expectation of a move this year, the Fed’s Williams once again reiterated his call that a hike this year ‘makes sense’, also stating that he expects the tightening process to be the most gradual in the history of the Fed.”

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