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US GDP: Further slowing likely in Q1 – Wells Fargo

Data released On Thursday showed real GDP in the United States grew 2.1% (annualized rate) during the fourth quarter of last year, in line with expectations. Analysts at Wells Fargo, look for further slowing in Q1-2020. According to them the underlying fundamentals of the economy generally remain solid.

Key Quotes: 

“The year-over-year growth rate, which smooths out the volatility inherent in the sequential growth figures, and is reflective of the underlying trend pace of growth, came in at 2.3%.”

“Net exports made an eye-popping 1.5 percentage point contribution to overall GDP growth in the fourth quarter. However, this large positive contribution essentially reflects the apparent collapse in real imports in Q4. Importers pulled their purchases forward into earlier in the year in order to evade the tariffs that were originally scheduled to take effect in December.”

“We look for the economy to decelerate further in Q1-2020. Specifically, imports should bounce back after their tariff-induced distortion in Q4. In addition, the halt to Boeing’s production of the 737 MAX should also weigh on GDP growth in the first quarter of the year.”

“The underlying fundamentals of the economy remain solid, in our view, and we do not look for an overall contraction in the economy this year.”

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