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8 Feb 2016
US 2016Q1 GDP forecast revised higher – Nomura
Research Team at Nomura, suggests that in light of recent release of the US preliminary estimate of 2015 Q4 GDP and other incoming data, they have readjusted their near-term growth outlook.
Key Quotes
“The bottom line is that we have revised our Q1 GDP forecast slightly higher on more personal consumption and residential investment, and less drag from inventories. But we now see further drag in the industrial sector, as the headwinds such as lower oil prices and the strong dollar are unlikely to dissipate in the near term.
Personal consumption and residential fixed investment came in stronger than our expectations in Q4, which suggests better momentum heading into 2016. With gasoline prices likely to remain at low levels—or even trend lower—coupled with steady job and wage growth, we see more room for consumer and housing activity than before.
Manufacturing activity, in particular heavy industries, has been severely hampered by declining oil prices and the strong dollar. Investment in oil and gas drilling activity declined further in Q4, and the recent oil and gas rotary rig count that has fallen by 81 since last year suggests further slowdown in this sector to start the year. But given the already low level of investment in this sector, the negative contribution to growth should be more modest than in the past.
Other parts of the industrial sector seem to be struggling as well. Durable goods orders for core capital goods, a good proxy for capital goods demand, dropped sharply by 4.3%. Moreover, the recent decline in the capacity utilization of the industrial sector coupled with a slowing in exports should constrain business equipment investment. Taking all this into account, we now expect nonresidential fixed investment to decline further in Q1.
Incoming data on inventory suggest further drawdown in Q4, somewhat weaker than the BEA’s assumption in the preliminary estimate, implying less need for inventory adjustment in Q1. Last, we made adjustments to government expenditures, exports, and imports, primarily marking the forecast to incoming data.”
Key Quotes
“The bottom line is that we have revised our Q1 GDP forecast slightly higher on more personal consumption and residential investment, and less drag from inventories. But we now see further drag in the industrial sector, as the headwinds such as lower oil prices and the strong dollar are unlikely to dissipate in the near term.
Personal consumption and residential fixed investment came in stronger than our expectations in Q4, which suggests better momentum heading into 2016. With gasoline prices likely to remain at low levels—or even trend lower—coupled with steady job and wage growth, we see more room for consumer and housing activity than before.
Manufacturing activity, in particular heavy industries, has been severely hampered by declining oil prices and the strong dollar. Investment in oil and gas drilling activity declined further in Q4, and the recent oil and gas rotary rig count that has fallen by 81 since last year suggests further slowdown in this sector to start the year. But given the already low level of investment in this sector, the negative contribution to growth should be more modest than in the past.
Other parts of the industrial sector seem to be struggling as well. Durable goods orders for core capital goods, a good proxy for capital goods demand, dropped sharply by 4.3%. Moreover, the recent decline in the capacity utilization of the industrial sector coupled with a slowing in exports should constrain business equipment investment. Taking all this into account, we now expect nonresidential fixed investment to decline further in Q1.
Incoming data on inventory suggest further drawdown in Q4, somewhat weaker than the BEA’s assumption in the preliminary estimate, implying less need for inventory adjustment in Q1. Last, we made adjustments to government expenditures, exports, and imports, primarily marking the forecast to incoming data.”