US GDP: Significant negative surprise - Lloyds

Analysts from Lloyds Bank point out that today’s US Q2 GDP data makes a near-term interest rate hike from the Federal Reserve look unlikely.

Key Quotes:

“The initial reading of US GDP for 2016Q2 came in much weaker than expected at 1.2% annualised (CON:2.5%). This was only a modest improvement on the downwardly revised anaemic 0.8% (ann) growth rate seen in Q1.”

“Much of the downside surprise was due to a fall in inventories rather than weak final demand and as such is likely to be temporary.”

“It is still a significant negative surprise, which makes a near-term interest rate rise look unlikely.”

“The detail of the report was mixed but painted a less negative picture than the weak headline growth rate suggested. Economic growth continued to be driven by consumer spending, which expanded at a very rapid 4.2% annualised rate. In contrast both business investment and housing investment contracted. Net exports made a small positive contribution to growth due to a rapid rise in export growth.”