US GDP miss as personal consumption declines

Following the fourth quarter annualised US GDP miss earlier, ZeroHedge has pointed out that this decline is off the back of falling personal consumption:

Personal Consumption Expenditures, showing a gradual and consistent decline over the past three months as it was revised relentlessly lower, dropping from 1.52% in the first revision, to 1.47% in the second, to 1.28% in the final. Offsetting this was a jump in Fixed Investment which rose to 1.69%, the highest since Q3 2011. Supposedly this implies that capital spending is soaring, when in reality companies continue to curb CapEx plans, instead focusing on short term shareholder gains such as buybacks and dividends, which is to be expected in the absence of any actual end-demand.


Markit's Chris Williamson:

The first quarter is looking far better than the fourth quarter of last year, and GDP is likely to have rebounded strongly. Official data available so far this quarter have shown surprisingly strong growth of manufacturing output, employment and retail sales, which the business surveys suggest continued into March, albeit with signs of consumers’ appetite to spend having been dented in March due to worries about fiscal policy.

The OECD’s estimate of annualised growth of 3.5% for the first quarter therefore looks reasonable in the light of the available data. If confirmed by the official data, attention will increasingly focus on the timing of the Fed’s exit from its current asset purchase programme. The OECD noted in its updated near-term outlook that ‘The point where the costs of further quantitative easing (QE) outweigh the benefits is likely to be within sight, but skilful judgement will be required to gauge the speed at which asset purchases can be phased out.’