US: Moderation in growth wasn’t really all that severe - CIBC

Growth numbers for the US economy came in better-than-expected today. A resilient American consumer was the most significant driver of growth, explained analysts at CIBC. 

Key Quotes: 

“Despite the negative tone to economic news and financial markets late last year, the anticipated moderation in US growth wasn’t really all that severe. That said, the better than expected 2.6% annualized growth print for Q4 looks likely to be followed by a much softer tone for Q1, given the weakness seen in core capital goods orders, the cooling in consumer appetites in December, and a likely slower pace for inventories. That prospect, and evidence of a slowing abroad, should be enough to keep the Fed on hold in the first half, particularly with today’s news on inflation remaining benign.”

“The upside surprise in today’s print wasn’t enough to change our 2019 growth forecast of 2.2%. While Q1 growth could be less than half that pace, sustained employment momentum could then give enough a lift to spring performance to nudge the Fed into a final quarter point rate hike, one we see as reversed in 2020 as fiscal policy turns into a headwind.”

“The positive surprise today has supported USD gains and has seen yields rise, but the market remains underpriced for even a single Fed hike in 2019.”