US: Downside risk to the initial Q4 GDP estimate - BBH

The US provides a second look at Q4 GDP, and slightly softer consumption warns of downside risk to the initial 2.6% estimate, according to analysts at BBH.  

Key Quotes

“Two-thirds of the way through Q1 18, the report is too historical to matter much.  Both the Atlanta Fed's and NY Fed's GDP trackers have converged to 3.1-3.2% SAAR for the current quarter's growth.”

“The faster growth that is anticipated seems to bump up against changing composition.  January retail sales were weaker than expected and the December series was revised lower.  Retail sales account for a little less than half of the personal consumption expenditures.  The January PCE is expected to slow to 0.2% from 0.5% average monthly gain H2 17 and would be the smallest increase since last August.  Industrial output also slowed in January after a strong (perhaps spurred by rebuilding from storms) Q4.  The trade balance deteriorated sharply in Q4, and the advance report for January merchandise trade is expected to show little improvement.”

“In addition to January 2017, there was only one other month last year that the core deflator rose by 0.2%.  This has two implications.  First, even a 0.3% increase in the core deflator in January 2018 will leave the y/y rate steady at 1.5%.  Second, an acceleration of price pressures, on which so much seems to ride, is subtle at best, and slow in any event.  The monthly increase average 0.13% in 2017 and 0.15% in 2016.  It averaged 0.11% in H1 17 and 0.14% in H2 17.”