Capital Economics: GDP growth likely to underwhelm in 2016

GDP rises 0.5% in 1Q

While some of the headwinds that restricted first-quarter GDP growth will disappear in the second half of the year, it would still take a lot to salvage GDP for 2016, a new report from Capital Economics stated.

According to the "advance" estimate released by the Bureau of Economic Analysis, real gross domestic product — the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes — increased at an annual rate of 0.5% in the first quarter of 2016.

The bureau cautioned that the first-quarter advance estimate is based on source data that are incomplete or subject to further revision by the source agency, pointing to the "second" estimate for the first quarter, which will be released on May 27 and is based on more complete data.

“Although the disappointing start to 2016 was the third consecutive year that growth had been unusually weak in the first quarter, the severe winters in 2014 and 2015 gave us more confidence that growth would quickly rebound in those earlier years,” Capital Economics report stated.

However, “There was no problem with the weather this year and the BEA fixed any potential ‘residual seasonality’ issues in its annual revision last year. Accordingly, there are no excuses for this year – GDP growth was just poor,” it continued. 

Given the new findings from the bureau, the Capital Economics report estimates that GDP growth is on course for another underwhelming gain of around 2% this year.

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