Is This Summer's GDP Slowdown Temporary?

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Forecasters are looking for the U.S. government to report on Friday the U.S. expanded at a healthy +3.0% pace in Q1 after a +0.4% gain in Q4. 

Don’t put too much stock into this backward-looking and preliminary real GDP report.

Yet, a few signs of another mid-year slowdown are already evident

  • Softer consumer spending,
  • A barely growing manufacturing industry,
  • A slow March pace of private-sector hiring,
  • Recent softness in existing home sales

The same forecaster’s outlook for Q2 shows growth slowing to +1.8%.

Sequestration cuts have yet to kick in.

The chart below shows a real GDP view of the last 10 years.  We now have a real economy that is +2.7% greater in size than in 2008.

 

My RTI questions for you: 

A similar seasonal pattern occurred in 2012 and 2011. 

Is a summer seasonal slowdown a permanent feature of our economy now, or is this a more serious event in the 2013 context, given sequestration? 

Will the stock market care this time around, or is the overall higher level of real GDP going to push the S&P 500 to new highs?

Zacks Investment Research



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