In this Outlook, we concentrate on the U.S. inflation outlook, which is not rosy. We also deal with the recent ‘flash-crash’ of the Japanese yen and provide GDP growth forecasts as well as updates to China’s debt stimulus. We end with recommendations for preparation for businesses and investors, as usual.
GDP Forecasts
(GnS Economics, OECD, Atlanta Fed, Statistics Finland, Q-to-Q). The first estimate indicated that the U.S. GDP had grown by just 0.4% in Q1, while our last nowcasts indicated that it would have grown by 0.7%. So, this was a big miss, actually our biggest for a very long time. It seems that the main culprits for this negative surprise were higher than usual imports (which decrease net exports, which decrease GDP) and declining inventories. Consumer spending on services continued to be robust. It’s interesting to see, how long can this robustness continue, considering that interest paid on credit card loans continues to push to never-before-seen heights,1 and that inflation is re-accelerating (see our analysis from below).
