US labour market in December was best performer of the year adding as much as 297,000 jobs, however that might not prevent weakness in GDP in the fourth quarter. Despite job gains, US manufacturing sector might have contracted for the quarter, with ISM manufacturing number strongly pointing at contraction.
According to Barclays' research -
"Importantly, a large part of the slowdown in the Q4 print, relative to the expectations, owes to idiosyncratic factors or to temporary dips in the data that analysts at Barclays do not view as durable rather than to a change in trend GDP growth.
Other parts such as our large downward revision to export growth and equipment investment are consistent with our longer-run view on
Manufacturing, which we expect to trend down to sideways for some time. On consumption, about 0.4pp of the decline in our tracking estimate owes to unusually warm weather in October and November, which sharply lowered consumption as households reduced their expenditures on home heating relative to a normal winter.
We expect December utilities consumption to remain weak but spending on this category should return to normal this year as the weather seems to have turned seasonably cool in January. Outside of utilities, October consumption of goods was also very weak, falling 0.1% on the month, but this weakness abated in November, where goods consumption jumped upward sharply, increasing 1.0% on the month. The rise in goods consumption was sufficiently strong to overcome the drag from services, leading to a 3.6% m/m increase in overall consumption. Although the downturn in October weighs heavily on the fourth quarter growth rate, such declines in spending are not unusual and do not automatically imply a step down in trend growth."
Real time measure of GDP, from Federal Reserve Bank of Atlanta, fourth quarter GDP is expected to be just 0.6% as of January 15th, which stand lower of 0.8% measured on a week before. According to consensus, real time consumer spending is likely to drop from 2% to 1.7%.
Market, which is already being battered by bears this year, might derail further if signs emerge that world's largest economy is slowing down.
