US economy likely slowed in Q1, growth to decelerate to 2.2% for whole of 2016

In the US, growth in employment continued to be strong in Q1 2016. In March, nonfarm payrolls rose 215,000 and averaged more than 200,000 a month in the first quarter. The jobless rate rose to 5% in March from January and February’s 4.9%. On the contrary, expenditure and output indicators imply a slightly weaker result for the economic growth in the first quarter as compared to earlier expectations, noted Lloyds Bank.

In the first quarter, consumption seems to have fallen in spite of labor market rebounding further. Last month, retail sales declined 0.3% and dropped in the first quarter as a whole. Meanwhile, personal consumption data shows a slowdown in spending growth and an increase in precautionary savings, according to Lloyds Bank. Furthermore, trade figures show that net exports are a drag on the economic growth, added Lloyds Bank.

As the US economy is likely to post a weak GDP growth print in the first quarter, US Fed policymakers will be keeping a close watch for proof of a solid improvement in the second quarter. Several business surveys indicate that the first quarter end was strong. For instance, the March ISM manufacturing index rose more than the threshold of 50, while non-manufacturing index also posted stronger than anticipated figure.

“For the year as a whole, we have revised down our growth forecast for 2016 to 2.2% from 2.4%, which would be a shade weaker than last year”, said Lloyds Bank.