دويتشه بنك عن البيانات الامريكية الصادرة غدا الاربعاء
FOMC to look through weak Q1 output
given sturdy income growth
__________________________________________________ __________________________________________________ ____________
Deutsche Bank Securities Inc.
DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 148/04/2014.
Wednesday Release Forecast Previous Consensus
8:30 am Real GDP (Adv Q1 15): +0.7% +2.2% +1.0%
GDP deflator: +0.5% +0.1% +0.5%
10:00 am Pending home sales (Mar): +1.0% +3.1% +1.0%
Source: Deutsche Bank, Bloomberg Finance LP
Commentary for Wednesday: The initial print on Q1 real GDP is released this
morning. These figures are highly preliminary and prone to massive revisions.
Last year, the first reading on Q1 output was reported at 0.1%, only to be
revised down to -1.0% one month later and then to -2.9% one month after that.
Since then, Q1 2014 real GDP growth has been revised further to show a -2.1%
decline. However, the figures are susceptible to further revision this July, when
the Bureau of Economic Analysis releases the annual benchmark revision.
History appears to be repeating, as we project just a 0.7% increase in Q1 2015
real GDP, but the risk is that it is even weaker. In our view, the economy had to
deal with more adverse shocks this year relative to last. In addition to the
unusually harsh winter weather, the economy had to contend with a much
stronger dollar, a sharp plunge in energy capex and the West Coast port
slowdown. Despite all this, employment was relatively robust last quarter,
growing at a 2.2% annualized rate. This will likely be the second-consecutive
quarter in which payroll growth has outpaced GDP, which has not occurred
since Q2/Q3 2006. It is possible that GDP growth (specifically productivity) is
being understated, because the income side of the economy has not
experienced the same degree of weakness evident in the output figures.
The chart below shows the annualized changes in real gross domestic income
(GDI) compared to real GDP. We only focus on 2014, because the GDI data
were distorted in 2013 by a change in tax policy. In Q1 2014, GDI declined
-0.7% compared to a -2.1% drop in GDP. In Q2, GDI rose 4.1% versus 4.6%; in
Q3, GDI was up 5.2% compared to 5.0% for GDP and then in Q4, GDI
increased 3.2%, one full percentage point faster than GDP. Over the full year,
GDI rose on average 50 basis points more than GDP. In our view, the GDI data
are a better proxy of underlying economic activity than the GDP figures
because the former are derived from withheld income tax receipts, which do
not get revised. To be sure, the stronger 2014 GDI numbers are, on the
surface, more consistent with the underlying trend in the labor market, which
generated 3.1 million jobs last year. If we are to believe the expenditures
figures, this would mean that productivity growth was unusually weak. It
seems unlikely that companies would hire so many unproductive workers.
Unfortunately, the GDI data have displayed the same pattern of seasonal
softness as GDP, with a relatively weak Q1 followed by strength thereafter.
This is another reason Fed policymakers will look through Q1 2015 GDP data,
which will be evident in this afternoon’s FOMC statement.