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The US Sneezes


A quick guest blog from Coreco’s Rob Gill on some interesting statistics coming out of the US last week.

The US let out an almighty AAATTTCHOOOO!!! last week with some truly shocking GDP numbers.

On June 25th the Bureau of Economic Analysis announced that Q1 GDP fell at an annualised rate of 2.9%. Their own previous estimate was a decline of 1% while the consensus estimate amongst economists was a drop of 1.8%. A real shock in every sense.

It does appear however as if it is a case of the US catching a cold in the most literal sense. The past winter was the coldest in the US for 20 years, which is hugely disruptive in a country where such weather means a bit more than delayed trains or working from home while the kids enjoy a snow-filled day off school.

While commentators have enjoyed poking fun at politicians and policy makers blaming the weather for any poor economic performance (lots of “wrong kind of snow jokes” and the like), we’ve seen in the UK how worse than expected winters can disrupt economic activity, and usually to an extent which is wildly underestimated by forecasters.

The other important factor is that most other economic indicators, especially those of a “leading” rather than a “lagging” nature (Q1 for example started 6 months ago) are largely positive. US stock markets breached all-time highs some months ago, while the jobs report of early June confirmed that the US economy has now replaced all the jobs lost during the recession. These two factors are a bit like house prices in the UK: if job prospects are good and mutual funds are riding high then American’s tend to feel confident about themselves and the economy.

A big sneeze certainly, hopefully the type brought on by warmer weather and a thawing economy rather than anything more serious.



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