Global politics has been drowning out most economic reports in the last few weeks and so the release of March quarter US GDP figures has received less attention than it would have under normal conditions. The US Commerce Department released Q1 2017 “advance” estimates of US GDP on Friday night Australian time. This estimate is the first of four estimates and subject to three more revisions over the next two months. They show an annualised growth rate of 0.7%, lower than the median estimate of 1.0% and well down up on the Q4 2016 figure of 2.1%.
Yields of US Treasury bonds were mixed on the day. 2 year bond yields were 2bps higher at 1.27% and 10 year bonds were 1bp lower at 2.28%. While the GDP figure was disappointing, in another part of the report regarding core personal consumption expenditure (PCE), the PCE price index increased by 2.0%, up from 1.3% in the December quarter. In some ways the March quarter figures are reminiscent of December quarter GDP figures; those figures were “disappointing” but the composition of the GDP (that is, strong imports) suggests a strong domestic economy. In this case, a measure of price growth has provided the same reassuring feature.
US GDP numbers are published in a manner which is different to most other countries; quarterly figures are compounded to give an annualised figure. In countries such as Australia and the UK, an annual figure is calculated by taking the latest number and comparing it with a figure from a year ago. The diagram below shows US GDP once it has been expressed in the normal manner.’
