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U.S. Second-Quarter Growth Forecasts Surge on Trade, Inventories

U.S. Economic Growth Revised Down to 2.2% in 1Q

Judging by some big boosts to U.S. tracking forecasts following April merchandise-trade data and revised first-quarter growth, economists have turned decidedly more bullish about a pickup from the slow patch in early 2018.

Analysts at Morgan Stanley raised their projection for second-quarter gross domestic product growth to a 3.3 percent annualized rate from 2.5 percent, while Macroeconomic Advisers by IHS Markit estimates the economy will expand 3.6 percent, up from a previous forecast of 2.9 percent. Michael Feroli, chief U.S. economist at JPMorgan Chase & Co., lifted his estimate by half a percentage-point to 2.75 percent and Amherst Pierpont Securities LLC’s chief economist Stephen Stanley boosted his projection to 4.2 percent from 3.8 percent.

The upgrades came after the government’s preliminary figures showed on Wednesday that the nation’s merchandise-trade deficit unexpectedly narrowed in April to a six-month low of $68.2 billion. While the Commerce Department’s GDP revisions showed slightly weaker growth than it initially reported for the January-March period, one big reason was a slower pace of stockpiling. That bodes well for the current quarter, as producers have more room to ramp up output when demand rises.

Separately on Wednesday, the Federal Reserve’s Beige Book survey said the U.S. economy “expanded moderately” through much of April and May, a subtle upgrade from previous periods.

For the team at Bloomberg Economics, the second-quarter expansion forecast stands at 3.4 percent. After growth of 2.2 percent in the previous quarter, that’s still a healthy pickup.

Brewing Optimism

Wednesday data prompt firms to revise up 2Q GDP tracking estimates

Source: Research notes

— With assistance by Rich Miller

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