Can the Economy Maintain Momentum After Surprise Q4 Surge?

Will final week’s information of considerably stronger-than-expected progress for US financial output in 2023’s fourth quarter prolong into this 12 months’s Q1?

It’s too quickly to make high-confidence estimates, however CapitalSpectator.com’s preliminary median nowcast (based mostly on a number of unbiased estimates) for this 12 months’s first quarter suggests the enlargement will proceed to sluggish relative to the earlier excessive level in final 12 months’s red-hot Q3.

It’s nonetheless early within the present quarter so there’s loads of guesswork lurking for the quick future. That caveat apart, our opening median nowcast signifies a 1.5% rise in Q1 (seasonally adjusted annual price).

That’s a hefty downshift from This autumn’s sturdy 3.3% rise, a acquire that shocked most analysts, together with CapitalSpectator.com’s forward of the federal government’s report final week.

US Actual GDP Change

The haircut for the Q1 estimate implies that final 12 months’s sturdy run of financial exercise faces stronger headwinds this 12 months. Nonetheless, a 1.5% rise in Q1 GDP continues to be sturdy sufficient to maintain .

In the meantime, survey information for January paints an upbeat profile, based mostly on this month’s US PMI Output Index, a proxy for GDP.

This benchmark rose to 52.3 within the opening month of the 12 months, marking a seven-month excessive. A studying above the impartial 50 mark equates with progress, reasonably so on this case.

The firmer PMI print displays “an encouraging begin to the 12 months,” says Chris Williamson, chief enterprise economist at S&P World Market Intelligence, which publishes the information.

“Output measured throughout each items and companies rose in January on the quickest price since final June, progress momentum having stepped up a gear on the again of improved demand circumstances.”

One other shiny spot that would present essential assist to financial exercise within the months forward is the recovering temper within the shopper sector.

Yesterday’s ongoing restoration within the Shopper Confidence Index for January lifted this measure to a two-year excessive.

“January’s enhance in shopper confidence doubtless mirrored slower inflation, anticipation of decrease rates of interest forward, and usually favorable employment circumstances as corporations proceed to hoard labor,” says Dana Peterson, chief economist at The Convention Board.