Recent economic data would appear to suggest that the UK and US economies have both weakened significantly in the first quarter of 2016.
In the preliminary GDP numbers released a few weeks ago it was the US economy that appeared to suffer the sharpest slowdown, as economic activity slid back from a solid Q4 of an annualised 1.4% to 0.5% in Q1, its lowest level in two years.
While investors are banking on a sharp rebound in Q2 the fact that the economy slipped back so sharply in the first quarter should be a concern given how benign the weather was in this particular quarter. Typically Q1 tends to be a fairly weak quarter anyway but that is normally down to adverse weather conditions, something we didn’t really get this year.
We have seen a bit of a pickup in the April data but it still remains doubtful that this will be in time for the Federal Reserve to consider a rate rise at their June meeting, irrespective of what a number of policymakers are saying.
In the UK it’s a slightly different story, though we did see a minor slowdown in Q1, down from 0.5% in Q4 to 0.4% in Q1. The biggest worry for the UK economy would appear to be the weakness exhibited in recent April data which appears to show significant divergence to recent April data in the US.
April PMI’s were disappointing across the board for the UK economy, raising the prospect that a combination of a weak global outlook and some uncertainty surrounding next months “Brexit” vote might be undermining investment spending.
This week we can expect to see the latest confirmation of a weak US economy in the Q1 GDP number of 0.5%, while UK Q1 GDP is expected to come in at 0.4%.
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