US: Atlanta Fed revised down their Q2 GDP forecast to 1.7% - Deutsche Bank

Research Team at Deutsche Bank, suggests that in terms of the components of the US ISM services reading, employment, new orders and prices paid all rose last month, although there was a slight decline for business activity and new export orders (albeit from recent highs).

Key Quotes

“The spread between the two ISM series is now back to 4.9pts (after being 2.7pts and 3.9pts in March and February respectively) and the most since January.

Meanwhile, the March trade deficit narrowed a touch at $40.4bn (vs. $41.2bn expected) and narrowing nearly $7bn from February. The final services PMI was revised up 0.7pts to 52.8 and so resulting in a composite print of 52.4 which is a gain of 0.7pts from March and the second consecutive monthly increase.

Elsewhere, factory orders rose a bit more than expected in March (+1.1% mom vs. +0.6% expected), Q1 nonfarm productivity weakened slightly less than expected (- 1.0% qoq vs. -1.3% expected) and unit labour costs rose +4.1% qoq. That fall in productivity is the second consecutive negative quarterly reading and leaves YoY growth in productivity at a fairly subdued +0.6%.

The end result of all that data was for the Atlanta Fed to revise down their Q2 GDP forecast by a tenth to 1.7%. That’s still above the forecast of our US economists however who expect only a mild rebound from the weak first quarter and currently have growth pegged at 1.0%.”