US growth downshifts – Westpac

According to Richard Franulovich, head of FX strategy at Westpac, soft surveys and financial conditions signal a rapid loss of growth momentum in the US.

Key Quotes

“The latest regional US PMIs are showing some welcome stabilisation and the partial government shutdown has ended, albeit temporarily. But, earlier sharp declines in various soft surveys and the recent tightening in financial conditions are still resonating and they suggest the US economy quickly lost altitude in the new year.”

‘Our composite indicator of “soft” US data has a solid six-month lead on nominal GDP growth and the recent pullback signals a fairly rapid loss of momentum for the US. Some of the inputs pre-date the partial shutdown and will inevitably stabilise in their next readings thanks to the short term deal to re-open government.”

“The partial government shutdown and the lack of US data points in recent weeks cloud the picture but the overall message is that US growth momentum has notably eased. Duration is an open question, though encouragingly some PMIs have stabilised in the new year and financial conditions improved in January.”