Apr 2, 201510:40 AMOpen Mic
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Market and economic update: Stronger U.S. dollar drove imports in the fourth quarter
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U.S. economic data continued its trend of negative surprises led by weaker-than-expected economic growth in the fourth quarter. However, overall data still remain consistent with solid economic growth in the range of 2% to 3%, rather than the robust rates of 4% to 5% experienced in the second and third quarters of 2014.
The linchpin in our expectation for solid U.S. economic growth remains consumer economic data. In the fourth quarter, personal consumption expenditures expanded 4.4%, personal incomes continued their solid growth, and consumer confidence remained at a high level. The stronger U.S. dollar seems to have led to stronger import growth in the fourth quarter, creating a drag on net U.S. economic activity.
Data in the first quarter of 2015 appear to indicate some constraints on business activity due to weather. Consumer financial health appears to remain solid, although instead of expanding spending in light of lower energy prices, consumers appear to be expanding savings in the near term. Stronger home sales data and the threat of rising interest rates may help unlock consumer spending over the next couple of quarters, leading to stronger U.S. economic growth.
Outside the United States, growth in developed economies, such as Europe and Japan, appears to be on more solid footing. Flash Purchasing Manager Index (PMI) survey data are pointing to stronger activity in Europe and an improvement in consumer confidence surveys. For Japan, year-over-year inflation remains above the 2% Bank of Japan target, and consumer activity appears to be improving. Data for emerging economies remain relatively soft in contrast.