US Economic Outlook – 3 May 2019

According to the advance estimate, headline real GDP growth in 1Q19 was a solid 3.2% (qoq annualized). However, more than half of the increase was driven by inventory accumulation and net exports. By contrast, final sales to domestic purchasers advanced by a much weaker 1.5%, weighed upon by the long government shut-down and severe weather. We expect the shut-down related drag to reverse in 2Q19, boosting both consumer spending and federal outlays compared to the 1Q19 results. Given the strong headline start to the year, we have also revised up our full-year GDP growth forecast by three ticks, to 2.5%, and the projection for 2020 by one tick to 1.8%. Nevertheless, we expect the profile of growth on a yoy basis to decelerate from here on, as last year's fiscal boost – which added almost a full percentage point to growth – is now fading and may potentially turn into a modest fiscal contraction next year.