US GDP tracking update – Nomura
Analysts at Nomura explained their GDP tracking update after today’s retails sales disappointment and CPI beat.
“January core retail sales were weaker than we expected with downward revisions to sales in November and December, implying less PCE growth in Q4 as well as Q1. In addition, January core CPI inflation was stronger than we expected.
Higher-than-expected core CPI inflation points to modestly stronger PCE inflation in the near term, which we use to deflate core retail sales, implying less real PCE growth in January and in Q1.
However, the weaker-than-expected core retail sales suggest that retail inventory buildup could be greater in Q1 than our estimate.
Moreover, the December business inventories report included upward revisions for November and the growth in December is likely greater than BEA’s assumption, implied by the BEA’s advance estimate of Q4 GDP.
This suggests that inventory investment in Q4 was likely stronger than the BEA’s assumption, which lowered our estimate of Q1 inventory build up due to a higher jumping-off point from Q4.
Altogether, we lowered our Q4 real GDP tracking estimate by 0.1pp to 2.5% q-o-q saar and our Q1 real GDP tracking estimate by 0.4pp to 2.0% q-o-q saar.”