US real GDP likely slowed at year end to a 2.1% - BMO CM

According to the analysts at BMO Capital Markets, after storming back in the third quarter, US real GDP likely slowed at year end to a 2.1% annualized rate.

Key Quotes

“Our estimate is slightly below the consensus call, in line with the post-recession norm, and modestly above potential growth. The third quarter’s soybean-led spike in exports unwound in earnest, and the full weight of the mighty dollar bore down on the trade balance. As well, consumers throttled back after spending at an average 3.6% clip in the previous two quarters. But the big story for Q4 should be the return of business capex after a year-long slump. As well, residential construction rebounded with purpose, as builders turned the most upbeat since the housing bubble.”

“Accordingly, final domestic demand (2.4% expected) likely had its best quarter of the year. With growth around 1.6%, 2016 might have been the weakest year for the economy since the Great Recession (2011 was 1.602%). However, the strong finish—with auto sales revving the fastest in 11 years and several confidence measures hitting multi-decade highs—flags good momentum heading into the new year.”

“Durable Goods Orders: Boeing likely propelled durable goods orders 3% faster in December, as its sales climbed to the highest altitude since mid-2014. Moreover, machinery and other capital goods bookings should extend recent gains, as business confidence hooked up after the election. Following a year-long slump, business capital spending looks to have found its groove in anticipation of a more supportive taxation and regulatory environment.”