The first estimate of US national accounts for Q4 showed that US GDP growth slowed to 0.7% q/q AR in Q4. Private consumption grew 2.2% q/q AR and continues to be the main growth driver. Oil investments, inventories and net exports dragged GDP growth down.
We expect the US to continue to grow at a moderate pace this year but it depends solely on US consumers. We expect private consumption to continue to be the main growth driver supported by higher employment, positive real wage growth and high consumer confidence. Consumer confidence in January was relatively unaffected by the financial market turmoil. However, the risk is that the slowdown in the energy and manufacturing sector will have negative contagion effects on the rest of the economy.
The weak growth in Q4 partly explains why the FOMC statement from the meeting held earlier this week was relatively dovish. While today's release supports our view that the Fed will stay on hold in March, our main scenario is still that the Fed will hike for the second time in April, although there are downside risks to this call, as, in our view, the Fed will not risk tightening too much, too quickly. Our expectation is based on our main scenario, which is that the financial stress will ease and data will rebound.
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