Forex Flash: US March quarter GDP growth poised to resume – NAB

Economic indicators available for the March quarter are pointing to a resumption of GDP growth following an essentially flat December quarter (the small decline in the Advance GDP estimate has been revised away). In particular, the ISM manufacturing and non-manufacturing surveys are consistent with above trend growth.

Indeed, consumer spending growth slowed in December and January (following a large increase in November post-Hurricane Sandy). However, this was still a positive outcome given the hit to incomes from the January tax increases. Household disposable income fell -4.0% MoM in January reflecting the tax increases as well as the fact that some income was brought forward (out of 2013) into 2012 to escape the tax rises. According to the NAB Analyst Team, “This has led to a big swing in the household savings ratio as households smooth out the impact of these income swings on their consumption.”

The resilience in consumer spending looks to have continued into February as motor vehicle sales rose in the month. However, household spending will also come under pressure from the increase in petrol prices in February although early data for March suggests that this has been partially reversed. Delays in issuing tax refunds may also have a temporary affect on spending.