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Analysts Lower GDP Forecast On Durable Goods

Published 03/25/2015, 02:37 PM
Updated 07/09/2023, 06:31 AM

After February durable goods were reported below expectations, dropping 1.4% -- its third decline in the last four months -- analysts began recalibrating first-quarter real GDP growth lower.

Economists at Barclays (LONDON:BARC) cut their Q1 U.S. GDP tracking estimate to just a 1.2% growth rate, from 1.3%. Economists at Morgan Stanley (NYSE:MS) cut Q1 GDP tracking by 0.3 point to a 0.9% increase. And Goldman's (NYSE:GS) team cut Q1 US GDP tracking by 0.2 point to 1.8%.

(NYSE:RBS) economist Guy Berger said the ugly report means the equipment portion of Q1 GDP could come in flat.

RBC's Tom Porcelli's team said capital spending could be negative in Q1. "The February durables report was weaker on the current month but also witnessed non-trivial downward revisions to January. The end result is that our CAPEX tracking is now into negative terrain at a 2% decline for Q1, with GDP moving to 1.8%."

Porcelli suggested West coast port disruptions in the U.S. could have disrupted the supply chain, and if so, there could be "a decent rebound in March."

Economist Michael Feroli at JPMorgan (NYSE:JPM) suggested the Street might have moved too fast, however. He sees "real equipment spending growth in Q1 at around a 4% annual rate, which looks better than what one might have thought given the core capital goods numbers. This is because some categories of equipment spending not measured by the core number, such as commercial aircraft and medium and heavy trucks, are actually doing fairly well."

Nevertheless, JPM has lowered its Q1 real GDP estimate to 1.5% from its prior 2.0% increase with downside risk.

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Citi Economics said they are not altering their GDP forecast on the back of the durables report. "We downgraded our expectations for real GDP growth in Q1 2015 in early March from a three-percent annualized-handle, to a range of 2.25 to 2.50%." Citi said there are downside risks, however.

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